<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CLASSIC CABLE, INC.
(Exact name of registrant as specified in its charter)
For a list of Co-Registrants, refer to the page immediately following this page.
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<S> <C> <C>
DELAWARE 4841 74-2750981
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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515 CONGRESS AVENUE
SUITE 2626
AUSTIN, TEXAS 78701
512/476-9095
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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J. MERRITT BELISLE
CHIEF EXECUTIVE OFFICER
CLASSIC CABLE, INC.
515 CONGRESS AVENUE
SUITE 2626
AUSTIN, TEXAS 78701
512/476-9095
(Name, address including zip code, and telephone number, including area code, of
agent for service)
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Copies of all communications to:
PETER C. KRUPP, ESQ.
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 W. WACKER DRIVE
SUITE 2100
CHICAGO, ILLINOIS 60606
312/407-0700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) REGISTRATION FEE
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10 1/2% Senior Subordinated Notes due 2010.................. $225,000,000 $59,400(1)
Guarantees of the 10 1/2% Senior Subordinated Notes due
2010...................................................... N/A $ 0(2)
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(1) In accordance with Rule 457(f)(2), the registration fee is calculated based
on the book value, which has been computed as of April 14, 2000, of the
outstanding 10 1/2% Senior Subordinated Notes due 2010 of the Registrant to
be canceled in the exchange transaction hereunder.
(2) Pursuant to Rule 457(n), no separate registration fee is being paid in
respect of the guarantees.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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TABLE OF CO-REGISTRANTS
<TABLE>
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PRIMARY STANDARD
INDUSTRIAL IRS EMPLOYER
STATE OF CLASSIFICATION IDENTIFICATION
NAME ORGANIZATION CODE NUMBER NUMBER
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<S> <C> <C> <C>
Classic Cable Holding, Inc........................ Delaware 4841 74-2807609
Classic Telephone, Inc............................ Delaware 4841 75-2590205
Universal Cable Holdings, Inc..................... Delaware 4841 75-2077867
Universal Cable Communications, Inc. ............. Delaware 4841 84-0913858
Universal Cable of Beaver Oklahoma, Inc. ......... Delaware 4841 75-2243788
Universal Cable Midwest, Inc. .................... Delaware 4841 75-2205815
WT Acquisition Corporation........................ Delaware 4841 74-2644608
W.K. Communications, Inc.......................... Kansas 4841 48-1037491
Television Enterprises, Inc....................... Texas 4841 74-1532349
Black Creek Communications, L.P................... Delaware 4841 74-2881867
Black Creek Management, L.L.C..................... Delaware 4841 74-2881870
Friendship Cable of Texas, Inc.................... Texas 4841 75-2237583
Correctional Cable TV, Inc........................ Texas 4841 75-2443515
CallCom 24, Inc................................... Texas 4841 75-2774129
Friendship Cable of Arkansas, Inc................. Texas 4841 71-0634055
Classic Network Transmission, L.L.C............... Delaware 4841 74-2924093
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<PAGE> 3
PROSPECTUS
EXCHANGE OFFER FOR
$225,000,000
10 1/2% SENIOR SUBORDINATED NOTES DUE 2010 [CLASSIC CABLE, INC. LOGO]
Terms of Exchange Offer
- Expires 5:00 p.m., New York City time, , 2000 unless
extended
- Not subject to any condition other than that the exchange offer not
violate applicable law or any applicable interpretation of the Staff of
the Securities and Exchange Commission
- All old notes that are validly tendered and not validly withdrawn will be
exchanged
- Tenders of old notes may be withdrawn any time prior to the expiration of
the exchange offer
- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes
- We will not receive any proceeds from the exchange offer
- The terms of the exchange notes are substantially identical to the old
notes, except for certain transfer restrictions and registration rights
relating to the old notes
- As of December 31, 1999, on a pro forma basis we had approximately $165.5
million of senior indebtedness
See "Risk Factors" beginning on page 15 to read about certain factors you
should consider before buying shares of the Class A common stock.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE EXCHANGE NOTES TO BE DISTRIBUTED IN THE EXCHANGE
OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
, 2000
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AVAILABLE INFORMATION
We are currently subject to the informational requirements of the
Securities Exchange Act of 1934. We are required to file annual, quarterly and
special reports and other information with the Securities and Exchange
Commission. You may read and copy any of these reports, statements and other
information that we file at the SEC's public reference rooms in Washington,
D.C., New York, New York, and Chicago, Illinois. Please call 1-800-SEC-0330 for
further information on the public reference rooms. Our filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at http://www.sec.gov.
We, together with the subsidiary guarantors, have filed a registration
statement on Form S-4 to register with the SEC the exchange notes to be issued
in exchange for the old notes. This prospectus is part of that registration
statement. As allowed by the SEC's rules, this prospectus does not contain all
of the information you can find in the registration statement or the exhibits to
the registration statement.
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SUMMARY
The following summary is intended to highlight certain information
contained elsewhere in this prospectus. This summary is not intended to be a
complete statement of all material facts of the offering and is qualified in its
entirety by the more detailed information and historical and pro forma financial
information, including the notes relating to that information, appearing
elsewhere in this prospectus. Except as otherwise required by the context, the
information presented in this prospectus concerning Classic and its business
gives effect to (1) the completed acquisition of Buford Group, Inc. by Classic
and the related financing; (2) other acquisitions completed by either Classic or
Buford prior to the date of this prospectus; (3) the completed acquisition of
substantially all of the assets of Star Cable Associates by a subsidiary of
Classic and the related financing; (4) the various redemptions of our 2008
subordinated notes and the related financing; (5) the capital contribution from
Classic Communications, Inc. of a portion of the proceeds from their initial
public offering; (6) the repayment of a portion of our credit facility; and (7)
the offering of the old notes. Reference should be made to "Selected Historical
Consolidated Financial Data -- Classic Cable, Inc." and "Selected Historical
Consolidated Financial Data -- Buford Group, Inc." and "Unaudited Pro Forma
Consolidated Financial Information" for the definition of certain financial
terms appearing throughout this prospectus. As used in this prospectus, the
terms "Classic," "we," "us" and "our" refer to Classic Cable, Inc. and the term
"Classic Communications" refers to our parent, Classic Communications, Inc.
THE EXCHANGE OFFER
Exchange Notes............. The forms and terms of the exchange notes are
identical in all material respects to the terms of
the old notes, except for certain transfer
restrictions, registration rights and liquidated
damages provisions relating to the old notes. These
are described elsewhere in this prospectus under
"Description of Notes" and "The Exchange Offer."
The Exchange Offer......... We are offering to exchange up to $225,000,000 of
the exchange notes for up to $225,000,000 of the
old notes. Old notes may be exchanged only in
$1,000 increments.
Expiration Date; Withdrawal
of Tender.................. Unless we extend the exchange offer, it will expire
at 5:00 p.m., New York City time, on
2000. We will not extend this time period to a date
later than 2000. You may withdraw any
old notes you tender pursuant to the exchange offer
at any time prior to 2000. We will
return, as promptly as practicable after the
expiration or termination of the exchange offer,
any old notes not accepted for exchange for any
reason without expense to you.
Certain Conditions to the
Exchange Offer........... The exchange offer is subject to the following
conditions, which we may waive.
These conditions permit us to refuse acceptance of
the old notes or to terminate the exchange offer
if:
- a lawsuit is instituted or threatened in a court
or before a government agency which may impair
our ability to proceed with the exchange offer;
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- a law, statute, rule or regulation is proposed or
enacted or interpreted by the SEC which may
impair our ability to proceed with the exchange
offer; or
- any governmental approval is not received which
we think is necessary to consummate the exchange
offer.
Procedures for Tendering
Old Notes................ If you wish to accept the exchange offer, you must
complete, sign and date the letter of transmittal
in accordance with the instructions, and deliver
the letter of transmittal, along with the old notes
and any other required documentation, to the
exchange agent. By executing the letter of
transmittal, you will represent to us that, among
other things:
- any exchange notes you receive will be acquired
in the ordinary course of your business;
- you have no arrangement with any person to
participate in the distribution of the exchange
notes; and
- you are not an affiliate of Classic or, if you
are an affiliate, you will comply with the
registration and prospectus delivery requirements
of the Securities Act of 1933 to the extent
applicable.
If you hold your old notes through The Depository
Trust Corporation and wish to participate in the
exchange offer, you may do so through The
Depository Trust Corporation's Automated Tender
Offer Program. By participating in the exchange
offer, you will agree to be bound by the letter of
transmittal as though you had executed such letter
of transmittal.
Interest on the Exchange
Notes.................... Interest on the exchange notes accrues from the
date of issuance at the rate of 10 1/2% per annum.
Payment of Interest........ Interest is payable semi-annually in arrears on
each March 1 and September 1, commencing on
September 1, 2000.
After September 1, 2000, interest on the old notes
accepted for exchange will stop accruing upon the
issuance of the exchange notes.
Special Procedures for
Beneficial Owners........ If you are a beneficial owner whose old notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
wish to tender such old notes in the exchange
offer, please contact the registered holder as soon
as possible and instruct them to tender on your
behalf and comply with our instructions set forth
elsewhere in this prospectus.
Guaranteed Delivery
Procedure................ If you wish to tender your old notes, you may, in
certain instances, do so according to the
guaranteed delivery procedures set forth elsewhere
in this prospectus under "The Exchange Offer --
Guaranteed Delivery Procedures."
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Registration Rights
Agreement................ We sold the old notes and the related guarantees to
the initial purchasers in a transaction exempt from
the registration requirements of the Securities Act
on February 16, 2000. At that time, Classic and the
initial purchasers entered into an exchange and
registration rights agreement which grants the
holders of the old notes certain exchange and
registration rights. This exchange offer satisfies
those rights, which terminate upon consummation of
the exchange offer. You will not be entitled to any
exchange or registration rights with respect to the
exchange notes.
Certain Federal Tax
Considerations........... With respect to the exchange of the old notes for
the exchange notes:
- the exchange should not constitute a taxable
exchange for U.S. federal income tax purposes;
- you should not recognize gain or loss upon
receipt of the exchange notes;
- you must include interest in gross income to the
same extent as the old notes; and
- you should be able to tack the holding period of
the exchange notes to the holding period of the
old notes.
Use of Proceeds............ We will not receive any proceeds from the exchange
of notes pursuant to the exchange offer.
Exchange Agent............. We have appointed Chase Bank of Texas, National
Association as the exchange agent for the exchange
offer.
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TERMS OF THE NOTES
The form and terms of the exchange notes are substantially the same as the
form and terms of the old notes, except that the exchange notes are registered
under the Securities Act. As a result, the exchange notes will not bear legends
restricting their transfer and will not contain the registration rights and
liquidated damages provisions contained in the old notes.
Issuer........................ Classic Cable, Inc.
515 Congress Avenue, Suite 2626
Austin, Texas 78701
Guarantors.................... The notes are guaranteed by each of our current
and future domestic restricted subsidiaries.
Each guarantor is our wholly owned or majority
owned subsidiary. If we cannot make payments on
the notes when they are due, the guarantors
must make them instead.
Maturity...................... March 1, 2010.
Interest...................... Annual rate -- 10 1/2%.
Payment frequency -- every six months on March
1 and
September 1.
First payment -- September 1, 2000.
Ranking....................... These notes and the subsidiary guarantees are
senior subordinated debts.
They rank behind all of our and our guarantors'
current and future indebtedness, other than
trade payables, except indebtedness that
expressly provides that it is not senior to
these notes and the subsidiary guarantees.
Optional Redemption........... On or after March 1, 2005, we may redeem some
or all of the notes at any time at the
redemption prices listed in the "Description of
Notes" section under the heading "Optional
Redemption."
Before March 1, 2003, we may redeem up to 35%
of the notes ever issued under the indenture
with the proceeds of one or more Public Equity
Offerings by, or Strategic Equity Investments
in, Classic or Classic Communications at the
price listed in the "Description of Notes"
section under the heading "Optional
Redemption."
Mandatory Offer to
Repurchase.................... If we sell assets under some circumstances, or
experience specific kinds of changes of
control, we must offer to repurchase the notes
at the prices listed in the "Description of
Notes" section under the heading "Repurchase at
the Option of Holders."
Basic Covenants of
Indenture..................... We will issue the exchange notes under an
indenture with Chase Bank of Texas, National
Association. The indenture, among other things,
restricts our ability and the ability of our
subsidiaries to:
- borrow money;
- pay dividends on stock or repurchase stock;
- make investments;
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- distribute proceeds from asset sales;
- use assets as security in other transactions;
- sell certain assets or merge with or into
other companies;
- engage in certain transactions with
affiliates; and
- incur liens.
These covenants are subject to important
exceptions. For more details, see the
"Description of Notes" section under the
heading "Certain Covenants."
Absence of a Public Market for
the Exchange Notes............ In general, you may freely transfer the
exchange notes. However, there are exceptions
to this general statement. Holders may not
freely transfer the exchange notes if:
- they acquire the exchange notes outside of
their ordinary course of business;
- they have an arrangement with any person to
participate in the distribution of the
exchange notes; or
- they are an affiliate of Classic.
Further, the exchange notes will be new
securities for which there will not initially be
a market. As a result, the development or
liquidity of any market for the exchange notes
may not occur. The initial purchasers have
advised us that they currently intend to make a
market in the exchange notes. However, you
should be aware that the initial purchasers are
not obligated to do so. In the event such a
market may develop, the initial purchasers may
discontinue it at any time without notice. We do
not intend to apply for a listing of the
exchange notes on any securities exchange or on
any automated dealer quotation system.
5
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OUR BUSINESS
We are a growth oriented cable operator focused on non-metropolitan markets
in the United States. We have experienced growth in subscribers, revenues and
cash flows, primarily through the successful execution and integration of over
20 acquisitions of cable systems primarily clustered in nine contiguous states.
Pro forma for the completed acquisition of Star and assuming completion of other
recently publicly announced transactions by other companies in the cable
television industry, we believe we are the 14th largest cable operator in the
United States. Our systems pass approximately 707,000 homes and serve
approximately 414,000 basic subscribers.
Through the acquisition of clustered non-metropolitan cable systems, and by
upgrading these cable systems, we are building a regional platform for the
delivery of digital cable and high-speed Internet access to the homes and
businesses of our customers. We believe that our strategy combines the
attractive characteristics of the non-metropolitan cable market segment with the
growth opportunity of broadband services and the Internet. The combination of
attractive market characteristics and the successful execution of our
acquisition strategy has enabled us to achieve high growth rates and attractive
EBITDA margins.
OUR STRATEGY
Our business strategy is to:
- FOCUS ON ATTRACTIVE NON-METROPOLITAN MARKETS: We plan to continue to
focus on growing communities in or around county seats, which generally
tend to have more robust household growth, higher income per household
and a stronger business foundation than do other non-metropolitan
markets.
- EXPAND AND IMPROVE CLUSTERS THROUGH SELECTIVE ACQUISITIONS: We plan to
continue to leverage our experience in acquiring and integrating cable
systems by continuing our acquisition growth strategy when attractive
cable systems are available for acquisition at reasonable valuations.
- FOCUS ON COMMUNITY RELATIONS AND CUSTOMER SATISFACTION: We plan to
maintain and enhance our relationships with the local communities in
which we operate and utilize our state-of-the-art call centers to
complement our existing service to our customers.
- INCREASE THE REVENUE-GENERATING BANDWIDTH OF OUR CABLE PLANT: We plan to
continue to upgrade our cable plant aggressively and systematically,
utilizing the most cost-effective and appropriate technology.
- IMPLEMENT OUR BROADBAND SERVICES: We plan to continue to offer enhanced
video services and to selectively expand our high-speed Internet access
offerings, a move which we believe will improve our competitiveness and
increase our revenues and cash flows.
RAPIDLY CONSOLIDATING INDUSTRY
Consolidation in the cable industry over the past three years has been
driven by the benefits derived from scale, including operating efficiencies,
increased advertising sales and the ability to deploy new broadband applications
efficiently. This consolidation has accelerated recently with the emergence of
the Internet as a mass medium for disseminating information, entertainment and
commerce. We believe that cable companies are the leaders in the race to become
the high-speed data service providers of choice to the consumer. Recent
investments and acquisitions by AT&T, Microsoft, and Charter Communications have
validated cable's position as a preferred broadband solution.
6
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While this consolidation has taken place primarily among large-scale
metropolitan operators, attention has expanded recently to non-metropolitan
markets. Smaller independent operators understand the value created through
consolidation and are beginning to make themselves available to be merged or
acquired. Additionally, metropolitan focused consolidators are beginning to sell
their non-metropolitan area systems. We believe that these circumstances create
an opportunity for us to continue and accelerate our focused strategy to
consolidate attractive non-metropolitan cable assets.
PROVEN MANAGEMENT TEAM
J. Merritt Belisle, our Chief Executive Officer, and Steven E. Seach, our
President and Chief Financial Officer, founded Classic in 1992 and have
assembled a management team with significant experience operating cable
television systems and providing quality customer service to cable subscribers.
Messrs. Belisle and Seach have 20 years of collective experience in acquiring,
operating, integrating and developing cable television systems and have worked
together for over ten years.
As a result of the Buford acquisition, our management team has been further
enhanced by the addition of several key members of Buford's management team,
including Ron Martin, who became our Executive Vice President of Operations, and
Kay Monigold, who became our Executive Vice President of Administration. Mr.
Martin and Ms. Monigold have been in the cable industry for over 25 years and 18
years, respectively.
On April 7, 2000, Classic Communications announced that Dale Bennett will
become our Chief Operating Officer. Mr. Bennett, a cable industry veteran,
assumes the COO role after spending the last three years as vice president of
AT&T Broadband and Internet Service's Texas Metro Region.
THE BUFORD ACQUISITION
On July 28, 1999, we acquired Buford Group, Inc., which operates cable
television systems in Arkansas, Louisiana, Missouri and Texas, for approximately
$300 million in cash. The Buford cable systems served approximately 170,000
basic subscribers and, we believe, represented an excellent geographic and
strategic fit with our other cable systems. In addition, we believe that the
Buford acquisition provided other benefits, including an opportunity to reduce
programming costs, consolidate headends and enhance customer service. The Buford
acquisition was financed through a $350.0 million credit facility and the
issuance of $150.0 million of our senior subordinated notes due 2009. See
"Description of Other Indebtedness." In addition, Classic Communications
contributed approximately $95.7 million in cash to us pursuant to the Brera
Classic equity investment. See "--The Brera Classic Equity Investment."
THE BRERA CLASSIC EQUITY INVESTMENT
In connection with the Buford acquisition, Classic Communications received
$100.0 million from Brera Classic, LLC, $95.7 million of which Classic
Communications contributed in cash to us, $3.3 million of which was paid to
Brera Classic pursuant to management and advisory fee agreements, and $750,000
of which was paid to Brera Classic to reimburse Brera Classic for certain of its
fees and expenses incurred in connection with the Brera Classic equity
investment. This equity investment was financed through the sale of common stock
of Classic Communications to Brera Classic. Brera Classic is an indirect
subsidiary of Brera Capital Partners Limited Partnership. Brera Capital Partners
is a $650 million private equity investment fund based in New York that invests
in a very limited number of companies in a few selected industries,
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including telecommunications and media. Brera Classic owns approximately 36.6%
of the outstanding capital stock of Classic Communications, representing an
approximate 77.3% voting interest. Certain investors hold an approximate 20%
nonvoting equity interest in Brera Classic, including a 9.0% nonvoting equity
interest held by affiliates of Goldman Sachs, one of the initial purchasers. See
"Certain Relationships and Related Transactions" and "Principal Stockholders."
THE STAR ACQUISITION
On February 16, 2000, one of our subsidiaries acquired substantially all
the assets of Star Cable Associates, which operates cable television systems in
Texas, Louisiana and Ohio, for an aggregate purchase price of approximately $110
million in cash and 555,555 shares of the Class A common stock of Classic
Communications. The Star cable systems serve approximately 57,000 subscribers
and represent a continuation of our clustering strategy. In addition, we believe
that the Star acquisition provides further benefits in the form of headend
consolidation opportunities. We financed the Star acquisition with available
cash and a portion of the proceeds from the offering of the old notes.
RECENT FINANCING
In December 1999, Classic Communications completed an initial public
offering of 7,250,000 shares of its Class A common stock. Stockholders of
Classic Communications sold an additional 2,237,500 shares. Classic
Communications raised approximately $168.9 million of proceeds in the offering,
net of the underwriting discount. Classic Communications used the proceeds from
the offering to pay offering expenses and to redeem all of its outstanding
13 1/4% senior discount notes due 2009. The remainder of the proceeds were
contributed by Classic Communications to us. We will use those proceeds for
general business purposes, a portion of which was already used to finance part
of the Star acquisition. The Classic Communications initial public offering
provides us with additional flexibility by making the common stock of Classic
Communications a form of currency to make acquisitions and improves our capital
structure by providing an expanded equity base.
In connection with the offering of the old notes, we entered into an
amendment to our senior credit facility, which (1) allowed for the offering of
the old notes, (2) modified some of the covenants in the credit facility to
provide us more flexibility (i.e., maximum total debt ratio, total interest
coverage ratio, maximum capital expenditures, limitations on investments,
permitted acquisitions, and lines of business), (3) restructured the term loan A
facility so that following a prepayment in full of the term loan A facility, and
subject to certain additional conditions, we have the ability to reborrow in one
or more advances under the term loan A facility until February 10, 2001, and (4)
increased the term loan A facility so that an additional $25.0 million may be
made available under that facility.
RISK FACTORS
You should carefully consider all of the information in this prospectus. In
particular, you should evaluate the specific risk factors under "Risk Factors"
beginning on page 15 before deciding whether to participate in the exchange
offer.
---------------
Our principal executive offices are located at 515 Congress Avenue, Suite
2626, Austin, Texas 78701. Our telephone number is (512) 476-9095, and our
Internet website is www.classic-cable.com. The information on our web site is
not a part of this prospectus.
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SUMMARY PRO FORMA FINANCIAL AND OPERATING DATA
The following table presents summary pro forma financial and operating data
about us. The unaudited pro forma data give effect to (1) the completed
acquisition of Buford Group, Inc. and the related financing, (2) other
acquisitions completed by either Classic or Buford prior to the date of this
prospectus, (3) the acquisition of substantially all of the assets of Star by a
subsidiary of Classic and the related financing, (4) the partial redemption of
our 2008 senior subordinated notes and the related financing, (5) the repurchase
of approximately $36 million aggregate principal amount of our 2008 subordinated
notes and related costs, (6) the capital contribution from Classic
Communications resulting from their initial public offering, (7) the repayment
of a portion of our credit facility and (8) the offering of the old notes as if
all of these transactions had been consummated on January 1, 1999, in the case
of the statement of operations and other financial data, and on December 31,
1999, with respect to the balance sheet data. The pro forma data have been
derived from the Unaudited Pro Forma Consolidated Financial Information of
Classic, which is included elsewhere in this prospectus. The unaudited pro forma
data do not purport to be indicative of the results that would have been
obtained had such transactions been completed as of the assumed dates and for
the periods presented nor are they necessarily indicative of results that may be
obtained in the future. You should read this information together with "Selected
Historical Consolidated Financial Data -- Classic Cable, Inc.," "Selected
Historical Consolidated Financial Data -- Buford Group, Inc.," "Unaudited Pro
Forma Consolidated Financial Information," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Classic's, Buford's and
Star's consolidated financial statements and the notes relating to those
statements included elsewhere in this prospectus.
<TABLE>
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YEAR ENDED
DECEMBER 31, 1999
-----------------
(IN THOUSANDS,
EXCEPT
SUBSCRIBER DATA)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $181,292
Costs and expenses.......................................... 114,503
Depreciation and amortization............................... 85,928
--------
Operating loss.............................................. (19,139)
Interest expense............................................ (54,781)
Other income (expense)...................................... 337
--------
Loss before income tax benefit.............................. (73,583)
Income tax benefit.......................................... 25,018
--------
Net loss.................................................... $(48,565)
========
BALANCE SHEET DATA:
Total cash and cash equivalents............................. $ 56,693
Total assets................................................ 763,858
Total debt.................................................. 543,478
Total liabilities........................................... 611,440
Total stockholder's equity.................................. 152,418
OTHER FINANCIAL DATA:
Cash flows from operating activities........................ 25,219
Cash flows from investing activities........................ (460,860)
Cash flows from financing activities........................ 33,829
Adjusted EBITDA(1).......................................... 70,551
Adjusted EBITDA margin(2)................................... 38.9%
Capital expenditures........................................ 45,615
Deficiency of earnings to fixed charges(3).................. (73,583)
</TABLE>
9
<PAGE> 14
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
(IN THOUSANDS,
EXCEPT
SUBSCRIBER DATA)
<S> <C>
OPERATING DATA:
Homes passed(4)............................................. 706,724
Basic subscribers(5)........................................ 413,603
Basic penetration(6)........................................ 58.5%
Digital subscribers......................................... 3,992
Premium subscribers(7)...................................... 222,767
Premium penetration(8)...................................... 53.9%
Average monthly basic revenue per basic subscriber(9)....... $ 30.15
Average monthly total revenue per basic subscriber(10)...... $ 36.70
</TABLE>
- ---------------
(1) Adjusted EBITDA is defined as operating income (loss) plus depreciation and
amortization plus non-cash operating charges. Non-cash operating charges
consist of Classic's compensation on Classic Communications restricted
stock of $1,920,000 as well as Buford's compensation relating to stock
appreciation rights and equity participation agreements of $1,842,000 for
the year ended December 31, 1999. Adjusted EBITDA is presented because
management believes it is a widely accepted financial indicator of a
company's ability to incur and service debt. We believe that Adjusted
EBITDA is not intended to be a performance measure that should be regarded
as an alternative to, or more meaningful than, either operating income or
net income as an indicator of operating performance or to the statement of
cash flows as a measure of liquidity, is not intended to represent funds
available for dividends, reinvestment or other discretionary uses, and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. Adjusted EBITDA measures presented may not be comparable to
similarly titled measures presented by other companies. Adjusted EBITDA for
the year ended December 31, 1999 was reduced by $5,462,000 of fees paid to
certain members of the management team in connection with completed
acquisitions and financing transactions, $1,179,000 of non-recurring costs
of Buford and Star incurred in connection with the acquisitions' working
capital adjustments and $425,000 of costs associated with Star's Deferred
Equity Bonus Plan payable upon the sale of cable systems. Without these
costs, Adjusted EBITDA for the year ended December 31, 1999 would have been
$77,617,000 and the Adjusted EBITDA margin would have been 42.8%.
(2) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of
revenues. This measurement is used by management, and is commonly used in
the cable television industry, to analyze and compare cable television
companies on the basis of operating performance. We do not believe that
Adjusted EBITDA margin is intended to be a performance measure that should
be regarded as an alternative either to operating income or net income as
prepared in accordance with generally accepted accounting principles.
Adjusted EBITDA measures presented may not be comparable to similarly
titled measures presented by other companies.
(3) Deficiency of earnings consists of loss before income tax benefit and
extraordinary loss. Fixed charges consist of interest expense and the
interest portion of rental expense.
(4) Homes passed refers to estimates by us of the approximate number of
dwelling units in a particular community that can be connected to our cable
television distribution system without any further extension of principal
transmission lines.
(5) A home with one or more television sets connected to a cable system is
counted as one basic subscriber. Bulk accounts are included on an
equivalent basic unit basis in which the total monthly bill for the account
is divided by the basic monthly charge for a single outlet in the area.
(6) Penetration is calculated as the number of basic subscribers as a
percentage of homes passed.
(7) Each premium channel received is counted as a separate premium subscriber.
Multiplexing of premium channels is counted as one subscriber for each
premium channel received.
(8) Premium penetration is calculated as the number of premium subscribers as a
percentage of basic subscribers.
(9) Average monthly basic revenue per basic subscriber equals revenues from
basic subscriptions of cable systems during the respective period divided
by the months in the period and divided by the weighted average number of
our basic subscribers for the respective period.
(10) Average monthly total revenue per basic subscriber equals total revenues of
cable systems during the respective period divided by the months in the
period and divided by the weighted average number of our basic subscribers
for such respective period.
10
<PAGE> 15
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA --
CLASSIC CABLE, INC.
The following table presents summary historical financial and operating
data about Classic. You should read this information together with "Selected
Historical Consolidated Financial Data -- Classic Cable, Inc.," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Classic's consolidated financial statements and the notes relating to those
statements included elsewhere in this offering circular.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
---- ---- ----
(IN THOUSANDS, EXCEPT SUBSCRIBER
DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 60,995 $ 69,802 $111,410
Costs and expenses.......................................... 36,555 42,070 71,426
Depreciation and amortization............................... 27,832 30,531 51,484
-------- -------- --------
Operating loss.............................................. (3,392) (2,799) (11,500)
Interest expense............................................ (20,759) (20,688) (31,201)
Gain on sale of cable systems............................... 3,644 -- --
Write-off of abandoned telephone operations................. (500) (220) --
Other income (expense)...................................... 71 192 605
-------- -------- --------
Loss before income tax benefit and extraordinary loss....... (20,936) (23,515) (42,096)
Income tax benefit.......................................... 7,149 2,339 10,128
Extraordinary loss.......................................... -- (5,524) (4,093)
-------- -------- --------
Net loss.................................................... $(13,787) $(26,700) $(36,061)
======== ======== ========
BALANCE SHEET DATA:
Total cash and cash equivalents............................. $ 616 $ 2,779 $ 85,855
Total assets................................................ 220,218 252,496 677,688
Total debt.................................................. 187,967 220,804 454,332
Total liabilities........................................... 202,887 239,354 519,508
Total redeemable preferred stock............................ 1,292 -- --
Total stockholder's equity.................................. 16,038 13,142 158,180
OTHER FINANCIAL DATA:
Cash flows from operating activities........................ $ 7,892 $ 13,996 $ 17,370
Cash flows from investing activities........................ (1,341) (57,245) (325,461)
Cash flows from financing activities........................ (6,588) 45,412 391,167
Adjusted EBITDA(1).......................................... 25,498(2) 28,840(3) 41,905(4)
Adjusted EBITDA margin(5)................................... 41.8% 41.3% 37.6%
Capital expenditures........................................ 10,135 13,759 32,435
Deficiency of earnings to fixed charges(6).................. (20,936) (23,515) (42,096)
OPERATING DATA (END OF PERIOD, EXCEPT AVERAGE):
Homes passed(7)............................................. 254,649 296,995 609,107
Basic subscribers(8)(9)..................................... 165,737 188,871 356,804
Basic penetration(9)(10).................................... 65.1% 63.6% 58.7%
Digital subscribers......................................... -- 200 3,599
Premium subscribers(11)..................................... 63,819 78,096 201,471
Premium penetration(12)..................................... 38.5% 41.3% 56.5%
Average monthly basic revenue per basic subscriber(13)...... $ 25.22 $ 27.87 $ 29.82
Average monthly total revenue per basic subscriber(14)...... $ 30.14 $ 33.24 $ 35.93
</TABLE>
11
<PAGE> 16
- ---------------
(1) Adjusted EBITDA is defined as operating loss plus depreciation and
amortization plus non-cash operating charges. Non-cash operating charges
for the years ended December 31, 1997, 1998, 1999 related to compensation
on Classic Communications restricted stock and were $1,058,000, $1,108,000,
and $1,921,000, respectively. Adjusted EBITDA is presented because we
believe it is a widely accepted financial indicator of a company's ability
to incur and service debt. We believe that Adjusted EBITDA is not intended
to be a performance measure that should be regarded as an alternative to,
or more meaningful than, either operating income or net income as an
indicator of operating performance or to the statement of cash flows as a
measure of liquidity, is not intended to represent funds available for
dividends, reinvestment or other discretionary uses, and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
Adjusted EBITDA measures presented may not be comparable to similarly
titled measures presented by other companies.
(2) Adjusted EBITDA for 1997 was reduced by legal, consultant and other
one-time non-recurring fees totaling $1,411,000 incurred in connection with
the settlement of certain claims that arose in conjunction with divorce
proceedings of one of our officers as well as $400,000 in fees paid to
certain members of our management team in connection with completed
acquisition and divestiture transactions. Without these fees, Adjusted
EBITDA would have been $27,309,000.
(3) Adjusted EBITDA for 1998 was reduced by $775,000 of fees paid to certain
members of our executive management team in connection with completed
acquisition and financing transactions. Without these fees, Adjusted EBITDA
would have been $29,615,000.
(4) Adjusted EBITDA for 1999 was reduced by $5,462,000 in fees paid to certain
members of our management team in connection with the July 1999 Buford
acquisition and related financing. Without these fees, Adjusted EBITDA
would have been $47,367,000.
(5) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of
revenues. This measurement is used by us, and is commonly used in the cable
television industry, to analyze and compare cable television companies on
the basis of operating performance. We believe that Adjusted EBITDA margin
is not intended to be a performance measure that should be regarded as an
alternative either to operating income or net income as prepared in
accordance with generally accepted accounting principles. Adjusted EBITDA
measures presented may not be comparable to similarly titled measures
presented by other companies.
(6) Deficiency of earnings consists of loss before income tax benefit and
extraordinary loss. Fixed charges consist of interest expense and the
interest portion of rental expense.
(7) Homes passed refers to estimates by us of the approximate number of
dwelling units in a particular community that can be connected to our cable
television distribution system without any further extension of principal
transmission lines.
(8) A home with one or more television sets connected to a cable system is
counted as one basic subscriber. Bulk accounts are included on an
equivalent basic unit basis in which the total monthly bill for the account
is divided by the basic monthly charge for a single outlet in the area. End
of period basic and premium subscribers are net of system sales that
occurred during 1997.
(9) End of period subscribers reflect asset sales that were consummated during
the second quarter of 1997.
(10) Penetration is calculated as the number of basic subscribers as a
percentage of homes passed.
(11) Each premium channel received is counted as a separate premium subscriber.
Multiplexing of premium channels is counted as one subscriber.
(12) Premium penetration is calculated as the number of premium subscribers as a
percentage of basic subscribers.
(13) Average monthly basic revenue per basic subscriber equals revenues from
basic subscriptions of cable systems during the respective period divided
by the months in the period and divided by the weighted average number of
our basic subscribers for the respective period.
(14) Average monthly total revenue per basic subscriber equals total revenues of
cable systems during the respective period divided by the months in the
period and divided by the weighted average number of our basic subscribers
for the respective period.
12
<PAGE> 17
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA -- BUFORD GROUP, INC.
The following table presents summary historical financial and operating
data about Buford. You should read this information together with "Selected
Historical Consolidated Financial Data -- Buford Group, Inc.," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Buford's consolidated financial statements and the notes relating to those
statements included elsewhere in this offering circular.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
---- ---- ----
(IN THOUSANDS, EXCEPT
SUBSCRIBER DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................... $ 49,561 $ 58,136 $ 70,475
Costs and expenses.......................................... 32,932 40,858 51,168
Depreciation and amortization............................... 17,175 17,753 21,399
-------- -------- --------
Operating income (loss)..................................... (546) (475) (2,092)
Interest expense............................................ (5,345) (5,787) (7,919)
Gain on sale of cable systems............................... 5,418 -- --
Other income (expense)...................................... 344 859 (221)
-------- -------- --------
Loss before income taxes and cumulative effect of change in
accounting principle...................................... (129) (5,403) (10,232)
Income tax benefit (expense)................................ (94) 315 226
Cumulative effect of change in accounting principle, net of
taxes..................................................... -- -- --
-------- -------- --------
Net loss.................................................... $ (223) $ (5,088) $(10,006)
======== ======== ========
BALANCE SHEET DATA:
Total assets................................................ $117,676 $143,932 $175,953
Total debt.................................................. 60,053 85,000 118,000
Total liabilities........................................... 69,182 97,008 131,147
Total stockholders' equity.................................. 48,493 46,924 44,806
OTHER FINANCIAL DATA:
Cash flows from operating activities........................ $ 13,628 $ 16,872 $ 20,334
Cash flows from investing activities........................ (20,289) (39,683) (53,151)
Cash flows from financing activities........................ (10,927) 24,947 32,830
Adjusted EBITDA(1).......................................... 18,087 20,797 27,195
Adjusted EBITDA margin(2)................................... 36.5% 35.8% 38.6%
Capital expenditures........................................ $ 15,593 $ 22,042 $ 20,469
Deficiency of earnings to cover fixed charges(3)............ (129) (5,403) (10,232)
OPERATING DATA (END OF PERIOD, EXCEPT AVERAGE):
Homes passed(4)............................................. 234,994 270,430 315,629
Basic subscribers(5)........................................ 131,148 143,829 172,557
Basic penetration(6)........................................ 55.8% 53.2% 54.7%
Digital subscribers......................................... -- 65 1,254
Premium subscribers(7)...................................... 92,247 99,644 122,404
Premium penetration(8)...................................... 70.3% 69.3% 70.9%
Average monthly basic revenue per basic subscriber(9)....... $ 24.80 $ 26.31 $ 28.17
Average monthly total revenue per basic subscriber(10)...... $ 32.05 $ 33.68 $ 35.64
</TABLE>
13
<PAGE> 18
- ---------------
(1) Adjusted EBITDA is defined as operating income (loss) plus depreciation and
amortization plus non-cash operating charges. Non-cash operating charges
for the years ended December 31, 1996, 1997 and 1998 related to employee
stock compensation were $1,458,000, $3,519,000 and $7,888,000,
respectively. Adjusted EBITDA is presented because we believe it is a
widely accepted financial indicator of a company's ability to incur and
service debt. We believe that Adjusted EBITDA is not intended to be a
performance measure that should be regarded as an alternative to, or more
meaningful than, either operating income or net income as an indicator of
operating performance or to cash provided by operations as a measure of
liquidity, is not intended to represent funds available for dividends,
reinvestment or other discretionary uses, and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles. Adjusted EBITDA
measures presented may not be comparable to similarly titled measures
presented by other companies.
(2) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of
revenues. This measurement is used by us, and is commonly used in the cable
television industry, to analyze and compare cable television companies on
the basis of operating performance. We believe that Adjusted EBITDA margin
is not intended to be a performance measure that should be regarded as an
alternative either to operating income or net income as prepared in
accordance with generally accepted accounting principles. Adjusted EBITDA
measures presented may not be comparable to similarly titled measures
presented by other companies.
(3) Deficiency of earnings consists of loss before income tax benefit (expense)
and cumulative effect of change in accounting principle. Fixed charges
consist of interest expense and the interest portion of rental expense.
(4) Homes passed refers to estimates by us of the approximate number of
dwelling units in a particular community that can be connected to our cable
television distribution system without any further extension of principal
transmission lines.
(5) A home with one or more television sets connected to a cable system is
counted as one basic subscriber. Bulk accounts are included on an
equivalent basic unit basis in which the total monthly bill for the account
is divided by the basic monthly charge for a single outlet in the area.
(6) Penetration is calculated as the number of basic subscribers as a
percentage of homes passed.
(7) Each premium channel received is counted as a separate premium subscriber.
(8) Premium penetration is calculated as the number of premium subscribers as a
percentage of basic subscribers.
(9) Average monthly basic revenue per basic subscriber equals revenues from
basic subscriptions of cable systems during the respective period divided
by the months in the period and divided by the weighted average number of
Buford's basic subscribers for the respective period.
(10) Average monthly total revenue per basic subscriber equals total revenues of
cable systems during the respective period divided by the months in the
period and divided by the weighted average number of Buford's basic
subscribers for the respective period.
14
<PAGE> 19
RISK FACTORS
Before you participate in the exchange offer, you should be aware that
there are various risks, including those described below. You should carefully
consider these risk factors, together with all of the other information included
in this prospectus.
WE HAVE SIGNIFICANT DEBT WHICH MAY LIMIT FUNDS AVAILABLE TO OPERATE AND COMPETE
EFFECTIVELY.
We have a significant amount of debt outstanding. As of December 31, 1999,
pro forma for the Star acquisition and the offering of the old notes, we would
have owed approximately $543.5 million under our various debt agreements. We are
currently able to borrow $175 million under our credit facility, subject to
certain limitations. Under our credit facility, we are required to make minimum
principal payments totaling approximately $0.4 million beginning in 2001,
increasing to $1.9 million by 2007, with all unpaid amounts due by 2008. You
should be aware that this significant amount of debt could have important
consequences to you, including the following:
- We may be unable to obtain additional financing for working capital,
capital expenditures, acquisitions and general corporate purposes;
- A significant portion of our cash flow from operations must be dedicated
to the repayment of indebtedness, which will reduce the amount of cash we
have available for other purposes;
- We may be disadvantaged as compared to our competitors as a result of the
significant amount of debt we now owe; and
- Our ability to adjust to changing market conditions and our ability to
withstand competition may be hampered by the amount of debt we now owe.
It may also make us more vulnerable in a market downturn.
Our earnings on a pro forma basis were not sufficient to cover our fixed
charges by $73.6 million for the year ended December 31, 1999. However, you
should know that these amounts reflect non-cash charges for depreciation,
amortization and compensation totaling approximately $87.8 million for the year
ended December 31, 1999.
DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR SUBSIDIARIES WILL BE ABLE TO
INCUR SUBSTANTIALLY MORE DEBT. THIS COULD FURTHER EXACERBATE THE RISKS
ASSOCIATED WITH OUR SUBSTANTIAL LEVERAGE.
We and our subsidiaries will be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. Our credit facility permits additional
borrowing of up to $175 million, subject to certain limitations, and all of
those borrowings would be senior to the notes and the subsidiary guarantees. If
new debt is added to our and our subsidiaries' current debt levels, the related
risks that we and they now face could intensify. See "Description of Other
Indebtedness" and "Description of Notes."
WE MAY NOT HAVE ENOUGH CASH TO SERVICE OUR INDEBTEDNESS AND TO FUND OUR CAPITAL
EXPENDITURES AND ACQUISITIONS.
We intend to upgrade a significant portion of our cable systems over the
coming years and make other capital investments. Over the next four years, we
plan to spend approximately $200 million to maintain, expand and upgrade the
systems we own, including the systems recently acquired from Star. We have never
managed a capital expenditure program of this size and the cost of our plans
could increase if we fail to effectively execute our plan. Our ability to make
payments on and to refinance our indebtedness, including these notes, and to
fund planned capital expenditures and acquisitions will depend on our ability to
generate cash in the future. This, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control.
15
<PAGE> 20
We cannot assure you that our business will generate sufficient cash flow
from operations and that currently anticipated cost savings and operating
improvements will be realized on schedule in an amount sufficient to enable us
to pay our indebtedness, including indebtedness under these notes, or to fund
our other liquidity needs. We may need to refinance all or a portion of our
indebtedness, including these notes, on or before maturity. We cannot assure you
that we will be able to refinance any of our indebtedness, including our credit
facility, on commercially reasonable terms or at all.
WE MAY NOT BE ABLE TO CONTINUE OUR ACQUISITION STRATEGY.
A significant element of our growth strategy is to expand by acquiring
cable television systems located in reasonable proximity to existing systems or
of a sufficient size to enable the acquired system to serve as the basis for a
regional cluster. We cannot assure you that we will be able to identify and
acquire additional cable systems or that we will be able to finance significant
acquisitions in the future. See "Business -- Our Strategy."
IF THE OPERATIONS OF THE COMPANIES THAT WE ACQUIRE ARE NOT SUCCESSFULLY
INTEGRATED WITH OUR OPERATIONS, OUR FINANCIAL RESULTS MAY BE ADVERSELY AFFECTED.
The benefits we anticipate in our combination with Buford and Star may not
be realized if combining our business, Buford's business and Star's business
cannot be accomplished in an efficient and effective manner. This combination
will require, among other things, the integration of management philosophies and
personnel, arrangements with third party vendors, standardization of training
programs, realization of operating efficiencies and effective coordination of
sales and marketing and financial reporting efforts. Acquisitions in general
pose a number of special risks for us, including adverse short-term effects on
our reported operating results, diversion of management's attention, and
unanticipated problems or legal liabilities. Future acquisitions and the
integration of other companies' operations into ours may not be successful or
accomplished efficiently. If we fail to integrate Buford's and Star's operations
successfully, our operations and our financial results could be affected, both
materially and adversely.
IF WE CANNOT ADEQUATELY MANAGE OUR INCREASED SIZE RESULTING FROM OUR ACQUISITION
OF BUFORD AND STAR, OUR FUTURE OPERATIONS MAY BE ADVERSELY AFFECTED.
Our operations approximately doubled with the purchase of Buford. The Star
acquisition resulted in the addition of 37 systems to our operations. Our future
operations depend largely upon our ability to manage this sizeable and growing
business successfully. In addition, our management team now manages a larger
number of cable operations than it has previously operated. If we fail to manage
the size and the growth of our business or our expansion plans, a material
adverse effect could result.
WE EXPECT TO CONTINUE TO INCUR NET LOSSES.
We had a pro forma consolidated net loss of $48.6 million for the year
ended December 31, 1999. We expect to continue to incur net losses for the
foreseeable future. These losses reflect significant depreciation and
amortization charges and interest expense on debt we incurred. We cannot assure
you that we will become profitable in the foreseeable future, if ever. You
should also be aware that there are restrictions and limitations on our ability
to utilize our net operating losses for federal income tax purposes in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations -- Classic Cable."
16
<PAGE> 21
OUR DEBT AGREEMENTS MAY SIGNIFICANTLY LIMIT OR PROHIBIT US FROM ENGAGING IN
CERTAIN TRANSACTIONS.
The indenture governing the notes, our other indentures and our credit
facility impose significant operating and financial restrictions on us and our
subsidiaries.
The loan documents we signed to borrow money to acquire Buford impose
significant restrictive covenants on us and require us to maintain specified
financial ratios and satisfy certain financial tests. Our ability to meet these
financial ratios and tests may be affected by events beyond our control and, as
a result, we cannot assure you that we will be able to meet such tests. In
addition, the restrictions contained in our credit facility could limit our
ability to obtain future financing, make needed capital expenditures, withstand
a future downturn in our business or in the economy or otherwise conduct
necessary corporate activities. Our failure to comply with the restrictions in
our indentures and our credit facility could lead to a default under the terms
of those documents. In the event of such a default, the lenders could declare
all amounts borrowed and all amounts due under other instruments that contain
certain provisions for cross-acceleration or cross-default due and payable. In
addition, the lenders could terminate their commitments to lend to us in the
future. If that occurs, we cannot assure you that we would be able to meet debt
service and other obligations or that we would be able to find additional
alternative financing. Even if we could obtain additional alternative financing,
we cannot assure you that it would be on terms that are favorable or acceptable
to us.
You should also be aware that the existing indebtedness under our credit
facility is secured by substantially all of our and our subsidiaries' assets.
Should a default or acceleration of this indebtedness occur, the holders of this
indebtedness could sell the assets to satisfy all or a part of what is owed. See
"Description of Notes -- Certain Covenants" and "Description of Other
Indebtedness."
YOUR RIGHTS TO PAYMENT ON THE NOTES ARE SUBORDINATE TO OUR SENIOR DEBT.
The notes will be unsecured and subordinated in right of payment to all of
our existing and future senior indebtedness, including obligations under our
credit facility. As a result, in the event of a default in payment of or
acceleration of our other indebtedness, or upon our liquidation, reorganization,
insolvency, bankruptcy, or dissolution, holders of senior indebtedness will be
entitled to receive payment in full prior to any payment being made on the
notes. As of December 31, 1999, pro forma for the Star acquisition, we would
have had approximately $165.5 million of senior indebtedness. If any default
exists with respect to certain senior indebtedness under our credit facility and
certain other conditions are satisfied, we may not make any payments on the
notes for a designated period of time. As a result of the subordination
provisions, upon the occurrence of any such event, there may be insufficient
assets remaining after payment of senior indebtedness to pay amounts due on the
notes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Description of
Notes -- Subordination."
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURE TO PURCHASE THESE NOTES.
If we or Classic Communications has a change of control, we will be
required to make an offer to purchase all of the notes under the indenture then
outstanding. We would be required to purchase the notes at 101% of their
principal amount, plus accrued interest and special interest, if any, to the
date of repurchase. If a change of control occurs, we cannot be sure that we
would have enough funds to pay for all of the notes. If we are required to
purchase the notes, we would need to secure third-party financing if we do not
have available funds to meet our purchase obligations. However, we cannot assure
you that we would be able to secure such financing on favorable terms, if at
all.
17
<PAGE> 22
Also, our financing arrangements will restrict our ability to repurchase
the notes, including pursuant to a change of control. Furthermore, a change of
control will result in an event of default under our credit facility and may
lead to an acceleration of any other senior indebtedness we may have at that
time. In such event, the subordination provisions of the notes would require us
to pay our credit facility and any other senior indebtedness in full before
repurchasing notes. In addition, a change of control could require us to
repurchase our existing notes. See "Description of Notes -- Repurchase at the
Option of Holders -- Change of Control." The inability to repay senior
indebtedness, if accelerated, and to purchase all of the tendered notes, would
constitute an event of default under the indenture.
BRERA CLASSIC IS THE CONTROLLING STOCKHOLDER OF CLASSIC COMMUNICATIONS.
Classic Communications has two classes of voting common stock -- Class A
common stock, which carries one vote per share, and Class B common stock which
carries ten votes per share. Holders of Class B common stock control
approximately 87.9% of the voting power of Classic Communications. Brera Classic
owns approximately 88.0% of the Class B common stock, representing an
approximate 77.3% voting interest. Since we are wholly-owned by Classic
Communications, Brera Classic controls us and has the ability to select the
majority of our directors. The board, in turn, may appoint new senior
management. The interests of Brera Classic and its respective affiliates may
conflict with the interests of the holders of the notes.
OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF KEY PERSONNEL. THE LOSS OF ANY ONE
OF THESE PERSONS COULD ADVERSELY AFFECT OUR BUSINESS.
Our continued success is highly dependent upon the personal efforts and
abilities of our senior management, including J. Merritt Belisle, our Chief
Executive Officer, and Steven E. Seach, our President and Chief Financial
Officer. Although we have employment contracts with these officers, we cannot
assure you that their services will continue to be available to us and the loss
of either one of them could impact us in a negative way.
WE CANNOT ASSURE YOU THAT OUR FRANCHISES WILL BE RENEWED OR THAT A FRANCHISING
AUTHORITY WILL NOT GRANT A FRANCHISE IN OUR MARKETS TO A COMPETITOR.
Our business is dependent upon the retention and renewal of our local
franchises. Franchises typically impose conditions relating to the operation of
cable television systems, including requirements relating to the payment of
fees, system bandwidth capacity, customer service requirements, franchise
renewal and termination. Historically, franchises have been renewed for cable
operators that have provided satisfactory services and have complied with the
terms of their franchises. We may not be able to retain or renew such
franchises, or renew these franchises on terms as favorable to us as our
existing franchises. Furthermore, it is possible that a franchising authority
might grant a franchise to another cable company or other telecommunications
provider seeking to provide cable services. The non-renewal or termination of
franchises relating to a significant portion of our subscribers could have a
material adverse effect on our results of operations. See
"Business -- Franchises."
OUR BUSINESS IS SUBJECT TO COMPREHENSIVE LEGISLATION AND GOVERNMENT REGULATION.
The cable television industry is subject to extensive regulation at the
federal and local levels, and in some cases, at the state level. The 1984 Cable
Act, the 1992 Cable Act and the 1996 Telecom Act establish a national policy to
guide the development and regulation of cable television systems. Principal
responsibility for implementing the policies of the Cable Acts and 1996 Telecom
Act has been allocated between the FCC and state or local regulatory
authorities. We cannot predict the effect that ongoing or future developments
may have on the cable communications industry or on our operations and we cannot
assure you that our revenues and
18
<PAGE> 23
results of operations will not be adversely affected in the future by regulation
of cable system rates.
In June 1999, a federal district court in Oregon held that, as a condition
of approving AT&T's acquisition of TCI's cable franchises, the City of Portland
had the authority to require AT&T to provide competing Internet and other
on-line services providers with open access to AT&T's cable platforms. This case
has been appealed. Open access requirements have also been adopted in
approximately a dozen communities nationwide and are being considered by a
number of other franchising authorities. Some of these decisions are on appeal.
Similar conditions could be imposed upon us, either pursuant to a local
franchising authority's approval of a merger or other transaction between us and
another company or through future regulatory or legislative developments at the
federal, state or local level. On the other hand, future regulatory or
legislative developments at the federal or state level could limit the authority
of local franchising authorities to impose such conditions. Restrictions along
these lines, if upheld or enacted, could prohibit us from entering into
exclusive agreements with affiliated, and possibly unaffiliated, providers of
Internet access services. As a result of such open-access pressure, AT&T, Time
Warner, Comcast and Cox have recently announced that they would open their cable
platforms to unaffiliated Internet service providers in 2002. These actions may
lead other cable operators to provide contractually for open access, especially
if regulatory or legislative pressure to provide open access increases. In
addition, we may face increased competition in the provision of Internet access
services and other services from other Internet access service providers and
other providers of video services via the Internet and we cannot assure you that
our revenues and results of operations will not be adversely affected in the
future by open-access regulations or legislation. See "Legislation and
Regulation -- Federal Regulation -- Cable Entry into Telecommunications and
Broadband Services."
A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies. Although no state in which we currently
operate has enacted state level regulation, we cannot assure you that the states
in which we do operate will not enact such regulation, or that we will not
acquire any other cable systems in a state that does regulate our business. See
"Legislation and Regulation -- State and Local Regulation." Government
regulations at any level may affect our ability to obtain a sufficient return on
our investments. Furthermore, the regulations are changing rapidly to allow
significantly increased competition among various service providers. See
"Legislation and Regulation."
THE CABLE TELEVISION INDUSTRY IS EXTREMELY COMPETITIVE AND WE CANNOT PREDICT
WHETHER WE WILL BE SUCCESSFUL IN REMAINING COMPETITIVE.
We compete with other operators of cable systems, including systems
operated by local governments, and with other distribution systems capable of
delivering programming to homes or businesses, including direct broadcast
satellite systems, known as DBS, and multichannel multipoint distribution
service systems, known as wireless cable, which use low-power microwave
frequencies to transmit video programming over the air to customers. Within the
home video programming market, we compete with other cable franchise holders and
with DBS and wireless cable providers. In recent years, the FCC has adopted
policies providing for a more favorable operating environment for new and
existing technologies that provide, or have the potential to provide,
substantial competition to cable systems. Programming comparable to that of
cable systems is currently available to the owners of home satellite dish earth
stations through high-powered satellites. Two companies offer DBS service in the
United States. In recent years there has been significant national growth in the
number of subscribers to DBS services, and such growth will be assisted by the
recent passage of legislation authorizing the carriage of local broadcast
signals by DBS providers.
In addition, recent FCC and judicial decisions and federal legislation have
enabled local telephone companies to provide a wide variety of video and data
services competitive with
19
<PAGE> 24
services provided by cable systems and to provide cable services directly to
customers. We cannot predict the extent to which competition will materialize
from other cable television operators, other distribution systems for delivering
video programming to the home or other potential competitors, or, if such
competition materializes, the extent of its effect on us. Various local exchange
carriers currently are providing video programming services within and outside
their telephone service areas through a variety of distribution methods,
including both the deployment of broadband cable facilities and the use of
wireless transmission facilities. In addition, a substantial transaction
involving a cable system operator and an Internet services provider has recently
been announced, and other transactions in the cable system, content and Internet
services industries have been or soon may be announced. Our services and the
competition we face may be affected by such industry consolidation. As a result,
we cannot predict the eventual effect of these regulations. Advances in
communications technology, as well as changes in the marketplace and the
regulatory and legislative environment, are constantly occurring. As a result,
we cannot predict the effect that ongoing or future developments might have on
the cable industry. See "Business -- Competition" and "Legislation and
Regulation."
WE COULD BE ADVERSELY AFFECTED IF OUR OR OUR VENDORS' COMPUTER SYSTEMS ARE NOT
YEAR 2000 COMPLIANT.
Year 2000 issues exist when dates are recorded in computers using two
digits, rather than four, and are then used for arithmetic operations,
comparisons or sorting. A two-digit recording may recognize a date using "00" as
1900 rather than 2000, which could cause our computer systems to perform
inaccurate computations. During 1999, we planned, inventoried and evaluated
systems, remediated, replaced where and when necessary and tested such
remediation and replacements. We used internal information systems technology,
personnel and other personnel. As a result, we experienced no year 2000 related
issues on January 1, 2000. We recognize that there may be residual effects
related to year 2000 issues. Our assessment of our year 2000 readiness will be
ongoing as we continue to develop our operating systems and rely on our vendors'
or their vendors' systems. We do not have any way to assess the costs related to
remediation of any residual year 2000 effect. We intend to use internal
resources for such remediation where possible. We may in the future identify a
significant internal or external year 2000 related residual issue which, if not
remedied in a timely manner could have a material adverse effect on our
business, financial condition and results of operations.
WE ARE A HOLDING COMPANY AND ARE DEPENDENT ON THE OPERATIONS OF OUR
SUBSIDIARIES.
We are a holding company and are dependent on the cash flow generated by
our direct and indirect operating subsidiaries. We must rely on dividends or
other intercompany transfers from our operating subsidiaries to generate the
funds necessary to meet debt service and other obligations, including the
payment of principal and interest on the notes. The ability of our subsidiaries
to pay dividends or make other payments will be subject to applicable state
laws.
THE INCURRENCE OF THIS INDEBTEDNESS MAY BE VOIDED BY A COURT IF THE COURT
DETERMINES THAT THE INCURRENCE OF THIS INDEBTEDNESS RESULTED IN A FRAUDULENT
TRANSFER.
In the event of the bankruptcy or insolvency of any of the subsidiary
guarantors, the incurrence by each subsidiary guarantor of its guarantee of
these notes would be subject to review under relevant federal and state
fraudulent conveyance and similar statutes in a bankruptcy or reorganization
case or a lawsuit by or on behalf of creditors of such subsidiary guarantor.
Under those statutes, if a court were to find that the subsidiary guarantee was
incurred with the intent of hindering, delaying or defrauding creditors or that
such subsidiary guarantor received less than a reasonably equivalent value or
fair consideration therefor and, at the time of its incurrence, the subsidiary
guarantor either (a) was insolvent or rendered insolvent by reason thereof, (b)
was engaged in a business or transaction for which its remaining
20
<PAGE> 25
unencumbered assets constituted unreasonably small capital, or (c) intended to
or believed that it would incur debts beyond its ability to pay as they matured
or became due, the court could void those obligations.
The measure of insolvency for purposes of a fraudulent conveyance claim
will vary depending upon the law of the jurisdiction being applied. Generally,
however, a company is considered insolvent at a particular time if the sum of
its debts is greater than the then fair value of its assets, or if the fair
salable value of its assets is less than the amount that would be required to
pay its probable liability on its existing debts as they become absolute and
mature. As of December 31, 1999, pro forma for the Star acquisition and the
offering of the old notes, we would have had total indebtedness of approximately
$543.5 million and we believe that the total fair value of our assets is not
less than that amount. We believe that each of our subsidiary guarantors is (a)
neither insolvent nor rendered insolvent by the incurrence of its subsidiary
guarantee, (b) in possession of sufficient capital to run its business
effectively, and (c) incurring debts within its ability to pay as the same
mature or become due. We cannot assure you, however, that the assumptions and
methodologies used by us in reaching our conclusions about the solvency of the
subsidiary guarantors would be adopted by a court or that a court would concur
with those conclusions.
In the event that the subsidiary guarantee of a subsidiary guarantor was
voided as a fraudulent conveyance, holders of the notes would effectively be
subordinated to all indebtedness and other liabilities and commitments of such
subsidiary guarantor.
YOU MAY FIND IT DIFFICULT TO SELL YOUR NOTES.
Currently, there is no public market for the notes. We do not intend to
apply for listing of the notes on any securities exchange or on any automated
dealer quotation system. Although the initial purchasers have informed us that
they intend to make a market in the notes, they are not obligated to do so and
may discontinue any such market at any time without notice. In addition, such
market making activity may be limited during the exchange offer or during an
offering under a shelf registration statement should we decide to file one. As a
result, we can make no assurances to you as to the development or liquidity of
any market for the notes, your ability to sell the notes, or the price at which
you may be able to sell the notes. Future trading prices of the notes will
depend on many factors, including, among other things, prevailing interest
rates, our operating results and the market for similar securities.
Historically, the market for securities similar to the notes, including
non-investment grade debt, have been subject to disruptions that have caused
substantial volatility in the prices of such securities. We cannot assure you
that, if a market develops, it will not be subject to similar disruptions.
21
<PAGE> 26
FORWARD-LOOKING STATEMENTS
The statements, other than statements of historical fact, included in this
prospectus are forward-looking statements. These statements include, but are not
limited to:
- statements regarding our plans for future acquisitions;
- statements regarding integration of our cable systems and future acquired
systems;
- statements regarding our planned capital expenditures and system
upgrades; and
- statements regarding the offering of video and Internet access on our
systems.
Forward-looking statements generally can also be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "plan," "seek," or "believe." We believe that the
expectations reflected in such forward-looking statements are accurate. However,
we cannot assure you that such expectations will occur. Our actual future
performance could differ materially from such statements. Factors that could
cause such or contribute to such differences include, but are not limited to:
- the uncertainties and/or potential delays associated with integrating
Buford and Star and future acquisitions;
- our ability to acquire additional cable systems on terms favorable to us;
- the passage of legislation or court decisions adversely affecting the
cable industry;
- our ability to repay or refinance our outstanding indebtedness;
- the timing, actual cost and allocation of our capital expenditures and
system upgrades;
- our potential need for additional capital;
- competition in the cable industry;
- the advent of new technology; and
- seasonality.
You should not unduly rely on these forward-looking statements, which speak
only as of the date of this prospectus. Except as required by law, we are not
obligated to publicly release any revisions to these forward-looking statements
to reflect events or circumstances occurring after the date of this prospectus
or to reflect the occurrence of unanticipated events. Important factors that
could cause our actual results to differ materially from our expectations are
discussed under "Risk Factors" and elsewhere in this prospectus. All subsequent
written and oral forward-looking statements attributable to Classic, or persons
acting on its behalf, are expressly qualified in their entirety by the
statements in those sections.
22
<PAGE> 27
USE OF PROCEEDS
This exchange offer is intended to satisfy our obligations under the
exchange and registration rights agreement dated as of February 16, 2000 by and
between Classic and Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Chase Securities Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, as initial purchasers. We will not receive any cash proceeds from
the issuance of the exchange notes. We will only receive old notes with a total
principal amount equal to the total principal amount of the exchange notes
issued in the exchange offer.
The net proceeds from the offering of the old notes were approximately
$216.7. We used the net proceeds from the offering to repay $100 million of the
outstanding indebtedness under our credit facility, repurchase approximately $36
million aggregate principal amount of our 9 7/8% senior subordinated notes due
2008 and finance a portion of the Star acquisition. The sources and uses of
funds from the offering of the old notes were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Net proceeds from offering of old notes................... $216,687
Available cash............................................ 30,038
--------
$246,725
========
USES OF FUNDS:
Purchase Star............................................. $110,000
Repayment of a portion of the 1999 credit facility........ 100,000
Repayment of a portion of the 2008 subordinated notes and
related costs.......................................... 36,725
--------
$246,725
========
</TABLE>
- ---------------
* Purchase price excludes equity contributed by Classic Communications as well
as the effect of any working capital adjustment.
In order to finance a portion of the Buford acquisition purchase price in
July of 1999, Classic entered into the 1999 credit facility, agented by Goldman
Sachs Credit Partners, L.P., Union Bank of California, N.A. and The Chase
Manhattan Bank. We used a portion of the net proceeds from the sale of the old
notes to repay $100 million of the borrowings under the 1999 credit facility,
which totaled $265 million at December 31, 1999. The weighted average interest
rate for borrowings under the credit facility repaid amounted to 8.0% for the
period ended December 31, 1999, excluding the amortization of financing costs.
The revolving credit facility and the term loan A facility mature on July 31,
2007. The term loan B facility and term loan C facility mature on January 31,
2008.
23
<PAGE> 28
CAPITALIZATION
The following table sets forth as of December 31, 1999 on a consolidated
basis:
- the actual capitalization of Classic;
- the pro forma capitalization of Classic to reflect:
(1) the issuance and sale by Classic of the old notes for net proceeds
of $216.7 million, after deducting underwriting discounts and estimated
offering expenses totaling $8.3 million and related credit facility
repayment as described in "Use of Proceeds";
(2) the repurchase of approximately $36 million aggregate principal
amount of our 2008 subordinated notes and related costs; and
(3) the acquisition of substantially all the assets of Star by a
subsidiary of Classic and the related financing.
This table should be read in conjunction with the "Unaudited Pro Forma
Financial Statements" and the accompanying notes included elsewhere in this
offering circular. See also "Use of Proceeds."
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets
Cash and cash equivalents................................. $ 85,855 $ 56,693
========= =========
Long-term debt:
10 1/2% senior subordinated notes......................... -- 225,000
9 7/8% senior subordinated notes.......................... 39,005 3,000
Discount on 9 7/8% senior subordinated notes.............. (151) --
9 3/8% senior subordinated notes.......................... 150,000 150,000
The 1999 credit facility.................................. 265,000 165,000
Other..................................................... 478 478
--------- ---------
Total long-term debt.............................. 454,332 543,478
Stockholder's equity
Common stock.............................................. -- --
Additional paid-in capital................................ 267,241 280,713
Accumulated deficit....................................... (109,061) (128,295)
--------- ---------
Total stockholder's equity........................ 158,180 152,418
--------- ---------
Total capitalization.............................. $ 612,512 $ 695,896
========= =========
</TABLE>
24
<PAGE> 29
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Financial Information is
based on the audited and unaudited financial statements of Classic, Buford, and
Star included elsewhere in this prospectus. The unaudited pro forma adjustments
are based upon available information and certain assumptions that we believe are
reasonable. The Unaudited Pro Forma Consolidated Financial Information and
accompanying notes should be read in conjunction with the historical financial
statements of Classic, Buford, and Star and the respective notes to those
statements, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus.
The Unaudited Pro Forma Consolidated Balance Sheet has been prepared to
give effect to (1) the acquisition of substantially all of the assets of Star by
a subsidiary of Classic, (2) the offering of the old notes, (3) the repurchase
of approximately $36 million aggregate principal amount of our 2008 subordinated
notes and related costs and (4) the repayment of a portion of the 1999 credit
facility as if all such transactions had occurred on December 31, 1999. The
Unaudited Pro Forma Consolidated Statements of Operations have been prepared to
give effect to (1) the transactions set forth in the previous sentence, (2) the
completed acquisition of Buford and the related financing and (3) the partial
redemption of our 2008 subordinated notes and the related financing, as if all
such transactions had occurred on January 1, 1999. All acquisitions are
accounted for under the purchase method of accounting. The Unaudited Pro Forma
Consolidated Financial Information reflects our allocation of our purchase price
for the Star acquisition based upon our current estimates of the fair values of
the assets acquired and liabilities assumed. The allocation of the final
purchase price may vary as additional information is obtained and, accordingly,
the ultimate allocation may differ from those used in the Unaudited Pro Forma
Consolidated Financial Information.
The Unaudited Pro Forma Consolidated Financial Information does not purport
to be indicative of the results that would have been obtained had the
transactions been completed as of the assumed date and for the periods presented
or that may be obtained in the future. The Unaudited Pro Forma Consolidated
Financial Information is included in this prospectus for informational purposes,
and while we believe that it may be helpful in understanding our combined
operations for the periods indicated, you should not unduly rely on the
information.
25
<PAGE> 30
CLASSIC CABLE, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASSIC STAR ADJUSTMENTS PRO FORMA
------- ---- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 85,855 $ 4,873 $(34,035)(10,22) $ 56,693
Accounts receivable, net.................................... 9,803 956 -- 10,759
Prepaid expenses............................................ 1,131 537 -- 1,668
Property, plant and equipment............................... 274,864 72,814 (21,933)(2,14) 325,745
Accumulated depreciation.................................... (60,939) (19,878) 19,878(3) (60,939)
--------- -------- -------- ---------
213,925 52,936 (2,055) 264,806
Deferred financing costs, net............................... 20,136 390 (10,440)(4,19,26) 10,086
Advances to parent.......................................... 908 -- -- 908
Intangible assets:
Subscriber relationships................................... 156,567 538 33,342(5,15) 190,447
Franchise rights........................................... 158,105 16,128 19,508(6,16) 193,741
Noncompete agreements...................................... 25,425 1,416 1,472(7,17) 28,313
Goodwill................................................... 102,261 9,076 (8,472)(8,18) 102,865
--------- -------- -------- ---------
442,358 27,158 45,850 515,366
Less accumulated amortization............................... (96,428) (9,042) 9,042(9) (96,428)
--------- -------- -------- ---------
345,930 18,116 54,892 418,938
--------- -------- -------- ---------
Total assets......................................... $ 677,688 $ 77,808 $ 8,362 $ 763,858
========= ======== ======== =========
LIABILITIES AND STOCKHOLDER'S (DEFICIT) EQUITY
Liabilities:
Accounts payable........................................... $ 3,254 $ 1,350 $ -- $ 4,604
Subscriber deposits and unearned income.................... 6,675 1,306 -- 7,981
Accrued expenses........................................... 15,606 643 (513)(11) 15,736
Accrued interest........................................... 10,676 420 (420)(12) 10,676
Long-term debt............................................. 454,332 90,234 (1,088)(13,19,21,23,24) 543,478
Deferred taxes, net........................................ 28,965 -- -- 28,965
--------- -------- -------- ---------
Total liabilities.................................... 519,508 93,953 (2,021) 611,440
Stockholder's (deficit) equity:
Common stock............................................... -- -- -- --
Additional paid-in capital................................. 267,241 -- 13,472(20) 280,713
Accumulated deficit........................................ (109,061) (16,145) (3,089)(1,19,25) (128,295)
--------- -------- -------- ---------
Total stockholder's (deficit) equity................. 158,180 (16,145) 10,383 152,418
--------- -------- -------- ---------
Total liabilities and stockholder's equity........... $ 677,688 $ 77,808 $ 8,362 $ 763,858
========= ======== ======== =========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet.
26
<PAGE> 31
CLASSIC CABLE, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
Set forth below are the notes to the Unaudited Pro Forma Consolidated
Balance Sheet. The letters set forth next to the line items below correspond to
the letters set forth on the Unaudited Pro Forma Consolidated Balance Sheet. The
following pro forma adjustments to the unaudited consolidated balance sheet
assume: (1) the acquisition of substantially all of the assets of Star by a
subsidiary of Classic; (2) the offering of the old notes; (3) the repurchase of
approximately $36 million aggregate principal amount of our 2008 subordinated
notes; and (4) the repayment of a portion of the 1999 credit facility as if all
such transactions had occurred on December 31, 1999.
The Star acquisition was accounted for using the purchase method. The cost
of the acquisition will be allocated based on the fair value of the assets
acquired and liabilities assumed, based upon a valuation that is not yet
complete.
The preliminary allocation of the final purchase price of Star is as
follows:
<TABLE>
<CAPTION>
STAR
--------
<C> <S> <C>
Purchase price.............................................. $122,596
========
(1) Eliminate partner's deficiency.............................. (16,145)
Eliminate historical property, plant and equipment:
(2) Costs....................................................... (72,814)
(3) Accumulated deprecation..................................... 19,878
Eliminate historical intangible assets:
(4) Deferred financing costs.................................... (390)
(5) Subscriber relationships.................................... (538)
(6) Franchise rights............................................ (16,128)
(7) Noncompete agreements....................................... (1,416)
(8) Goodwill and other intangible assets........................ (9,076)
(9) Accumulated amortization.................................... 9,042
(10) Eliminate cash not purchased................................ (4,873)
(11) Eliminate accrued expenses not assumed...................... 513
(12) Eliminate accrued interest not assumed...................... 420
(13) Eliminate long-term debt not assumed........................ 90,234
Adjustments to record assets at fair value:
(14) Property, plant and equipment............................... 50,881
(15) Subscriber relationships.................................... 33,880
(16) Franchise rights............................................ 35,636
(17) Noncompete agreements....................................... 2,888
(18) Goodwill.................................................... 604
--------
Total....................................................... $122,596
========
</TABLE>
27
<PAGE> 32
<TABLE>
<CAPTION>
(19) Concurrent with the offering of the old notes, we wrote off unamortized deferred
financing costs and discount of $18,363 and $151, respectively. The charge for these write
offs will be reflected as an extraordinary charge in the income statement for the period
during which the transactions occurred. No such charge is included in the pro forma
income statement information presented in this prospectus.
<C> <S> <C>
Sources and uses of funds for the Star acquisition and the offering of the old
notes are as follows:
</TABLE>
<TABLE>
<S> <C> <C>
SOURCES OF FUNDS:
(20) Capital contribution from Classic Communications*........... $ 13,472
(21) Proceeds from the offering of the old notes................. 225,000
(22) Cash........................................................ 29,162
--------
$267,634
========
USES OF FUNDS:
Purchase Star............................................... $122,596
(23) Repayment of a portion of the 1999 credit facility.......... 100,000
(24) Repayment of a portion of the 2008 subordinated notes....... 36,005
(25) Payment of premium on the 2008 subordinated notes........... 720
(26) Fees and expenses........................................... 8,313
--------
$267,634
========
</TABLE>
- ---------------
* Represents the portion of the purchase price paid with 555,555 shares of the
Class A common stock of Classic Communications.
28
<PAGE> 33
CLASSIC CABLE, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASSIC BUFORD(1) STAR ADJUSTMENTS PRO FORMA
------- --------- ---- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues.................................... $111,410 $44,901 $24,981 $ -- $181,292
Operating expenses:
Programming............................ 29,906 12,468 7,407 -- 49,781
Plant and operating.................... 12,744 4,325 3,707 -- 20,776
General and administrative............. 17,126 12,305 2,444 -- 31,875
Marketing and advertising.............. 1,929 972 251 -- 3,152
Corporate overhead..................... 9,721 260 876 (1,938)(a) 8,919
Depreciation and amortization.......... 51,484 14,052 7,415 12,977(b) 85,928
-------- ------- ------- -------- --------
Total operating expenses.......... 122,910 44,382 22,100 11,039 200,431
-------- ------- ------- -------- --------
Income (loss) from operations............... (11,500) 519 2,881 (11,039) (19,139)
Interest expense............................ (31,201) (4,642) (7,183) (11,755)(c) (54,781)
Other income (expense)...................... 605 (377) 109 -- 337
-------- ------- ------- -------- --------
Loss before income taxes.................... (42,096) (4,500) 4,193 (22,794) (73,583)
Income tax benefit.......................... 10,128 210 -- 14,680(d) 25,018
-------- ------- ------- -------- --------
Net loss.................................... $(31,968) $(4,290) $(4,193) $ (8,114) $(48,565)
======== ======= ======= ======== ========
</TABLE>
- ---------------
(1) Represents seven months activity from January 1, 1999 through its
acquisition by Classic.
See the Notes to Unaudited Pro Forma Consolidated Statement of Operations.
29
<PAGE> 34
CLASSIC CABLE, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
The accompanying Unaudited Pro Forma Consolidated Statements of Operations
for the year ended December 31, 1999 reflect the pro forma adjustments described
below as if (1) the completed acquisition of Buford by Classic and the related
financing, (2) the acquisition of substantially all of the assets of Star by a
subsidiary of Classic and the related financing, (3) the partial redemption of
our 2008 subordinated notes and the related financing, (4) the repurchase of
approximately $36 million aggregate principal amount of our 2008 subordinated
notes and related costs, (5) the repayment of a portion of the 1999 credit
facility and (6) the offering of the old notes as if all such transactions had
occurred on January 1, 1999. The Unaudited Pro Forma Consolidated Statements of
Operations combine the historical results of operations of Classic with those of
Buford and Star. These statements reflect the following adjustments:
(a) Classic formulated a restructuring plan whereby certain identified
employees of Buford's corporate management were terminated. The functions
of these employees were duplicative with those of Classic and there is no
expectation that the revenues generated by the Buford systems will be
adversely affected by the restructuring plan. The costs associated with
these employees were $1,062 for the year ended December 31, 1999.
Star pays a management fee to its general partner based upon a certain
percentage of revenues. This arrangement terminated upon the closing of the
Star acquisition. There is no expectation that the revenues generated by
the Star systems will be adversely affected by the termination of this
agreement. The costs associated with this agreement were $876 for the year
ended December 31, 1999.
(b) Represents pro forma adjustments to depreciation and amortization
in connection with the Buford acquisition and the Star acquisition. The
depreciation and amortization expense of property, plant and equipment and
intangible assets acquired, net of elimination of depreciation and
amortization expense on historical assets, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Depreciation and amortization expense on the purchased basis
of property, plant and equipment and intangible assets
acquired.................................................. $34,444
Elimination of historical depreciation and amortization
expense................................................... 21,467
-------
Total adjustment to depreciation and
amortization..................................... $12,977
=======
</TABLE>
30
<PAGE> 35
The property, plant, and equipment and intangible assets acquired in
connection with the Star acquisition are estimated below:
<TABLE>
<CAPTION>
DEPRECIATION/
AMORTIZATION
PERIOD
STAR (YEARS)
-------- -------------
<S> <C> <C>
Land...................................................... $ 367 --
Buildings................................................. 1,614 30
Leasehold improvements.................................... 338 7
Vehicles.................................................. 1,559 5
Cable television distribution systems..................... 18,142 12
UHF system................................................ 3,832 7
Mobile radio equipment.................................... 150 7
Headend electronics....................................... 10,905 7
Headend tower and antennae................................ 4,574 7
Microwave equipment....................................... 1,923 7
Shop and test equipment................................... 2,279 7
Drops..................................................... 3,974 7
Furniture and fixtures.................................... 664 7
Office equipment.......................................... 407 7
Computer hardware and equipment........................... 133 4
Computer software......................................... 20 3
Subscriber relationships.................................. 33,880 12
Franchise rights.......................................... 35,636 8
Noncompete agreements..................................... 2,888 3
Goodwill.................................................. 604 20
--------
$123,889
========
</TABLE>
(c) Represents:
- interest expense on the credit facility using a current interest
rate of 8.81% and 8.81% for the Term B and Term C loans,
respectively, per annum,
- interest expense on the 2010 senior subordinated notes using a
rate of 10.50% per annum,
- interest expense on the 2009 senior subordinated notes using a
rate of 9.375% per annum,
- amortization expense of deferred financing fees related to the
2010 senior subordinated notes, the 2009 senior subordinated
notes and the credit facility,
- elimination of historical interest expense related to Buford's
and Star's debt not assumed, and
31
<PAGE> 36
- elimination of historical interest expense from the 1998 credit
facility, the redeemed portion of the 2008 subordinated notes and
the paid down portion of the 1999 credit facility as well as the
elimination of the related amortization of deferred financing
costs, as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Interest expense on the credit facility..................... $ 5,748
Interest expense on the 2010 senior subordinated notes...... 23,625
Interest expense on the 2009 senior subordinated notes...... 8,086
Interest expense on the 2008 senior subordinated notes...... 296
Amortization expense of deferred financing fees............. 1,576
Elimination of historical interest expense on the 1998
credit facility, redeemed portion of the 2008 subordinated
notes, paid down portion of the 1999 credit facility,
subordinated debt and acquisition debt not assumed as well
as related amortization of deferred financing costs....... (27,576)
--------
Total increase to interest expense................ $ 11,755
========
</TABLE>
- ---------------
* The total effect of a 1/8% variance in the interest rate would be $206.
(d) Represents the:
- tax effect of pro forma adjustments, and
- recognition of tax benefit for the acquired systems which were
historically not allocated tax benefit by their former parent.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Pro forma loss before income taxes.......................... $(73,583)
Tax rate.................................................... 34%
--------
Pro forma income tax benefit................................ 25,018
Historical income tax benefit............................... (10,338)
--------
Total pro forma adjustment to income tax benefit............ $ 14,680
========
</TABLE>
32
<PAGE> 37
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA --
CLASSIC CABLE, INC.
The following table presents selected historical financial data about
Classic. You should read this information together with "Summary Historical
Financial and Operating Data -- Classic Cable, Inc.," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and Classic's
consolidated financial statements and the notes relating to those statements
included elsewhere in this offering circular.
Classic's selected historical financial data as of and for each of the five
years in the period ended December 31, 1999 have been derived from Classic's
consolidated financial statements, which have been audited and reported upon by
Ernst & Young LLP for the years ended December 31, 1995 and 1996 and
PricewaterhouseCoopers LLP for the years ended December 31, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................. $ 36,677 $ 59,821 $ 60,995 $ 69,802 $111,410
Costs and expenses........................................ 18,911 33,553 36,555 42,070 71,426
Depreciation and amortization............................. 16,427 27,510 27,832 30,531 51,484
-------- -------- -------- -------- --------
Operating income (loss)................................... 1,339 (1,242) (3,392) (2,799) (11,500)
Interest expense.......................................... (14,132) (20,164) (20,759) (20,688) (31,201)
Gain on sale of cable systems............................. -- 4,901 3,644 -- --
Write-off of abandoned telephone operations............... -- (2,994) (500) (220) --
Other income (expense).................................... -- -- 71 192 605
-------- -------- -------- -------- --------
Loss before income tax benefit, minority interest and
extraordinary loss...................................... (12,793) (19,499) (20,936) (23,515) (42,096)
Income tax benefit........................................ 4,510 6,633 7,149 2,339 10,128
Extraordinary loss........................................ (4,054) -- -- (5,524) (4,093)
-------- -------- -------- -------- --------
Net loss.................................................. $(12,337) $(12,866) $(13,787) $(26,700) $(36,061)
======== ======== ======== ======== ========
BALANCE SHEET DATA (END OF PERIOD):
Total assets.............................................. $271,496 $245,987 $220,218 $252,496 $677,688
Total debt................................................ 204,646 193,998 187,967 220,804 454,332
Total liabilities......................................... 229,426 215,826 202,887 239,354 519,508
Total redeemable preferred stock.......................... 1,293 1,293 1,293 -- --
Total stockholder's equity................................ 40,777 28,868 16,038 13,142 $158,180
</TABLE>
33
<PAGE> 38
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA -- BUFORD GROUP, INC.
The following table presents selected historical financial data about
Buford. You should read this information together with "Summary Historical
Financial and Operating Data -- Buford Group, Inc.," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and Buford's
consolidated financial statements and the notes relating to those statements
included elsewhere in this offering circular.
The selected data presented below under the headings "Income Statement
Data" and "Balance Sheet Data," for and as of the end of each of the years in
the five-year period ended December 31, 1998 are derived from Buford's
consolidated financial statements, which financial statements have been audited
by KPMG LLP, independent certified public accountants. The consolidated
financial statements as of December 31, 1998 and 1997, and for each of the years
in the three-year period ended December 31, 1998, and the auditors' report
thereon, are included elsewhere in this offering circular.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................... $ 37,032 $ 49,558 $ 49,561 $ 58,136 $ 70,475
Costs and expenses.......................................... 26,755 32,965 32,932 40,858 51,168
Depreciation and amortization............................... 13,670 17,379 17,175 17,753 21,399
-------- -------- -------- -------- --------
Operating income (loss)..................................... (3,393) (786) (546) (475) (2,092)
Interest expense............................................ (2,823) (6,332) (5,345) (5,787) (7,919)
Gain on sale of cable systems............................... -- 8,506 5,418 -- --
Other income (expense)...................................... 191 1,443 344 859 (221)
-------- -------- -------- -------- --------
Loss before income tax benefit (expense) and cumulative
effect of change in accounting principle.................. (6,025) 2,831 (129) (5,403) (10,232)
Income tax benefit (expense)................................ 3,027 7,235 (94) 315 226
Cumulative effect of change in accounting principle......... -- -- -- -- --
-------- -------- -------- -------- --------
Net income (loss)........................................... $ (2,998) $ 10,066 $ (223) $ (5,088) $(10,006)
======== ======== ======== ======== ========
BALANCE SHEET DATA (END OF PERIOD):
Total assets................................................ $127,702 $127,379 $117,676 $143,932 $175,953
Total debt.................................................. 72,110 70,643 60,053 85,000 118,000
Total liabilities........................................... 91,773 80,122 69,182 97,008 131,147
Total stockholders' equity.................................. 35,969 47,257 48,493 46,924 44,806
</TABLE>
34
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides additional information regarding our pro
forma financial condition for the year ended December 31, 1999. It also includes
historical information regarding our financial condition and results of
operations for each of the years ended December 31, 1997, 1998 and 1999. This
discussion should be read in conjunction with "Selected Historical Consolidated
Financial Data -- Classic Cable, Inc.," "Selected Historical Consolidated
Financial Data -- Buford Group, Inc.," "Unaudited Pro Forma Consolidated
Financial Information" and Classic's, Buford's and Star's consolidated financial
statements and the notes relating to those statements appearing elsewhere in
this prospectus. During their existence, both Classic and Buford have completed
multiple acquisitions and divestitures of cable systems. As a result, we believe
that period-to-period comparisons of their financial results to date are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
OVERVIEW
As a result of the Buford acquisition and the Star acquisition and assuming
completion of other recently publicly announced transactions by other companies
in the cable television industry, we believe we are the 14th largest cable
television operator in the United States. We own, operate and develop cable
television systems in selected non-metropolitan markets clustered primarily in
nine contiguous states primarily located in the central United States. Since
1992, we have completed and integrated over 20 acquisitions. As of December 31,
1999, our collective systems passed approximately 707,000 homes and served
approximately 414,000 basic subscribers, which includes approximately 98,000
homes and 57,000 subscribers for Star.
REVENUES. Revenues are primarily attributable to monthly subscription fees
charged to subscribers for our basic and premium cable television programming
services. Basic revenues consist of monthly subscription fees for all services,
other than premium programming, as well as monthly charges for customer
equipment rental. Premium revenues consist of monthly subscription fees for
programming provided on a per channel basis. In addition, other revenues are
derived from:
- installation and reconnection fees charged to basic subscribers to
commence or reinstate service;
- pay-per-view charges;
- late payment fees;
- advertising revenues; and
- commissions related to the sale of merchandise by home shopping services.
35
<PAGE> 40
At December 31, 1999, our collective systems served approximately 414,000
basic subscribers and approximately 223,000 premium units, representing a basic
penetration rate of approximately 59% and a premium penetration rate of
approximately 54%. For Classic and Star premium subscribers are the number of
subscribers who pay a monthly fee for premium channels. Multiplexing premium
channels is counted as one subscriber. For Buford, each premium channel received
is counted as a separate premium subscriber. Premium penetration is calculated
as the number of premium subscribers as a percentage of basic subscribers. The
table below sets forth the percentage of our total revenues attributable to the
various sources:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Basic....................................................... 83.3%
Premium..................................................... 10.3
Other....................................................... 6.4
-----
Total revenues.................................... 100.0%
=====
</TABLE>
OPERATING EXPENSES. Our operating expenses consist of (a) programming fees,
(b) plant and operating costs, (c) general and administrative expenses and (d)
marketing costs directly attributable to the systems. Programming fees have
historically increased at rates in excess of inflation due to system
acquisitions and internal growth, as well as increases in the number, quality
and cost of programming services offered by us. We benefit from our membership
in an industry cooperative with over 10 million basic subscribers that provides
its members with volume discounts from programming networks and cable equipment
vendors. Plant and operating costs include expenses related to wages and
employee benefits of technical personnel, electricity, systems supplies,
vehicles and other operating costs. General and administrative expenses directly
attributable to the systems include wages and employee benefits for customer
service, accounting and administrative personnel, franchise fees and expenses
related to billing, payment processing, and office administration.
CORPORATE OVERHEAD. Corporate overhead consists primarily of expenses
incurred by our executive management, which are not directly attributable to any
one system.
OPERATING LOSSES. The high level of depreciation and amortization
associated with the acquisitions and capital expenditures related to continued
construction and upgrading of the current systems, together with interest costs
related to our financing activities, have contributed to our net losses. We
believe that such net losses are common for the cable television industry.
36
<PAGE> 41
RESULTS OF OPERATIONS -- CLASSIC CABLE
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1999
------------------------ ------------------------
AMOUNT % OF REVENUES AMOUNT % OF REVENUES
------ ------------- ------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................... $69,802 100.0% $111,410 100.0%
Operating expenses:
Programming....................... 17,840 25.6 29,906 26.8
Plant and operating............... 8,437 12.1 12,744 11.4
General and administrative........ 11,295 16.2 17,126 15.4
Marketing and advertising......... 850 1.2 1,929 1.8
Corporate overhead................ 3,648 5.2 9,721 8.7
Depreciation and amortization..... 30,531 43.7 51,484 46.2
------- ----- -------- -----
Total operating expenses..... 72,601 104.0 122,910 110.3
------- ----- -------- -----
Loss from operations......... $(2,799) (4.0)% $(11,500) (10.3)%
======= ===== ======== =====
</TABLE>
REVENUES. Revenues increased $41.6 million, or 60%, in 1999. Revenues
increased due to increased subscribers from acquisitions of approximately 28,000
subscribers in July 1998 and 170,000 subscribers in July 1999 and basic rate
increases. The increase in subscribers was due to the acquisition of systems
from Cable One in July 1998 and the acquisition of Buford in July 1999. In
addition, there was a rate increase of approximately 7% affecting approximately
two-thirds of our customers in February 1999, resulting in an increase in basic
revenues per subscriber of 7% from $27.87 to $29.82 period to period. We have
historically increased rates in February in order to offset increases in
operating costs such as programming which occur primarily in January of each
year.
OPERATING EXPENSES. Operating expenses increased $50.3 million, or 69%, in
1999. Programming expenses increased $12.1 million due to the continued
escalation in rates charged by programming vendors as well as an increase in the
subscriber base over the same period in 1998. Plant and operating and general
and administrative expenses increased $10.1 million, or 51%, as a result of the
additional costs associated with the systems acquired in 1998 and 1999.
Corporate overhead increased $6.1 million primarily due to $6.6 million of
acquisition related compensation expenses incurred in connection with the Buford
acquisition. Depreciation and amortization expense in 1999 was $51.5 million, an
increase of $21.0 million over the same period in 1998. The increase represents
the effect of acquisitions and capital expenditures.
OTHER INCOME AND EXPENSES. Interest expense increased $10.5 million, or
51%, in 1999. This increase is primarily the result of the debt issued in
conjunction with the July 1999 and 1998 acquisitions and subsequent refinancing
of debt.
INCOME TAX BENEFIT. The income tax benefit increased $10.3 million in 1999.
The pre-tax loss increased in 1999 and the effective tax rate increased from
9.9% to 24.1% for 1999. The effective tax rates for 1999 and 1998 differ from
the statutory rates primarily due to an increase in the valuation allowance on
deferred tax assets.
NET LOSS. As a result of the above described fluctuations in our results of
operations and extraordinary losses recognized in connection with the July 1998
and 1999 refinancing of debt, the net loss of $36.1 million in 1999 increased by
$9.4 million, as compared to the net loss of $26.7 million in 1998.
37
<PAGE> 42
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
------------------------ ------------------------
AMOUNT % OF REVENUES AMOUNT % OF REVENUES
------ ------------- ------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $60,995 100.0% $69,802 100.0%
Operating expenses:
Programming........................ 14,916 24.5 17,840 25.6
Plant and operating................ 7,622 12.5 8,437 12.1
General and administrative......... 9,257 15.2 11,295 16.2
Marketing and advertising.......... 438 0.7 850 1.2
Corporate overhead.................... 4,322 7.1 3,648 5.2
Depreciation and amortization......... 27,832 45.6 30,531 43.7
------- ----- ------- -----
Total operating expenses...... 64,387 105.6 72,601 104.0
------- ----- ------- -----
Loss from operations.......... $(3,392) (5.6)% $(2,799) (4.0)%
======= ===== ======= =====
</TABLE>
REVENUES. Revenues for the year ended December 31, 1998 were $69.8 million,
an improvement of $8.8 million over revenues for the year ended December 31,
1997. Basic revenues improved by $7.4 million, or 15%, while average monthly
basic revenues per subscriber increased from $25.22 to $27.87, or 11%. The
improvement was due primarily to basic rate increases in February 1998 affecting
234 systems and serving approximately 114,000 subscribers, or 69% of total
subscribers, as well as revenue generated from the systems acquired from Cable
One on July 29, 1998. The majority of the remaining systems also had rate
increases during 1998. The change in basic subscribers for the year ended
December 31, 1998 is primarily due to the acquisition of systems from Cable One
in 1998 and the sale of certain Kansas and Oklahoma systems serving
approximately 4,000 basic subscribers during the second quarter of 1997, as well
as bulk account equivalent basic unit conversion calculations following the
basic rate increases, the increased availability and affordability of
competitive video services, non-pay disconnects, and other terminations of
service. The remaining revenues increased 13.7%, from $10.2 million for the year
ended December 31, 1997 to $11.6 million for the year ended December 31, 1998,
due in large part to continued promotion of pay-per-view events.
OPERATING EXPENSES. Operating expenses for the year ended December 31, 1998
were $72.6 million, an increase of $8.2 million, or 13%, over operating expenses
for the year ended December 31, 1997. An escalation in rates charged by certain
programming vendors as well as increases in copyright fees and premium units
were largely responsible for the $2.9 million increase in programming costs over
programming costs for the year ended December 31, 1997. Plant and operating
expenses increased from $7.6 million for the year ended December 31, 1997 to
$8.4 million for the year ended December 31, 1998, reflecting increases in
technical wages and benefits, plant power, and amounts paid to outside
contractors to update our subscriber database. General and administrative
expenses increased from $9.3 million for the year ended December 31, 1997 to
$11.3 million for the year ended December 31, 1998 due to increases in
administrative wages and benefits, telephone, property taxes and bad debt
expense. General and administrative expense as a percentage of revenue increased
during this period from 15% to 16%. Marketing expenses for the year ended
December 31, 1998 were $0.9 million, an increase of 94% over marketing expenses
for the year ended December 31, 1997. The majority of this increase relates to
increased spending associated with our marketing initiatives. As a percentage of
revenues, operating expenses decreased slightly from 106% for the year ended
December 31, 1997 to 104% for the year ended December 31, 1998.
38
<PAGE> 43
CORPORATE OVERHEAD. Corporate overhead decreased $0.7 million, or 16%, from
$4.3 million for the year ended December 31, 1997 to $3.6 million for the year
ended December 31, 1998 due primarily to a reduction in litigation costs
compared to the year ended December 31, 1997.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for
the year ended December 31, 1998 was $30.5 million, an increase of $2.7 million
over depreciation and amortization expense for the year ended December 31, 1997.
The increase is largely reflective of the inclusion of fixed assets placed into
service during 1997 and 1998.
INCOME TAX BENEFIT. The income tax benefit decreased from $7.1 million for
year ended December 31, 1997 to $2.3 million for the year ended December 31,
1998. The pre-tax loss increased in 1998. However, the effective tax rate
decreased. The effective tax rate decreased from 34.1% for the year ended
December 31, 1997 to 9.9% for the year ended December 31, 1998. This decrease is
primarily due to an increase in the valuation allowance against deferred tax
assets.
RESULTS OF OPERATIONS -- BUFORD GROUP, INC.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUES. Revenues in 1998 were $70.5 million, an improvement of $12.4
million, or 21%, over revenues in 1997. The improvement was due primarily to
basic rate increases during the first half of 1998 as well as revenue generated
from the systems acquired in late April 1998. Buford has historically increased
rates in the majority of its systems during the first half of the year in order
to offset increases in its operating costs such as programming which occur in
January of each year. Average monthly basic revenue per basic subscriber
increased 7%, from $26.31 for the year ended December 31, 1997 to $28.17 for the
year ended December 31, 1998.
OPERATING EXPENSES. Operating expenses in 1998 were $41.8 million, an
increase of $5.8 million, or 16%, over operating expenses for the year ended
December 31, 1997. The continued escalation in rates charged by programming
vendors as well as increases in copyright fees and premium units were largely
responsible for the $4.0 million increase in programming costs over 1997. Plant
and operating expenses increased from $6.6 million for the year ended December
31, 1997 to $6.9 million for the year ended December 31, 1998, reflecting
increases in technical wages and benefits and amounts paid to outside
contractors. General and administrative expenses increased from $14.9 million
for the year ended December 31, 1997 to $16.2 million for the year ended
December 31, 1998 due to increases in administrative wages and benefits and
utility expense. Marketing and advertising expenses for the year ended December
31, 1998 were $0.3 million, an increase of 50% over marketing and advertising
expenses for the year ended December 31, 1997. The majority of this increase
relates to increased spending associated with Buford's marketing initiatives.
CORPORATE OVERHEAD. Corporate overhead increased $4.5 million, or 92%,
from $4.9 million for the year ended December 31, 1997 to $9.4 million for the
year ended December 31, 1998 due primarily to an increase in compensation
expense related to employee stock appreciation rights from $3.5 million for the
year ended December 31, 1997 to $7.9 million for the year ended December 31,
1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for
the year ended December 31, 1998 was $21.4 million, an increase of $3.6 million
over depreciation and amortization expense for the year ended December 31, 1997.
The increase is largely reflective of the inclusion of fixed assets acquired and
those placed into service during 1997 and 1998.
INCOME TAX BENEFIT. Income tax benefit of $0.2 million was recorded for
the year ended December 31, 1998 versus $0.3 million for the year ended December
31, 1997. This decrease is primarily due to an increase in the valuation
allowance against deferred tax assets.
39
<PAGE> 44
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations increased 24% or $3.4 million to $17.4 million,
driven by the acquisition of cable systems in 1998 and 1999. Cash used in
investing activities increased 469% or $268.2 million to $325.5 million, driven
primarily by the acquisition of Buford in July 1999, as well as by increased
levels of capital spending. Cash provided by financing activities increased 761%
or $345.8 million to $391.2 million due to the investment by Brera Classic,
Classic Communications' initial public equity offering, and additional debt
incurred in conjunction with the Buford acquisition. EBITDA increased 44% or
$12.3 million to $40.0 million due primarily to the acquisition of cable systems
in 1998 and 1999. EBITDA has been reduced by non-cash operating charges
consisting of compensation on stock awards of $1.9 million and $1.1 million as
well as by non-recurring fees paid to certain members of the management team in
connection with completed acquisitions and financing transactions of $5.5
million and $0.8 million for 1999 and 1998, respectively. Without the non-cash
operating charges and other fees, EBITDA would have been $47.4 million and $29.6
million for 1999 and 1998, respectively. EBITDA is presented because management
believes it is a widely accepted financial indicator of a company's ability to
incur and service debt. We believe that EBITDA is not intended to be a
performance measure that should be regarded as an alternative to, or more
meaningful than, either operating income or net income as an indicator of
operating performance or to the statement of cash flows as a measure of
liquidity; is not intended to represent funds available for dividends,
reinvestment or other discretionary uses and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with generally accepted accounting principles. EBITDA as presented may not be
comparable to similarly titled measures presented by other companies.
In July 1999, we issued $150 million of 9.375% senior subordinated notes
concurrently with our entry into the 1999 credit facility totaling $450 million,
as amended. These transactions, along with $100 million in proceeds from a sale
of Classic Communications stock to Brera Classic, were utilized to purchase
Buford, repay our previous credit agreement and pay the fees and expenses of
these transactions.
In December 1999, Classic Communications completed an initial public
offering of 7,250,000 shares of its Class A Common Stock, raising approximately
$168.9 million. It used the proceeds from the offering to pay offering expenses
and to redeem all of its outstanding 13.25% senior discount notes due 2009.
Classic Communications contributed the remainder of the proceeds, approximately
$83.5 million, to us, which we used for general business purposes, including
financing part of the Star acquisition.
In February 2000, one of our subsidiaries purchased substantially all of
the assets of Star Cable Associates, which operates cable television systems in
Texas, Louisiana and Ohio, for an aggregate purchase price of approximately $110
million in cash and 555,555 shares of Classic Communications Class A Common
Stock.
In February 2000, we completed a private offering of $225 million of Senior
Subordinated Notes due 2010. The securities sold in the private offering will
not be and have not been registered under the Securities Act of 1933 and may not
be offered or sold in the United States without registration or an applicable
exemption from registration requirements. We used the proceeds of the offering
to fund a portion of the acquisition of Star, repay a portion of indebtedness
under our senior credit facility and repurchase approximately $33 million of our
9.875% Senior Subordinated Notes due 2008.
In connection with the offering, we entered into a second amendment to our
senior credit facility, which (1) allowed for the offering of our 10.5% senior
subordinated notes, (2) modified some of the covenants in the credit facility to
provide us more flexibility (i.e., maximum total debt ratio, total interest
coverage ratio, maximum capital expenditures, limitations on investments,
permitted acquisitions, and lines of business), (3) restructured the term loan A
facility so that
40
<PAGE> 45
following a prepayment in full of the term loan A facility, and subject to
certain additional conditions, we have the ability to reborrow in one or more
advances under the term loan A facility until February 10, 2001 and (4)
increased the term loan A facility so that an additional $25 million may be made
available under that facility.
We have debt service requirements increasing from approximately $41 million
in 2000 to $53 million in 2001 and remaining consistent at that level through
2007. Our debt has significant maturities during the years 2008 to 2010.
Additionally, the Company has standby letters of credit totaling $3 million
maturing through August 2000.
Our capital improvement plan contemplates the investment of approximately
$200.0 million over the next four fiscal years as follows:
- $126.0 million to establish a technical standard of 550-750 MHz bandwidth
capacity in cable television systems serving approximately 72% of our
basic subscribers and for the consolidation of headends;
- $52.0 million for ongoing maintenance and replacement, installations and
extensions to the cable plant related to customer growth; and
- $22.0 million for the purchase of additional addressable converters and
headend equipment to support the deployment of digital services.
We have in place a credit facility which, as amended, currently allows for
$175 million of additional borrowing subject to certain limitations.
All of our debt is fully and unconditionally guaranteed by our wholly owned
direct and indirect subsidiaries on a joint and several basis. There are
presently no restrictions on the ability of these subsidiaries to make
distributions to us.
INTEREST RATE RISK MANAGEMENT
We are exposed to market risk including changes in interest rates. To
manage the volatility relating to these exposures, we enter into various
derivative transactions pursuant to our policies in areas such as counterparty
exposure and hedging practices. Positions are monitored using techniques
including market value and sensitivity analyses. We do not hold or issue any
derivative financial instruments for trading purposes and are not a party to
leveraged instruments. The credit risks associated with our derivative financial
instruments are controlled through the evaluation and monitoring of the
creditworthiness of the counterparties. Although we may be exposed to losses in
the event of nonperformance by the counterparties, we do not expect such losses,
if any, to be significant.
INTEREST RATE RISK
The use of interest rate risk management instruments, such as interest rate
exchange agreements ("Swaps"), interest rate cap agreements ("Caps") and
interest rate collar agreements ("Collars"), is required under the terms of
certain of our outstanding debt agreements. Our policy is to manage interest
costs using a mix of fixed and variable rate debt. Using Swaps, we agree to
exchange, at specified intervals, the difference between fixed and variable
interest amounts calculated by reference to an agreed-upon notional principal
amount. Caps are used to lock in a maximum interest rate should variable rates
rise, but enable us to otherwise pay lower market rates. Collars limit our
exposure to and benefits from interest rate fluctuations on variable rate debt
to within a certain range of rates.
During the year ended December 31, 1999, we entered into Collars with an
aggregate notional amount of $75.0 million. No other instruments were
outstanding during the year.
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<PAGE> 46
The table set forth below summarizes the fair values and contract terms of
financial instruments subject to interest rate risk maintained by us as of
December 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
----------------------------------------------- VALUE AT
2000 2001 2002 2003 2004 THEREAFTER TOTAL 12/31/1999
---- ----- ---- ---- ----- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt:
Fixed Rate.............. $0.5 $ -- $-- $-- $ -- $188.8 $189.3 $185.2
Average Interest Rate... 9.0% 0.0% 0.0% 0.0% 0.0% 9.5% 9.5%
Variable Rate........... $-- $ 2.4 $7.5 $9.4 $13.2 $232.5 $265.0 $265.0
Average Interest Rate... 0.0% 8.8% 8.8% 8.8% 8.8% 8.9% 8.9%
Interest Rate Instruments:
Collar.................. $75.0 $ 75.0 $ --
Average Cap Rate........ 8.3% 8.3%
Average Floor Rate...... 5.5% 5.5%
</TABLE>
The notional amounts of interest rate instruments, as presented in the
table above are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss. The estimated fair value
approximates the proceeds (costs) to settle the outstanding contracts. Interest
rates on variable debt are estimated by us using the average implied forward
London Interbank Offer Rate ("LIBOR") rates for the year of maturity based on
the yield curve in effect at December 31, 1999, plus the borrowing margin in
effect for each credit facility at December 31, 1999. While Swaps, Caps and
Collars represent an integral part of our interest rate risk management program;
their incremental effect on interest expense for the years ended December 31,
1999 and 1998 was not significant.
INTANGIBLES
We have recorded net intangible assets of $345.9 million, 51.0% of total
assets. These assets arose during the acquisition of cable systems throughout
our history. These intangible assets are amortized over their estimated useful
lives. We review the valuation and amortization periods of these intangibles on
a periodic basis, taking into consideration any events or circumstances that
might result in diminished fair value or revised useful life. No events or
circumstances have occurred to warrant a diminished fair value or reduction in
the useful life of the intangible assets.
YEAR 2000 COMPLIANCE
During 1999, we planned, inventoried and evaluated systems, remediated,
replaced where and when necessary and tested such remediation and replacements.
As a result, we experienced no adverse year 2000 related issues on January 1,
2000. We recognize that there may be residual effects related to year 2000
issues. Our assessment of our year 2000 readiness will be ongoing as we continue
to develop our operating systems and rely on our vendors' or their vendors'
systems. We do not have any way to assess the costs related to remediation of
any residual year 2000 effect. We intend to use internal resources for such
remediation where possible. We may in the future identify a significant internal
or external year 2000 related residual issue which, if not remedied in a timely
manner, could have a material adverse effect on our business, financial
condition and results of operations.
INFLATION
Certain of our expenses, such as programming, wages and benefits, equipment
repair and maintenance, billing and marketing are subject to inflation. However,
because changes in costs are generally passed through to subscribers, these
changes historically have not had a material adverse effect on our results of
operations.
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<PAGE> 47
BUSINESS
COMPANY OVERVIEW
We are a growth oriented cable operator focused on non-metropolitan markets
in the United States. We have experienced growth in subscribers, revenues and
cash flows, primarily through the successful execution and integration of over
20 acquisitions of cable systems primarily clustered in nine contiguous states.
As of December 31, 1999, our systems pass approximately 707,000 homes and serve
approximately 414,000 basic subscribers, which includes approximately 98,000
homes and 57,000 subscribers for Star.
We believe that there are significant operating, competitive and economic
advantages in acquiring and owning systems in non-metropolitan markets. In
pursuing our business strategy, we have focused our acquisition efforts on cable
television systems in growing non-metropolitan markets and have sought to build
geographic clusters of these systems. Because of poor reception of broadcast
television signals, customers often require cable television service in these
markets to receive a full complement of off-air broadcast stations, such as ABC,
NBC, CBS, and FOX. These off-air broadcast stations represent approximately 30%
of overall television viewing. In addition, there are typically fewer
competitive entertainment alternatives in these markets. As the leading
multi-channel video provider in our markets, we have capitalized on these market
characteristics by generating predictable revenue streams and EBITDA.
Approximately 71% of our cable subscribers reside in a county seat or are
located within a 30-mile radius of a county seat. These markets typically have
(a) larger populations, (b) more favorable demographics, (c) higher growth
characteristics, and (d) stronger economic activity than do other
non-metropolitan markets. We have created clusters of cable television systems
around these markets and believe that clustering cable systems provides
significant operating and cost advantages. We own and manage 576 cable systems
primarily clustered in nine contiguous states. Approximately 72% of our
customers are located on approximately 27% of our headends. This level of
clustering allows us to deploy our technical staff, vehicle fleet, and shared
resources more efficiently, resulting in lower operating and capital costs and
improved customer response time. Clustering also allows us to:
- manage the workforce and allocate personnel more effectively;
- address the specific customer service and programming needs of our
customers;
- introduce digital cable services and other new services in a cost
effective manner;
- increase the number of households reached with existing marketing
budgets;
- increase the benefits of local and regional community relations efforts;
and
- manage political relationships at the local and state level.
We believe that providing superior customer service and developing strong
community relations are key elements to our long-term success and enable us to
maintain our subscribers, support our rates, and foster good working
relationships with local administrators. We seek to achieve a high level of
customer satisfaction by employing a well-trained staff of customer service
representatives and experienced field technicians. We operate two call centers
located in Tyler, Texas, and Plainville, Kansas, which offer 24-hour, 7-day per
week coverage to all of our customers on a toll-free basis. We believe that the
combination of these call centers provides us with redundancy safeguards and a
platform for further growth.
J. Merritt Belisle, our Chief Executive Officer, and Steven E. Seach, our
President and Chief Financial Officer, founded Classic in 1992 and have
assembled a management team with significant business experience operating cable
television systems and providing quality customer service to cable subscribers.
Messrs. Belisle and Seach have 20 years of collective experience in
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<PAGE> 48
acquiring, operating, integrating and developing cable television systems and
have worked together for over ten years.
As a result of the Buford acquisition, our management team has been further
enhanced by the addition of several key members of Buford's management team,
including Ron Martin, who became our Executive Vice President of Operations and
Kay Monigold, who became our Executive Vice President of Administration. Mr.
Martin and Ms. Monigold have been in the cable industry for over 25 years and 18
years, respectively.
On April 7, 2000, Classic Communications announced that Dale Bennett will
become our Chief Operating Officer. Mr. Bennett, a cable industry veteran,
assumes the COO role after spending the last three years as vice president of
AT&T Broadband and Internet Service's Texas Metro Region.
OUR STRATEGY
FOCUS ON ATTRACTIVE NON-METROPOLITAN MARKETS
We have followed a systematic approach to acquiring, consolidating,
operating and developing cable television systems based on the primary goal of
increasing our operating cash flow while maintaining the quality of our
services. Our business strategy is to focus on serving growing non-metropolitan
communities in the United States. For example, approximately 71% of our cable
subscribers reside in a county seat or within a 30-mile radius of a county seat.
These markets generally tend to have more serviceable households per mile, more
robust household growth, higher income per household, more disposable income per
household and a stronger business foundation than do other non-metropolitan
markets. According to Equifax National Decisions Systems and Claritus, Inc.,
total households in the top 110 systems owned by us are projected to grow by
approximately 6.2%, versus the national average of 5.7%, from 1997 to 2002.
Those 110 systems currently serve approximately 62.6% of our total subscribers.
We believe that our cable systems generally are subject to less competition than
systems serving large urban cities, especially for services such as high speed
Internet access. It is our goal to continue to focus on growing non-metropolitan
areas.
EXPAND AND IMPROVE CLUSTERS THROUGH SELECTIVE ACQUISITIONS
To date, we have sought to acquire cable television systems in communities
that are in close geographic proximity to other cable television systems owned
or managed by us in order to maximize the economies of scale and operating
efficiencies associated with "clusters" of systems. We have created clusters of
cable television systems around these markets and believe that clustering cable
systems provides significant operating and cost advantages.
We plan to continue our clustering strategy by pursuing opportunities to
purchase cable television systems in our existing markets as well as by entering
contiguous or surrounding markets, if and when attractive acquisition
opportunities become available. In addition to system acquisition opportunities,
we expect to pursue opportunities to exchange certain of our cable systems for
other cable television properties to promote our clustering strategy further.
Factors likely to be considered by us in evaluating the desirability of a
potential acquisition or asset exchange opportunity include valuation,
subscriber densities, growth potential, in terms of both market and cash flow,
and whether the target system can be readily integrated into our operations.
In order to offer Internet access on a full-scale residential and
commercial basis in the communities we serve, we are actively seeking to acquire
incumbent Internet service providers in and around our markets. We believe that
acquiring the expertise from an incumbent Internet service provider would allow
us to offer services in the most effective and timely manner enabling us to
capitalize on the immediate, viable Internet opportunities in our markets. We
are also interested in acquiring or aligning with other companies that provide
other telecommunications
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<PAGE> 49
services including local and long distance telephone, utility, and
direct-to-home, in addition to other Internet technology and software firms.
FOCUS ON COMMUNITY RELATIONS AND CUSTOMER SATISFACTION
We believe that providing superior customer service and enhancing the
quality of life in the communities we serve are the key elements to our ultimate
long-term success. Our high level of service enables us to maintain subscribers
and support our rates. It is our goal to achieve a high level of customer
satisfaction by employing a well-trained staff of customer service
representatives and experienced field technicians.
Our Tyler, Texas call center offers 24-hour, 7-day per week coverage to
customers on a toll-free basis. The call center utilizes four T-1 lines and can
handle up to 80 incoming calls at any given time. We believe that, as currently
configured, the call center can accommodate 250,000 subscribers. The call center
complex, including hardware and software, was designed to be rapidly and
cost-effectively increased in scale to manage up to approximately 2.0 million
subscribers.
Our Tyler, Texas call center administers all phases of on-site service at a
customer's home, including dispatching the order, confirming that service has
been completed and updating the billing system and the customer's records to
reflect completion of the service. We utilize a satellite-based system to track
and dispatch our service vehicles throughout the service territory. The Qualcomm
OmniTRACS system provides real-time, constant two-way communications between the
call center and service vehicles. The system utilizes a base unit at the call
center that sends and receives messages via satellite from receiver/transmitters
installed atop each service vehicle.
Our Plainville, Kansas call center also offers 24-hour, 7-day per week
coverage on a toll-free basis. The customer service center is supported by three
T-1 lines and can handle up to 60 incoming calls at any given time through a
telephone switch we own. The switch is complemented by a software package that
can track call statistics ranging from average answer time to the number of
calls by type, as well as individual and group performance statistics. This
sophisticated software facilitates the movement of customer service and field
service agents in order to minimize answer times. Data is recorded daily and
reports can be generated to track trends in call volume.
We believe customer service is further enhanced by our 51 offices and their
ability to coordinate technical service and installation appointments more
effectively and to respond quickly to customer inquiries. We also believe that
local offices increase the effectiveness of our customer retention efforts,
community relations endeavors, and marketing campaigns. Our customer service and
technical staff attend ongoing workshops led by both a full-time, in-house
training specialist and outside customer service and technical training firms
that emphasize first time quality, point-of-sale subscriber acquisition, upgrade
and retention, technical support, and other pertinent customer service issues.
In addition, we employ bilingual customer service representatives to serve our
Spanish-speaking subscriber base.
We are dedicated to fostering strong community relations in the communities
we serve. The cornerstone of our community relations strategy is our Classic
Scholarship Fund, which has provided meaningful financial assistance to hundreds
of graduating high school seniors within our service areas over the past four
years. We install and provide free cable television service and Internet access
to public schools, government buildings, and public libraries in our franchise
areas. We believe that our relations with the communities we serve are good.
We maintain a site on the World Wide Web (http://www.classic-cable.com) to
help communicate and interact with our online customers. Our website was
designed to help our
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customers make intelligent television viewing choices and to acquaint our
customers with us and our corporate mission.
INCREASE THE REVENUE-GENERATING BANDWIDTH OF OUR CABLE PLANT
Through our capital improvement program, we plan to upgrade our cable plant
aggressively and systematically utilizing cost-effective and appropriate
technology for the market served. These upgrades include:
- Traditional rebuild to a 550-750 MHz bandwidth capacity in selected
systems;
- The deployment of digital compression services such as Headend in The
Sky(R), known as HITS, a digital compression service developed by
National Digital Television Center, Inc.;
- The deployment of fiber optic cable; and
- The consolidation of headends.
We believe that these technical upgrades create additional revenue
opportunities, enhance operating efficiencies, increase customer satisfaction,
improve franchise relationships and solidify our position as the dominant
provider of multi-channel video services in our markets. We seek to benefit from
the capital improvement program by generating additional revenue from:
- Expanded tiers of basic programming;
- Multiplexed premium services;
- Pay-per-view movies and events;
- Digital music;
- On-screen navigators;
- Home shopping services;
- High-speed data services;
- Internet access; and
- Advertising.
IMPLEMENT OUR BROADBAND SERVICES
DIGITAL SERVICES. Depending on the size of the system, we intend to offer
digital video services through either a digital headend or through a
direct-to-home solution. In larger systems, we provide enhanced digital video in
our upgraded and certain other systems using HITS. HITS enables us to deliver
video services such as:
- pay-per-view programming;
- on-screen programming navigators;
- multiplexed premium channels such as HBO-Family and HBO-Signature;
- digital music; and
- multiple tiers of niche satellite basic programming.
For systems with fewer than 2,000 subscribers, or other systems whose
headends are uneconomical to upgrade, we intend to use a digital satellite
alternative to provide a more robust cable product offering. Whether through the
resale of digital programming from a DBS provider or HITS-2-Home, we can offer
customers over 140 additional channels. For example, HITS has recently developed
a seamlessly delivered digital satellite programming overlay product direct to
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<PAGE> 51
the home. This product, HITS-2-Home, is expected to offer customers a
programming selection comparable to that currently offered by HITS to the
headend.
We believe that these enhanced digital video services will allow us to
provide digital services comparable to DBS at a lower cost. We have introduced
digital cable services to approximately 117,000 homes, representing
approximately 75,000 cable subscribers. As of December 31, 1999, we had
approximately 4,000 digital customers. We plan to continue the roll out of
digital cable services throughout the company over the next several months.
INTERNET SERVICES. We believe that additional revenue opportunities exist
in non-metropolitan markets by providing advanced telecommunication services,
such as Internet access and the delivery of high-speed data services, including
local- and wide-area network applications, for residential and commercial
customers. We believe that these markets have limited appeal to the larger
telecommunications companies and that our technical platform will provide these
services at higher speeds and lower cost, giving us a competitive advantage over
other telecommunication providers in the markets in which we operate. For
example, a 10 megabit cable modem can provide Internet access at download speeds
350 times faster than typical 28.8 kilobit dial-up telephone modem connections.
We have introduced Internet access via one-way cable modem in selected systems
and will seek to complement this service with the telephone modem connection
through acquisitions of local Internet service providers.
As part of our strategy to deliver Classic-branded advanced data services
in communities we serve, we have entered into a non-exclusive agreement with
High Speed Access Corporation, known as HSA. HSA provides a comprehensive
turnkey solution for high speed Internet access via cable modems to residential
and commercial end users. HSA will provide speed to market, call center/help
desk support, national and local marketing assistance, engineering and network
design, cable modems and supporting headend equipment. The General Instruments
modem that HSA currently uses is system flexible, capable of being deployed in a
one-way, or telco return, or two-way scenario. In return for these services, we
will receive a 50% split of gross customer revenue. We plan to pursue strategic
relationships with other high speed internet companies in the near future.
Currently, we have 17 active sites passing approximately 88,000 homes.
STAR ACQUISITION
In February 2000, a wholly owned subsidiary purchased substantially all of
the assets of Star Cable Associates, which operates cable television systems in
Texas, Louisiana and Ohio, for an aggregate purchase price of approximately $110
million in cash and 555,555 shares of Classic Communications Class A common
stock. The asset purchase agreement contained customary representations,
warranties, covenants, indemnities and closing conditions. Star serves
approximately 57,000 customers.
RECENT FINANCING
In December 1999, Classic Communications completed an initial public
offering of 7,250,000 shares of its Class A common stock. Stockholders of
Classic Communications sold an additional 2,237,500 shares. Classic
Communications raised approximately $168.9 million of proceeds in the offering.
Classic Communications used the proceeds from the offering to pay offering
expenses and to redeem all of its outstanding 13 1/4% senior discount notes due
2009. Classic Communications contributed the remainder of the proceeds,
approximately $83.5 million, to us, which we used for general business purposes,
including financing part of the Star acquisition.
In connection with the offering of the old notes, we entered into an
amendment to our senior credit facility, which (1) allowed for the offering of
the old notes, (2) modified some of the covenants in the credit facility to
provide us more flexibility (i.e., maximum total debt ratio, total interest
coverage ratio, maximum capital expenditures, limitations on investments,
permitted
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<PAGE> 52
acquisitions, and lines of business), (3) restructured the term loan A facility,
so that following a prepayment in full of the term loan A facility, and subject
to certain additional conditions, we have the ability to reborrow in one or more
advances under the term loan A facility until February 10, 2001 and (4)
increased the term loan A facility so that an additional $25 million may be made
available under that facility.
SYSTEM LOCATION
We operate cable television systems in non-metropolitan markets primarily
clustered in nine contiguous states in the central United States. The following
table illustrates our relative rank in each of the states we operate based on
total number of subscribers giving effect to recently announced transactions:
<TABLE>
<CAPTION>
EQUIVALENT
HOMES BASIC BASIC
STATE PASSED UNITS PENETRATION RANK
- ----- ------ ---------- ----------- ----
<S> <C> <C> <C> <C>
Texas.................................... 318,187 162,515 51% 5
Arkansas................................. 96,728 56,576 59 4
Oklahoma................................. 81,270 49,887 61 3
Louisiana................................ 63,900 44,516 70 4
Missouri................................. 67,072 39,164 58 4
Kansas................................... 50,965 35,599 70 3
Ohio..................................... 17,452 11,987 69 --
Colorado................................. 5,157 5,313 103(1) 5
Nebraska................................. 3,389 2,097 62 --
New Mexico............................... 2,604 1,659 64 --
------- ------- -----
Subtotal............................ 706,724 409,313 58
CCTV................................ 4,290
------- ------- -----
Total.......................... 706,724 413,603 59%
======= ======= =====
</TABLE>
- ---------------
(1) Our system in Colorado includes a number of multi-dwelling units, allowing
for basic penetration over 100%.
As part of the Buford acquisition, we acquired Correctional Cable
Television, Inc., known as CCT. CCT is the largest provider of programming
services to the prison market, serving 90 correctional facilities in 18 states,
reaching more than 70,000 inmates. CCT provides programming services through
company-owned and installed modified headends under three to five year
contracts. CCT's EBITDA has grown at a compounded annual rate of approximately
40% during the last three years. CCT's continued growth will be driven by
increased penetration of the prison market, which consists of approximately
2,000 federal, state and juvenile facilities.
MARKETING, PROGRAMMING AND RATES
Our marketing programs and campaigns are based upon a variety of cable
services creatively packaged and tailored to appeal to our different markets and
segments within each market. We routinely survey our customer base to ensure
that we are meeting the demands of our customers and staying abreast of our
competition in order to counter competitors' promotional campaigns effectively.
We use a coordinated array of marketing techniques to attract and retain
customers and to increase premium service penetration, including door-to-door
and direct mail solicitation, telemarketing, media advertising, local
promotional events typically sponsored by programming services and cross-channel
promotion of new services and pay-per-view.
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We have various contracts to obtain basic, satellite and premium
programming for our cable systems from program suppliers, including, in limited
circumstances, some broadcast stations, with compensation generally based on a
fixed fee per customer or a percentage of the gross receipts for the particular
service. Some program suppliers provide volume discount pricing structures
and/or offer marketing support. In addition, we are a member of a programming
consortium consisting of small to medium sized multiple cable systems operators
and individual cable systems serving, in the aggregate, over ten million cable
subscribers. The consortium helps create efficiencies in the areas of securing
and administering programming contracts, as well as establishing more favorable
programming rates and contract terms for small and medium sized cable operators.
We do not have long-term programming contracts for the supply of a substantial
amount of our programming. In cases where we do have such contracts, they are
generally for fixed periods of time ranging from one to five years and are
subject to negotiated renewal. While we believe that our relations with our
programming suppliers are generally good, the loss of contracts with certain of
our programming suppliers would have a material adverse effect on our results of
operations. Cable programming costs are expected to continue to increase due to
additional programming being provided to customers, increased costs to purchase
cable programming, inflationary increases and other factors. For the year ended
December 31, 1999, programming costs as a percentage of revenues were 27%. We
cannot assure you that our programming costs will not increase substantially in
the near future or that other materially adverse terms will not be added to our
programming contracts.
Our cable systems offer our customers programming that includes the local
network, independent and educational television stations, a limited number of
television signals from distant cities, numerous satellite-delivered,
non-broadcast channels such as CNN, MTV, USA, ESPN and TNT, and in some systems
local information and public access channels. The programming offered by us
varies among the cable systems depending upon each system's channel capacity and
viewer interests. Primarily for competitive reasons, we generally attempt to
offer a single level of basic service containing all broadcast and
satellite-delivered programming. In a few systems, however, we do offer multiple
tiers of cable television programming. We also offer premium programming
services, both on a per-channel basis and in many systems as part of premium
service packages designed to enhance our customer's perception of value.
Monthly customer rates for services vary from market to market, primarily
according to the amount of programming provided and competitive factors. At
December 31, 1999, our monthly full basic service rates for residential
customers ranged from $18.00 to $35.45 and per-channel premium service rates,
not including special promotions, ranged from $5.95 to $12.00 per service. At
December 31, 1999, the weighted average price for our monthly full basic service
was approximately $30.44.
A one-time installation fee, which we may wholly or partially waive during
a promotional period, is usually charged to new customers. We charge monthly
fees for converters and remote control tuning devices. In addition, we also
charge administrative fees for delinquent payments for service. Customers are
free to discontinue service at any time without additional charge but may be
charged a reconnection fee to resume service. Commercial customers, such as
hotels, motels and hospitals, are charged a negotiated, non-recurring fee for
installation of service and monthly fees. Multiple dwelling unit accounts may be
offered a bulk rate in exchange for single-point billing and basic service to
all units.
In addition to customer fees, we derive modest revenues from the sale of
local spot advertising time on locally originated and satellite-delivered
programming. We also derive modest revenues from affiliations with home shopping
services, which offer merchandise for sale to customers and compensate system
operators with a percentage of their sales receipts.
We also derive revenue from the sale of programming featuring movies and
special events to customers on a pay-per-view basis. We believe that we will be
able to further increase our pay-
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<PAGE> 54
per-view penetration rates and revenue as we continue to deploy addressable
technology in upgraded systems and in systems where we launch a digital
compression service.
While we plan to offer advanced telecommunications services in certain of
our cable systems, we anticipate that monthly customer fees derived from
multi-channel video services will continue to constitute the large majority of
our total revenues for the foreseeable future.
TECHNICAL OVERVIEW
We endeavor to maintain high technical performance standards in all of our
cable systems. To accomplish this, we have embarked on our capital improvement
plan to upgrade our cable systems selectively. This program, which involves the
use of fiber optic technology, will (a) expand channel capacities, (b) enhance
signal quality, (c) improve technical reliability, (d) augment addressibility,
and (e) provide a platform to develop high-speed data services and Internet
access. We believe that such technical upgrades create additional revenue
opportunities, enhance operating efficiencies, increase customer satisfaction,
improve franchising relations and solidify our position as the dominant provider
of video services in the markets in which we operate. Before committing the
capital to upgrade or rebuild a system, we carefully assess:
- the existing technical reliability and picture quality of the system;
- basic subscribers' demand for more channels;
- requirements in connection with franchise renewals;
- programming alternatives offered by our competitors;
- customers' demand for other cable television and broadband
telecommunications services; and
- the return on investment of any such capital outlay.
Currently, our subscribers, on average, are served by systems with an
analog capacity of 51 channels with 41 channels in use. The table below
summarizes our existing technical profile, as of December 31, 1999:
<TABLE>
<CAPTION>
UP TO 29 30 TO 39 40 TO 49 50 TO 59 OVER 60
CHANNELS CHANNELS CHANNELS CHANNELS CHANNELS TOTAL
-------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Number of Systems......... 18 249 131 68 110 576
Miles of Plant............ 169 5,147 5,341 3,497 5,647 19,801
Homes Passed.............. 7,001 162,774 193,317 108,586 235,046 706,724
Basic Subscribers......... 3,356 81,557 115,193 60,652 148,555 409,313(1)
% of Total Basic
Subscribers............. 0.8% 19.9% 28.1% 14.8% 36.4% 100.0%
Basic Subs per Mile....... 19.9 15.8 21.6 17.3 26.3 20.7
Premium Subs.............. 1,097 38,369 54,786 40,047 88,467 222,767
Premium Penetration....... 32.7% 47.0% 47.6% 66.0% 59.6% 54.4%
</TABLE>
-------------------------
(1) Does not include approximately 4,300 equivalent basic units
related to CCT.
Our capital improvement plan contemplates the investment of approximately
$200.0 million over the next four fiscal years as follows:
- $126.0 million to establish a technical standard of 550-750 MHz bandwidth
capacity in cable television systems serving approximately 72% of our
basic subscribers and for the consolidation of headends;
- $52.0 million for ongoing maintenance and replacement, installations and
extensions to the cable plant related to customer growth; and
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<PAGE> 55
- $22.0 million for the purchase of additional addressable converters and
headend equipment to support the deployment of digital services.
The table below summarizes our expected pro forma technical profile
assuming completion of the capital improvement program as of December 31, 1999:
<TABLE>
<CAPTION>
UP TO 29 30 TO 39 40 TO 49 50 TO 59 OVER 60
CHANNELS CHANNELS CHANNELS CHANNELS CHANNELS TOTAL
-------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Number of Systems(1)...... -- 212 117 42 205 576
Miles of Plant............ -- 3,379 1,783 1,101 13,538 19,801
Homes Passed.............. -- 101,034 65,700 31,665 508,325 706,724
Basic Subscribers......... -- 47,735 32,126 15,222 314,229 409,313(2)
% of Total Basic
Subscribers............. NA 11.6% 7.8% 3.7% 76.9% 100.0%
Basic Subs per Mile....... NA 14.1 18.0 13.8 23.2 20.7
Premium Subs.............. -- 22,035 13,671 8,936 178,124 222,767
Premium Penetration....... NA 46.2% 42.6% 58.7% 56.7% 54.4%
</TABLE>
-------------------------
(1) The analysis above does not reflect the impact of anticipated
headend consolidations achieved through the selective deployment
of fiber optic technology.
(2) Does not include approximately 4,300 equivalent basic units
related to CCT.
With the exception of 11 systems, we do not currently use addressable
technology. We utilize a "trap" scheme whereby a technician installs filters, or
traps, at each cabled home enabling the technician to configure the programming
received by each subscriber. The cable system improvement program contemplates
the use of addressable set-top boxes in selected analog upgraded systems, in
addition to digital addressable technology. This service transmits digitally
compressed signals of niche satellite programming, multiplexed premium services,
pay-per-view movies and digital music for reception by cable systems, which in
turn deliver them to their subscribers.
Our active use of fiber optic technology as an alternative to coaxial cable
is playing a major role in expanding channel capacity and improving the
performance of our cable television systems. Fiber optic strands are capable of
carrying hundreds of video, data and voice channels over extended distances
without the extensive signal amplification typically required for coaxial cable.
We expect to use fiber backbone architecture selectively to eliminate headend
facilities and to reduce amplifier cascades, thereby improving picture quality,
system reliability and headend and maintenance expenditures.
Recently, high-speed cable modems and set-top boxes using digital
compression technology have become commercially viable. These developments allow
for the introduction of high-speed data services and Internet access and will
increase programming services available to customers. Digital compression
technology has the potential to expand channel capacity significantly given that
up to 12 digital channels can be carried in the bandwidth of one analog channel
(6 MHz).
We own or lease 670 towers that are used to receive off-air broadcast
signals from the nearest urban transmit site or via intermittent microwave relay
stations. Our towers range from 15 feet to 600 feet in height and 146 of our
towers are at least 200 feet in height. We lease tower space to cellular
telephone, personal communications services paging and other transmission
companies for a fixed monthly charge typically dictated by long-term contract.
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FRANCHISES
Cable television systems are typically constructed and operated under
non-exclusive franchises granted by local governmental authorities. These
franchises typically contain conditions, such as:
- time limitations on commencement and completion of construction;
- conditions of service, including number of channels, types of programming
and the provision of free service to schools and certain other public
institutions; and
- the maintenance of insurance and indemnity bonds.
Certain provisions of local franchises are subject to federal regulation
under both the 1984 Cable Act and the 1992 Cable Act. See "Legislation and
Regulation -- Federal Regulation -- Cable Rate Regulation."
At December 31, 1999, pro forma for the Star acquisition, we held 787
franchises. These franchises, all of which are non-exclusive, generally provide
for the payment of fees to the issuing authority. Annual franchise fees imposed
on the cable systems range from 0% to 5% of the gross revenues generated by the
cable systems. With limited exceptions, franchise fees are passed directly
through to the customers on their monthly bills. The 1984 Cable Act prohibits
franchising authorities from imposing franchise fees in excess of 5% of gross
revenues, and permits a cable operator to seek renegotiation and modification of
franchise requirements if warranted by changed circumstances. Our franchises can
be terminated by the franchising authority prior to the stated expiration date
for uncured breaches by us of material provisions.
The following table sets forth the number of franchises by year of
franchise expiration and the approximate number and percentage of basic
subscribers at December 31, 1999:
<TABLE>
<CAPTION>
% OF NUMBER % OF
NUMBER OF TOTAL OF TOTAL
YEAR OF FRANCHISE EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS SUBSCRIBERS
- ---------------------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Prior to 2000.................. 29 3.7% 26,345 6.4%
2000 to 2003................... 187 23.8 94,917 23.2
After 2003..................... 571 72.6 288,051 70.4
--- ----- ------- -----
Total................ 787 100.0% 409,313 100.0%
=== ===== ======= =====
</TABLE>
The Cable Acts provide, among other things, comprehensive renewal
procedures which require that an incumbent franchisee's renewal application be
assessed on its own merits and not as part of a comparative process with
competing applications. See "Legislation and Regulation." We believe that we
have good relationships with our franchising communities. To date, we have never
had a franchise revoked or terminated. Additionally, no request made by us for
franchise renewals or extensions has been denied, although the renewed or
extended franchises have frequently resulted in franchise modifications on
satisfactory terms. The Cable Acts also establish the conditions for sale of a
cable system in the event that the franchise is not renewed or is revoked "for
cause" by the franchising authority.
The 1992 Cable Act provides that a franchising authority may not grant an
exclusive franchise, may not unreasonably refuse to award an additional
competitive franchise, and may operate cable systems itself without franchises.
Under the 1992 Cable Act, franchising authorities are immunized from monetary
damage awards arising from regulation of cable television systems or decisions
made on franchise grants, renewals, transfers and amendments. See "Legislation
and Regulation -- Federal Regulation -- Cable Rate Regulation."
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INDUSTRY OVERVIEW
A cable television system receives television, radio and data signals at
the system's "headend" site by means of off-air antennas, microwave relay
systems and satellite earth stations. These signals are then modulated,
amplified and distributed through coaxial and fiber optic distribution systems
to deliver a wide variety of channels of television programming to subscribers
who pay fees on a monthly basis for this service. A cable television system may
also originate its own television programming and other information services for
distribution through its system. Cable television systems generally are
constructed and operated pursuant to non-exclusive franchises or similar
licenses granted by local governmental authorities for a specified period of
time.
The cable television industry developed in the United States in the late
1940's and early 1950's in response to the needs of residents in predominantly
rural and mountainous areas of the country where the quality of off-air
television reception was inadequate due to factors such as unfavorable
topography and remoteness from television broadcast towers. In the 1960's, cable
systems also developed in non-metropolitan markets that had limited availability
of off-air television station signals. All of these markets are regarded within
the cable industry as "classic cable" television system markets.
Cable television systems offer customers programming consisting of
broadcast television signals of local network affiliates, independent and
educational television stations, a limited number of television signals from
so-called "super stations" originating from distant cites, such as WGN from
Chicago, various channels, such as Cable News Network, Music Television, the USA
Network, Turner Network Television, and Entertainment and Sports Programming
Network, programming originated locally by the cable television system, such as
public, government and education access programs, and informational displays
featuring news, weather and public service announcements. For an additional
monthly charge, cable television systems also offer "premium" television
services to customers on a per-channel basis. These services, such as Home Box
Office, Cinemax, Showtime, The Movie Channel and selected regional sports
networks, are channels that consist principally of feature films, live sporting
events, concerts and other special entertainment features, usually presented
without commercial interruption.
A customer generally pays an initial installation charge and fixed monthly
fees for basic and premium television services and for other services, such as
the rental of converters and remote control devices. These monthly service fees
constitute the primary source of revenues for cable television systems. In
addition to customer revenues from these services, cable television systems
generate revenues from additional fees paid by customers for pay-per-view
programming of movies and special events and from the sale of available
advertising spots on advertiser-supported programming. Cable television systems
also frequently offer their customers home shopping services for a share of the
revenues from products sold in their service areas. The cable television
industry is changing rapidly due to new technology and new alliances between
cable television and other telecommunications companies. Providing traditional
cable television programming is only one aspect of the industry as potential
opportunities to expand into Internet, broadband data, telephone, and other
telecommunications services continue to develop and become more commercially
viable.
COMPETITION
Cable television systems face competition from (a) alternative methods of
receiving and distributing television signals, such as off-air television
broadcast programming, direct broadcast satellite services, known as "DBS," and
wireless cable services, and (b) other sources of news, information and
entertainment, such as newspapers, movie theaters, live sporting events, on-line
computer services and home video products. Our competitive position depends, in
part, upon reasonable prices to customers, greater variety of programming and
other communications
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services, and superior technical performance and customer service. Accordingly,
cable operators in rural areas, where off-air reception is more limited,
generally achieve higher penetration rates than cable operators in major
metropolitan areas, where numerous, high quality off-air signals are available.
Cable television systems generally operate pursuant to franchises granted
on a nonexclusive basis, so that more than one cable television system may be
built in the same area, known as an "overbuild," with potential loss of revenue
to the operator of the original system. It is possible that a franchising
authority might grant a second franchise to another company containing terms and
conditions more favorable than those afforded to us. The 1992 Cable Act
prohibits franchising authorities from unreasonably denying requests for
additional franchises and permits franchising authorities to operate cable
television systems without a franchise. Although a private competitor ordinarily
would seek a franchise from a local jurisdiction, municipalities have built and
operated their own systems. Overbuilds historically have been relatively rare,
as constructing and developing a cable television system is capital-intensive,
and it is difficult for the new operator to gain a marketing advantage over the
incumbent operator. We currently have competing franchises in ten systems
passing approximately 23,100 homes.
In recent years, the FCC and Congress have adopted policies providing a
more favorable operating environment for new and existing technologies that
provide, or have the potential to provide, substantial competition to cable
television systems. These technologies include, among others, DBS service,
whereby signals are transmitted by satellite to satellite dishes as small as 18
inches located on customer premises. Programming is currently available to the
owners of DBS dishes through conventional, medium and high-powered satellites.
DBS systems provide movies, broadcast stations, and other program services
comparable to those of cable television systems. DBS systems can also provide
high speed Internet access. In March, 2000 both DirecTV and EchoStar announced
they would be capable of providing two-way high speed Internet access by the end
of 2000. Further, America Online Inc., the nations' leading provider of Internet
services has announced a plan to invest $1.5 billion in Hughes Electronics
Corp., DirecTV's parent company, and these companies intend to jointly market
America Online's prospective Internet television service to DirecTV's DBS
customers. These developments will provide significant new competition to our
offering of high speed Internet access. DBS service can be received anywhere in
the continental United States through installation of a small rooftop or
side-mounted antenna. This technology has the capability of providing more than
100 channels of programming over a single high-powered satellite with
significantly higher capacity if multiple satellites are placed in the same
orbital position. DBS is currently being heavily marketed on a nationwide basis
by two DBS providers. DBS providers are significant competition to cable service
providers, including us.
The 1992 Cable Act contains provisions, which the FCC has implemented with
regulations, to enhance the ability of cable competitors to purchase and make
available to home satellite dish owners certain satellite delivered cable
programming at competitive costs. The FCC also adopted regulations that preempt
certain local restrictions on satellite and over-the-air antenna reception of
video programming services, including zoning, land-use or building regulations,
or any private covenant, homeowners' association rule or similar restriction on
property within the exclusive use or control of the antenna user. Digital
satellite service, known as DSS, offered by DBS systems has certain advantages
over cable systems with respect to programming and digital quality, as well as
disadvantages that include high up-front costs and a lack of local service and
equipment distribution. Our strategy of providing pay-per-view and perhaps
satellite niche programming via digital services in certain of our cable systems
is designed to combat digital satellite service competition. "Bundling" of our
video service with advanced telecommunications services in certain of the cable
systems may also be an effective tool for competing with DSS. DBS suffers
certain significant operating disadvantages compared to cable television,
however, including the subscriber's present inability to view different
programming on different television sets, line-of-
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sight reception requirements, up-front costs associated with the dish antenna.
Legislation removing the existing legal obstacles to retransmitting local
broadcast programming to DBS subscribers was signed into law by President
Clinton on November 29, 1999. DBS providers are now making local broadcast
programming available in certain larger markets. If subsequent rural loan
legislation is enacted, local broadcast programming may become available to DBS
subscribers in smaller markets. In rural markets it may not be cost effective
for DBS providers to provide local programming unless subsidized by the federal
government.
Cable television systems also compete with wireless program distribution
services such as multichannel multipoint distribution service, or MMDS, which
use low power microwave signals to transmit video programming and high speed
data services, including Internet access, over the air to customers.
Additionally, the FCC licensed new frequencies in the 28 MHz band for a new
multichannel wireless video service similar to MMDS, known as Local Multipoint
Distribution Service, or LMDS. LMDS is also suited for providing wireless data
services, including the possibility of high speed Internet access. Wireless
distribution services generally provide many of the programming services
provided by cable systems, and digital compression technology may significantly
increase the channel capacity of these wireless distribution services. Because
MMDS service requires unobstructed "line of sight" transmission paths, the
ability of MMDS systems to compete may be hampered in some areas by physical
terrain and foliage.
Federal cross-ownership restrictions historically limited entry by local
telephone companies into the cable television business. The 1996 Telecom Act
eliminated this cross-ownership restriction, making it possible for companies
with considerable resources to overbuild existing cable systems. Congress has
also repealed the prohibition against national television networks owning cable
systems. Various local exchange carriers, commonly referred to as LECs,
currently are seeking to provide video programming services within their
telephone service areas through a variety of distribution methods, primarily
through the deployment of broadband wire facilities, but also through the use of
wireless or MMDS transmission. Several telephone companies have begun seeking
cable television franchises from local governmental authorities and constructing
cable television systems. Cable television systems could be placed at a
competitive disadvantage if the delivery of video programming services by LECs
becomes widespread, since LECs may not be required, under certain circumstances,
to obtain local franchises to deliver such video services or to comply with the
variety of obligations imposed upon cable television systems under such
franchises. The entry of telephone companies as direct competitors is likely to
continue and could adversely affect the profitability and valuation of our cable
systems. Issues of cross-subsidization by LECs of video and telephony services
also pose strategic disadvantages for cable operators seeking to compete with
LECs that provide video services. We believe, however, that the non-metropolitan
markets in which we provide or expect to provide cable services are unlikely to
support competition in the provision of video and telecommunications broadband
services given the lower population densities and higher costs per subscriber of
installing a plant.
The 1996 Telecom Act's provisions promoting facilities-based broadband
competition are primarily targeted at larger markets, and its prohibition of
buyouts and joint ventures between incumbent cable operators and LECs exempts
small operators and carriers meeting certain criteria. See "Legislation and
Regulation." We believe that significant growth opportunities exist for us by
establishing cooperative rather than competitive relationships with LECs within
our service areas, to the extent permitted by law.
The entry of electric utility companies into the cable television business,
as now authorized by the 1996 Telecom Act, could also have an adverse effect on
our business. Well-capitalized businesses from outside the cable industry may
also become competitors for franchises or providers of competing services.
Other new technologies may become competitive with non-entertainment
services offered by cable television systems. The FCC has authorized television
broadcast stations to transmit
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textual and graphic information useful both to consumers and businesses. The FCC
also permits commercial and noncommercial FM stations to use their sub-carrier
frequencies to provide non-broadcast services including data transmissions. The
FCC has established an over-the-air Interactive Video and Data Service that will
permit two-way interaction with commercial and educational programming along
with informational and data services. The expansion of fiber optic systems and
the introduction of new xDSL services by LECs and other common carriers provide
facilities for the transmission and distribution to homes and businesses of
video services, including interactive computer-based services like the Internet,
data and other non-video services. Wireless Internet access is now offered in
some markets by cellular, PCS and other mobile service providers, such as
Nextel.
Advances in communications technology as well as changes in the marketplace
and the regulatory and legislative environments are constantly occurring. Thus,
it is not possible to predict the effect that ongoing or future developments
might have on the cable industry or on our operations.
EMPLOYEES
At December 31, 1999, we had approximately 700 employees. None of our
employees is represented by a labor union. We consider our relations with our
employees to be good.
PROPERTIES
A cable television system consists of four principal operating components.
The first component, known as the headend, receives television, radio and
information signals by means of special antennas and satellite earth stations.
The second component, the distribution network, which originates at the headend
and extends throughout the system's service area, consists of microwave relays,
coaxial or fiber optic cables placed on utility poles or buried underground and
associated electronic equipment. The third component of the system is a "drop
cable," which extends from the distribution network into each customer's home
and connects the distribution system to the customer's television set. The
fourth component, a converter, is the home terminal device that expands channel
capacity to permit reception of more than 12 channels of programming.
Our principal physical assets consist of cable television systems,
including signal-receiving, encoding and decoding apparatus, headends,
distribution systems and subscriber house drop equipment for each of the cable
systems. The signal receiving apparatus typically includes a tower, antenna,
ancillary electronic equipment and earth stations for reception of satellite
signals. Headends, consisting of associated electronic equipment necessary for
the reception, amplification and modulation of signals, are located near the
receiving devices. Our distribution systems consist primarily of coaxial cable
and related electronic equipment. As the upgrades are completed, the cable
systems will incorporate fiber optic cable. Subscriber equipment consists of
taps, house drops and converters. We own our distribution systems, various
office fixtures, test equipment and certain service vehicles. The physical
components of the cable systems require maintenance and periodic upgrading to
keep pace with technological advances.
Our cables generally are attached to utility poles under pole rental
agreements with local public utilities, although in some areas the distribution
cable is buried in underground ducts or trenches. The FCC regulates most pole
attachment rates under the federal Pole Attachment Act.
We own or lease parcels of real property for signal reception sites, such
as antenna towers and headends, microwave complexes and business offices,
including our principal executive offices. We believe that our properties, both
owned and leased, are in good condition and are suitable and adequate for our
business operations as presently conducted.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which we are a party or
to which any of our respective properties are subject.
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LEGISLATION AND REGULATION
The cable television industry is regulated by the FCC, some state
governments and substantially all local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
Congress and various federal agencies have in the past materially affected, and
may in the future materially affect, us and the cable television industry. The
following is a summary of federal laws and regulations affecting the growth and
operation of the cable television industry and a description of certain state
and local laws. We believe that the regulation of our industry remains a matter
of interest to Congress, the FCC and other regulatory authorities. There can be
no assurance as to what, if any, future actions such legislative and regulatory
authorities may take or the effect thereof on our operations.
FEDERAL REGULATION
The primary federal statute dealing with the regulation of the cable
television industry is the Communications Act. The three principal amendments to
the Communications Act that shaped the existing regulatory framework for the
cable television industry were the 1984 Cable Act, the 1992 Cable Act and the
1996 Telecom Act. The 1996 Telecom Act, which became effective in February 1996,
was the most comprehensive reform of the nation's telecommunications laws since
the Communications Act. Although the long term goal of the 1996 Telecom Act is
to promote competition and decrease regulation of various communications
industries, in the short term, the law delegates to the FCC, and in some cases
to the states, broad new rulemaking authority. The FCC and state regulatory
agencies have been required to conduct numerous rulemaking and regulatory
proceedings to implement the 1996 Telecom Act and such proceedings have
materially affected, and may continue to materially affect, the cable television
industry.
The FCC, the principal federal regulatory agency with jurisdiction over
cable television, has promulgated regulations to implement the provisions
contained in the Communications Act. The FCC has the authority to enforce these
regulations through the imposition of substantial fines, the issuance of cease
and desist orders and/or the imposition of other administrative sanctions, such
as the revocation of FCC licenses needed to operate certain transmission
facilities often used in connection with cable operations. Below, you will find
a brief summary of certain of these federal regulations as adopted to date.
CABLE RATE REGULATION
The 1992 Cable Act imposed an extensive rate regulation regime on the cable
television industry. Under that regime, local franchise authorities had primary
responsibility for administering the basic service tier. The FCC directly
administered rate regulation of cable programming service tiers, which included
all video programming distributed over a system that is not part of the basic
service tier. Although the 1996 Telecom Act preserves local franchise authority
to regulate the basic service tier, it eliminated FCC authority to regulate
cable programming service tier rates as of March 31, 1999. Accordingly, the FCC
is no longer able to act on cable programming service tier rate increases that
occur after that date.
Federal law nonetheless continues to govern certain aspects of local rate
regulation. For example, federal law requires that the basic service tier be
offered to all cable subscribers. Recent FCC regulations adopted pursuant to the
1996 Telecom Act define "effective competition" and "small cable operator" for
purposes of exempting certain cable systems' basic tier from rate regulation.
Additional federal regulations require cable systems to permit customers to
purchase video programming on a per channel or per program basis without
subscribing to any tier of service, other than the basic service tier, unless
the cable system is technically incapable of doing so. Generally this exemption
is available until a cable system obtains the technical capability, but not
later than December 2002.
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Although the 1996 Telecom Act eliminated FCC rate regulation of the higher
tiers, local franchising authorities, known in the industry as LFAs, continue to
have authority over the regulation of the lowest level of cable -- the basic
service tier, commonly known as BST. For regulatory purposes, the BST contains
local broadcast stations and public, educational, and government, or PEG, access
channels and other services the system operator chooses to include in the same
package with these channels. Before an LFA begins BST rate regulation, it must
certify to the FCC that it will follow applicable federal rules, and many LFAs
have voluntarily declined to exercise this authority. LFAs also have primary
responsibility for regulating cable equipment rates. Under federal law, charges
for various types of cable equipment must be unbundled from each other and from
monthly charges for programming services. The 1996 Telecom Act allows operators
to aggregate costs for broad categories of equipment across geographic and
functional lines. Few of the LFAs in the communities in which we operate have
elected to certify to regulate rates. However there can be no assurance that our
revenues and results of operations will not be adversely affected in the future
by regulation of cable system rates.
FRANCHISE FEES
Federal law allows franchising authorities to impose franchise fees, but
such payments cannot exceed 5% of a cable system's annual gross revenues derived
from the operation of the cable system in providing cable service. Under the
1996 Telecom Act, franchising authorities may not exact cable franchise fees
from revenues derived from telecommunications services; however, many local
governments seek analogous fees under separate telecommunications service
franchises and ordinances. Some courts have held that the 1996 Telecom Act
allows local telecommunications fees only when directly related to the
provider's use of the public right-of-way.
RENEWAL OF FRANCHISES
The 1984 Cable Act established renewal procedures and criteria designed to
protect incumbent franchisees against arbitrary denials of renewal. While these
formal procedures are not mandatory unless timely invoked by either the cable
operator or the franchising authority, they can provide substantial protection
to incumbent franchisees. Even after the formal renewal procedures are invoked,
franchising authorities and cable operators remain free to negotiate a renewal
outside the formal process. Nevertheless, renewal is by no means assured, as the
franchisee must meet certain statutory standards. Even if a franchise is
renewed, a franchising authority may impose new and more onerous requirements
such as upgrading facilities and equipment, although the municipality must take
into account the cost of meeting such requirements. The 1992 Cable Act made
several changes to the process under which a franchise is renewed, some of which
could make it easier in some cases for a franchising authority to deny renewal.
COMPETING FRANCHISES
The 1992 Cable Act prohibits franchising authorities from unreasonably
refusing to grant franchises to competing cable television systems and permits
franchising authorities to operate their own cable television systems without
franchises. We currently have competing franchises in ten systems passing
approximately 23,100 homes.
FRANCHISE TRANSFERS
The 1992 Cable Act requires franchising authorities to act on any franchise
transfer request within 120 days after receipt of all information required by
FCC regulations and by the franchising authority. Approval is deemed to be
granted if the franchising authority fails to act within such period.
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CABLE ENTRY INTO TELECOMMUNICATIONS AND BROADBAND SERVICES
The 1996 Telecom Act provides that no state or local laws or regulations
may prohibit or have the effect of prohibiting any entity from providing any
interstate or intrastate telecommunications service. States are authorized,
however, to impose "competitively neutral" requirements regarding universal
service, public safety and welfare, service quality, and consumer protection.
State and local governments also retain their authority to manage the public
rights-of-way and may require reasonable, competitively neutral compensation for
management of the public rights-of-way when cable operators provide
telecommunications service. The favorable pole attachment rates afforded cable
operators under federal law can be gradually increased by utility companies
owning the poles beginning in 2001 pursuant to an FCC prescribed formula if the
operator provides telecommunications service, as well as cable service, over its
plant. The FCC has clarified that a cable operator's favorable pole rates are
not endangered by the provision of non-cable services such as Internet access.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers, including cable operators, is the interconnection
obligation imposed on all telecommunications carriers. The FCC adopted
regulations implementing the 1996 Telecom Act requirement that LECs open their
telephone networks to competition by providing competitors interconnection,
access to unbundled network elements and retail services at wholesale rates. The
U.S. Supreme Court in January 1999 upheld the FCC's authority to adopt pricing
rules for unbundled network elements and resale by competitive LECs. The FCC has
redetermined which unbundled network elements LECs must make available to new
telecommunications providers at wholesale prices. The FCC's pricing rules may be
subject to further judicial review. The ultimate outcome of the litigation and
the FCC's rulemakings, and the ultimate impact of the 1996 Telecom Act or any
final regulations adopted pursuant to the new law on us or our business cannot
be determined at this time.
Cable entry into markets for broadband services such as Internet access may
be affected by the regulatory landscape now being fashioned by Congress, the
FCC, state and local regulators and the courts. In a report to Congress adopted
in January 1999, the FCC declined to regulate cable system delivery of Internet
services and specifically refused to require cable operators to provide
competitors with nondiscriminatory access to such services. More recently, in
October 1999, the FCC's Cable Services Bureau issued a staff report on the
status of the broadband market. The report recommended the continuation of the
FCC's policy of regulatory restraint for cable delivered Internet services. The
report noted, however, that the FCC should be prepared to act swiftly if
competitive harm actually arises, such as if the cable industry were to develop
a closed, proprietary network design that could create a technological barrier
to access by competitors to cable plant.
In recent months, some local franchise authorities have imposed open access
conditions on their approval of transfers of control, including those involving
such major transactions as AT&T's acquisition of TCI's and Media One's cable
franchises. For example, the City of Portland, Oregon required AT&T to provide
competing Internet and other on-line service providers with open access to its
newly acquired cable platforms. This decision was upheld on appeal before a
federal district court, although that decision is on appeal. Approximately a
dozen other LFAs have imposed similar open access requirements, some of which
are on appeal. Numerous other franchise authorities are considering imposing
similar requirements, either during transfer or renewal processes or by
promulgating regulations pursuant to their general franchise authority.
In addition to the developments above, several bills are also pending in
Congress that, if adopted, would require open access. As a result of open access
pressure, AT&T Time Warner, Comcast and Cox recently announced that each would
open their cable platforms to an unaffiliated Internet service providers in
2002.
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On October 26, 1999, GTE filed an antitrust lawsuit in federal district
court in Pittsburgh against TCI, Comcast and At Home Corporation alleging that
the relationships between these companies, which preclude open access,
constitute illegal tying, exclusive dealing and concerted refusal to deal. If
GTE prevails in this litigation, it could negatively impact our cable modem
service plans.
Open access conditions, similar to those described above, could be imposed
upon us, pursuant to a local franchising authority's approval of a merger or
other transaction between us and another company, through the franchise renewal
process, through future regulatory, judicial or legislative developments at the
federal, state or local levels, or through pressure for action by cable
operators. Such developments could negatively impact our cable modem service
plans, decrease our revenues and increase the competition we face. On the other
hand, future developments at these levels could limit or preempt the authority
of franchise authorities to impose mandated access conditions.
TELEPHONE COMPANY ENTRY INTO CABLE TELEVISION
The 1996 Telecom Act makes far reaching changes in the regulation of
telephone companies that provide video programming services. The new law
eliminates federal legal barriers to competition in the local telephone and
cable communications businesses, preempts state and local laws and regulations
which create competitive barriers and sets basic standards for relationships
between telecommunications providers. The 1996 Telecom Act also eliminates the
requirements that LECs obtain FCC approval under Section 214 of the
Communications Act before providing video services in their telephone service
areas and removes the statutory telephone company/cable television
cross-ownership prohibition, thereby allowing LECs to offer video services in
their telephone service areas. LECs may provide service as traditional cable
operators with local franchises, or they may opt to provide their programming
over "open video systems," subject to certain conditions, including, but not
limited to, setting aside a portion of their channel capacity, up to two-thirds,
for use by unaffiliated program distributors on a non-discriminatory basis.
While the Fifth Circuit Court of Appeals reversed certain of the FCC's open
video system rules, including its preemption of local franchising, on October
14, 1999, the Fifth Circuit ruled that a Southwestern Bell ("SWB") affiliate
could provide video services over SWB facilities without obtaining a cable
franchise. Both determinations may be subject to further appeal. It is unclear
what effect these rulings will have on the entities pursuing open video system
operation. LECs could be formidable competitors to traditional cable operators,
and certain LECs have begun offering cable services, both within and outside of
their service areas. We currently have telephone overbuilds in three systems
passing approximately 3,300 homes.
The 1996 Telecom Act generally limits acquisitions and prohibits certain
joint ventures between LECs and cable operators in the same market. There are
some statutory exceptions to the buy-out and joint venture prohibitions,
including exceptions for certain small cable systems as defined by federal law
and for cable systems or telephone facilities serving certain rural areas, and
the FCC is authorized to grant waivers of the prohibitions under certain
circumstances.
ELECTRIC UTILITY ENTRY INTO TELECOMMUNICATIONS/CABLE TELEVISION
The 1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services, including cable
television. Electric utilities must establish separate subsidiaries, known as
"exempt telecommunications companies" and must apply to the FCC for operating
authority. Because of their resources, electric utilities could also be
formidable competitors to traditional cable systems.
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ADDITIONAL OWNERSHIP RESTRICTIONS
The 1996 Telecom Act repealed the 1984 Cable Act's prohibition against LECs
providing video programming directly to customers within their local telephone
exchange service areas. However, with certain limited exceptions, a LEC or its
affiliate may not acquire more than a 10% equity interest in an existing cable
system operating within the LEC's service area. The 1996 Telecom Act also
authorized LECs and others to operate "open video systems" without obtaining a
local cable franchise under the 1984 Cable Act. However, in a January 1999
decision, the U.S. Court of Appeals for the Fifth Circuit held that the 1996
Telecom Act did not preempt state franchise laws that might be applicable to
these systems. See "Business -- Competition."
The 1984 Cable Act and the FCC's rules prohibit the common ownership,
operation, control or interest in a cable system and a local television
broadcast station whose predicted Grade B contour, a measure of a television
station's signal strength as defined by the FCC's rules, covers any portion of
the community served by the cable system. The 1996 Telecom Act eliminated the
statutory ban and directed the FCC to review its cross-ownership rule within two
years. Pursuant to the 1996 Telecom Act, the FCC eliminated its restrictions on
the cross-ownership of cable systems and national broadcasting networks, and has
commenced a proceeding to review its broadcast/cable cross-ownership
restrictions. In order to encourage competition in the provision of video
programming, the FCC adopted a rule prohibiting the common ownership,
affiliation, control or interest in cable television systems and wireless cable
facilities having overlapping service areas, except in very limited
circumstances. The 1992 Cable Act codified this restriction and extended it to
co-located satellite master antenna television systems, or SMATV systems.
Permitted arrangements in effect as of October 5, 1992, were grandfathered. In
January 1995, the FCC adopted regulations which permit cable operators to own
and operate SMATV systems within their franchise areas, provided that such
operation is consistent with local cable franchise requirements. The 1996
Telecom Act exempts cable systems subject to effective competition from the
wireless cable and SMATV restrictions. In addition, a cable operator can
purchase an SMATV system located within its franchise areas and technically
integrate it into its cable system. The 1992 Cable Act permits states or local
franchising authorities to adopt certain additional restrictions on the
ownership of cable television systems.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national program services and has imposed limits on the
number of cable subscribers that a single cable operator can serve. In general,
pursuant to rules adopted October 8, 1999, no cable operator can have an
attributable interest in cable systems which serve more than 30% of all
nationwide subscribers to multichannel video programming distributors, including
cable and DBS subscribers. These new horizontal ownership rules raised the
percentage of all cable subscribers that can be served by a single cable
operator to 36.7% of cable subscribers as of October 1999. Attributable
interests for these purposes include voting stock interests of 5% or more,
certain officerships and directorships, and general and uninsulated limited
partnership interests. The FCC raised the attribution threshold for voting stock
held by passive institutional investors from 10% to 20%, and created a new
equity/debt rule that treats any investor that holds over 33% of the total
equity plus debt as an attributable interest holder. The FCC has stayed the
effectiveness of its horizontal ownership rule. The FCC's October 8th decision
also defined what constitutes a "cognizable interest" triggering application of
various FCC rules relating to the provision of cable services such as
cross-ownership, leased access, open video systems, programming access and
channel occupancy. In addition, a rulemaking proceeding to examine, among other
issues, whether any limitations on cable DBS cross-ownership are warranted in
order to prevent anticompetitive conduct in the video services market remains
pending before the FCC.
There are no federal restrictions on non-U.S. entities having an ownership
interest in cable television systems. Section 310(b)(4) of the Communications
Act does, however, limit direct and indirect foreign ownership of interests in
FCC broadcast and common carrier radio licenses,
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although the FCC may conclude that this indirect foreign ownership is consistent
with the public interest.
TECHNICAL REQUIREMENTS
The FCC has imposed technical standards applicable to the cable channels on
which broadcast stations are carried, and has prohibited franchising authorities
from adopting standards which are in conflict with or more restrictive than
those established by the FCC. Those standards are applicable to all classes of
channels which carry downstream National Television System Committee, known as
NTSC, video programming. The FCC also has adopted additional standards
applicable to cable television systems using frequencies in the 108-137 MHz and
225-400 MHz bands in order to prevent harmful interference with aeronautical
navigation and safety radio services and has also established limits on cable
system signal leakage. Periodic testing by cable operators for compliance with
the technical standards and signal leakage limits is required and an annual
filing of the results of these measurements is required. The 1992 Cable Act
requires the FCC to update its technical standards periodically to take into
account changes in technology. Under the 1996 Telecom Act, local franchising
authorities may not prohibit, condition or restrict a cable system's use of any
type of subscriber equipment or transmission technology.
The FCC has adopted regulations to implement the requirements of the 1992
Cable Act designed to improve the compatibility of cable systems and consumer
electronics equipment. Among other things, these regulations generally prohibit
cable operators from scrambling their basic service tier. The 1996 Telecom Act
directs the FCC to rely on the marketplace and set only minimal standards to
assure compatibility between television sets, VCRs and cable systems.
Pursuant to the requirements of the 1996 Telecom Act, the FCC recently
reaffirmed an order implementing regulations intended to promote the commercial
availability of navigation devices, including set-top converters. The rules
apply generally to all multichannel video programming distributors, or MVPDs,
and to all equipment used to receive multichannel video programming, including
VCRs and even computers if used for that purpose. The FCC has exempted from its
rules all analog equipment and navigation devices that operate throughout the
continental United States and are commercially available from unaffiliated
sources, such as equipment used by DBS services. The order requires that the
security functions presently integrated in set-top converters be separated from
their other functions and that separate security modules be available from cable
operators by July 2000. Cable operators will be allowed to provide integrated
set-top converters to their customers until January 1, 2005. After that time,
the sale of or lease by operators of new set-top converters with embedded
security functions will be prohibited, subject to the FCC's reassessment in
2000.
POLE ATTACHMENTS
The FCC currently regulates the rates and conditions imposed by certain
public utilities for use of their poles unless state public service commissions
are able to demonstrate that they regulate the rates, terms and conditions of
cable television pole attachments. In addition, cooperatively and municipally
owned utilities are not subject to the FCC's pole attachment regulations and in
most cases are not subject to the pole attachment regulations of the state. We
may operate systems that utilize poles owned by cooperatively and government
owned utilities. Louisiana and Ohio are the only states in which we currently
operate cable systems that have certified to the FCC that they regulate the
rates, terms and conditions for pole attachments. In the absence of state
regulation, and except for cooperatively or government owned poles, the FCC
administers such pole attachment rates through use of a formula which it has
devised. As directed by the 1996 Telecom Act, the FCC has adopted a new rate
formula for any attaching party, including cable systems, which offers
telecommunications services. This new formula will result in significantly
higher attachment rates for cable systems which choose to offer such services,
or permit their transmission on their cable systems, but does not begin to take
effect
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until 2001 and will be phased in by equal increments over the ensuing five
years. Various parties have requested the FCC to reconsider these new
regulations and several parties have filed petitions for review at the FCC and
in federal appellate courts. A 1997 proceeding to consider whether certain
elements of the existing rate formula should be adjusted also remains pending
before the FCC. If adopted, these adjustments may increase the fees paid by
cable operators to utilities for pole attachments and conduit space. The
ultimate outcome of these rulemakings and the ultimate impact of any revised FCC
rate formula or of any new pole attachment rate regulations on us or our
business cannot be determined at this time.
MUST CARRY/RETRANSMISSION CONSENT
The 1992 Cable Act contains broadcast signals carriage requirements that,
among other things, allow local commercial television broadcast stations to
elect once every three years between requiring a cable system to carry the
station, known as must carry, or negotiating for payments for granting
permission to the cable operator to carry the station, known as retransmission
consent. A cable system generally is required to devote up to one-third of its
activated channel capacity for the carriage of local commercial television
stations whether pursuant to the mandatory carriage or retransmission consent
requirements of the 1992 Cable Act. Local non-commercial television stations are
also given mandatory carriage rights, subject to certain exceptions, within the
larger of: (a) a 50-mile radius from the station's city of license; or (b) the
station's Grade B contour. Unlike commercial stations, noncommercial stations
are not given the option to negotiate retransmission consent for the carriage of
their signal. In addition, cable systems must obtain retransmission consent for
the carriage of all "distant" commercial broadcast stations, except for certain
"superstations," i.e., commercial satellite-delivered independent stations, such
as WGN. Must carry requests can limit a cable systems' programming offerings,
and retransmission consent demands may require substantial payments or other
concessions. Either option has a potentially adverse effect on our business. The
burden associated with "must carry" may increase substantially as broadcasters
proceed with planned conversion to digital transmission and if the FCC
determines that cable systems must carry all analog and digital broadcasts in
their entirety. The FCC has initiated a rulemaking proceeding concerning whether
and under what circumstances cable operators must carry digital broadcast
signals.
ACCESS CHANNELS
LFAs can include franchise provisions requiring cable operators to set
aside certain channels for public, educational and governmental access
programming. The 1984 Cable Act further requires cable television systems with
36 or more activated channels to designate a portion of their channel capacity,
up to 15% in some cases, for commercial leased access by unaffiliated third
parties. While the 1984 Cable Act allowed cable operators substantial latitude
in setting leased access rates, the 1992 Cable Act requires leased access rates
to be set according to a formula determined by the FCC. The FCC has adopted
rules regulating the terms, conditions and maximum rates a cable operator may
charge for use of the designated channel capacity, but use of commercial leased
access channels has been relatively limited. The FCC released revised rules in
February 1997 mandating a modest rate reduction. The reduction sparked some
increase in part-time use, but did not make commercial leased access
substantially more attractive to third party programmers.
ACCESS TO PROGRAMMING
To spur the development of independent cable programmers and competition to
incumbent cable operators, the 1992 Cable Act imposed restrictions on the
dealings between cable operators and cable programmers. Of special significance
from a competitive business posture, the 1992 Cable Act precludes satellite
distributed video programmers affiliated with cable
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companies from favoring cable operators over competitors and requires such
programmers to sell their programming to other multichannel video distributors.
This provision limits the ability of vertically integrated cable programmers to
offer exclusive programming arrangements to cable companies. Recently, there has
been increased interest in further restricting the marketing practices of cable
programmers, including subjecting programmers who are not affiliated with cable
operators to all of the existing program access requirements. In an effort to
increase competition in the video marketplace, the FCC revised its program
access complaint procedures. Among other revisions, the order increased
sanctions for violation of the program access rules. The FCC has, in subsequent
decisions, declined to broaden the scope of the rules to include terrestrially
delivered programming.
INSIDE WIRING
In October 1997, the FCC adopted new procedural guidelines governing the
disposition of home run wiring, a line running to an individual subscriber's
unit from a common feeder or riser cable, in multi-dwelling units, or MDUs. The
rules allow MDU owners to attempt to force cable television operators without
contracts to either sell, abandon or remove home run wiring and terminate
service to MDU subscribers unless operators retain rights under common or state
law to maintain ownership rights in the home run wiring. In addition, the FCC is
reviewing the enforceability of contracts to provide exclusive video service
within an MDU complex. The FCC has sought comment on abrogating all such
contracts held by incumbent cable operators, but allowing such contracts when
held by new entrants. These changes, if ultimately adopted, will make it easier
for an MDU complex owner to terminate service from an incumbent cable operator
in favor of a new entrant and leave the already competitive MDU sector even more
challenging for incumbent cable operators unless operators retain rights under
common or state law to maintain ownership rights in the home run wiring.
On January 10, 2000, the FCC established minimum telephone inside wiring
standards to promote consumer access to advanced telecommunications services.
These new quality standards will support high-powered broadband technologies.
The new standards, when implemented by telephone companies, may increase
competitive pressures faced by cable operators and cable entry into other
broadband services.
OTHER FCC REGULATIONS
The FCC continues to have rulemaking proceedings pending that will
implement various provisions of the 1996 Telecom Act. It also has adopted
regulations implementing various provisions of the 1992 Cable Act and the 1996
Telecom Act, many of which have been the subject of petitions requesting
reconsideration and appeals of various aspects of its rulemaking proceedings. In
addition to the FCC regulations noted above, there are other FCC regulations
covering such areas as:
- equal employment opportunity;
- subscriber privacy;
- syndicated program exclusivity;
- network program non-duplication;
- closed captioning of video programming;
- registration of cable systems;
- maintenance of various records and public inspection files;
- aeronautical frequency usage;
- lockbox availability;
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- origination cablecasting and sponsorship identification;
- antenna structure notification;
- tower marking and lighting;
- blackouts of local sports broadcast programming;
- application of rules governing political broadcasts;
- limitations on advertising contained in non-broadcast children's
programming;
- programmer access to cable systems;
- programming agreements;
- technical standards;
- consumer protection and customer service standards;
- emergency alert system requirements;
- consumer electronics equipment compatibility; and
- implementation of rules governing DBS systems.
The 1992 Cable Act, the 1996 Telecom Act and the FCC's rules implementing
these statutory provisions generally have increased the administrative and
operational expenses of cable systems and have resulted in additional regulatory
oversight by the FCC and local franchise authorities. We will continue to
develop strategies to attempt to minimize the adverse impact that the FCC's
regulations and the other provisions of the 1992 Cable Act and the 1996 Telecom
Act have on our business. However, no assurances can be given that we will be
able to develop and successfully implement such strategies to minimize the
adverse impact of the FCC's rate regulations, the 1992 Cable Act or the 1996
Telecom Act on our business.
The FCC has the authority to enforce its regulations through the imposition
of substantial fines, the issuance of cease and desist orders and/or the
imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations.
COPYRIGHT
Cable systems are subject to federal copyright licensing covering carriage
of television and radio broadcast signals. In exchange for filing certain
reports and contributing a percentage of their revenue to a federal copyright
royalty pool, cable operators can obtain blanket permission to retransmit
copyrighted material on broadcast signals. The nature and amount of future
payments for broadcast signal carriage cannot be predicted at this time. The
possible simplification, modification or elimination of the compulsory copyright
license is the subject of continuing legislative review. The elimination or
substantial modification of the cable compulsory license could adversely affect
our ability to obtain suitable programming and could substantially increase the
cost of programming that remained available for distribution to our customers.
We cannot predict the outcome of this legislative activity.
Cable operators distribute programming and advertising that use music
controlled by the two major music performing rights organizations, ASCAP and
BMI. In October 1989, the special rate court of the U.S. District Court of the
Southern District of New York imposed interim rates on the cable industry's use
of ASCAP-controlled music. The same federal district court recently established
a special rate court for BMI. BMI and certain cable industry representatives
recently concluded negotiations for a standard licensing agreement covering the
usage of BMI music contained in advertising and other information inserted by
operators into cable programming and
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on certain local access and origination channels carried on cable systems. ASCAP
and cable industry representatives have met to discuss the development of a
standard licensing agreement covering ASCAP music in local origination and
access channels and pay-per-view programming. Recently, the U.S. District Court
of the Southern District of New York ruled that, on an interim basis, cable
operators must pay ASCAP the same fees paid to BMI for locally originated
programming, PEG, leased access and local advertising. Although we cannot
predict the ultimate outcome of these industry negotiations and litigation or
the amount of any license fees we may be required to pay for past and future use
of ASCAP-controlled music, we do not believe these license fees will be material
to our operations.
STATE AND LOCAL REGULATION
Cable television systems generally are operated pursuant to nonexclusive
franchises granted by a municipality or other state or local government entity
in order to cross public rights-of-way. Federal law now prohibits franchise
authorities from granting exclusive franchises or from unreasonably refusing to
award additional franchises. Cable franchises generally are granted for fixed
terms and in many cases include monetary penalties for non-compliance and may be
terminable if the franchisee fails to comply with material provisions. The terms
and conditions of franchises vary materially from jurisdiction to jurisdiction.
Each franchise generally contains provisions governing cable operations, service
rates, franchise fees, system construction and maintenance obligations, system
channel capacity, design and technical performance, customer service standards,
and indemnification protections. A number of states, such as Connecticut,
subject cable television systems to the jurisdiction of centralized state
governmental agencies, some of which impose regulation of a character similar to
that of a public utility. Although LFAs have considerable discretion in
establishing franchise terms, there are certain federal limitations. For
example, LFAs cannot impose franchise fees exceeding 5% of the system's gross
revenues, cannot dictate the particular technology used by the system, and
cannot specify video programming other than identifying broad categories of
programming.
The 1984 Cable Act places certain limitations on a franchising authority's
ability to control the operation of a cable system operator, and the courts have
from time to time reviewed the constitutionality of several general franchise
requirements, including franchise fees and access channel requirements, often
with inconsistent results. On the other hand, the 1992 Cable Act prohibits
exclusive franchises, and allows franchising authorities to exercise greater
control over the operation of franchised cable television systems, especially in
the area of customer service and rate regulation. Moreover, franchising
authorities are immunized from monetary damage awards arising from regulation of
cable television systems or decisions made on franchise grants, renewals,
transfers and amendments.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and service or increased
franchise fees as a condition of renewal. Similarly, if a franchise authority's
consent is required for the purchase or sale of a cable system or franchise,
such authority may attempt to impose more burdensome or onerous franchise
requirements in connection with a request for consent. Historically, franchises
have been renewed for cable operators that have provided satisfactory services
and have complied with the terms of their franchise. We have generally had good
experiences with our cable franchise renewals.
The 1996 Telecom Act provides that no state or local laws or regulations
may prohibit or have the effect of prohibiting any entity from providing any
interstate or intrastate telecommunications service. States are authorized,
however, to impose "competitively neutral" requirements regarding universal
service, public safety and welfare, service quality, and consumer protection.
State and local governments also retain their authority to manage the public
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rights-of-way and may require reasonable, competitively neutral compensation for
management of the public right-of-way when cable operators provide
telecommunications service.
In June 1999, the U.S. District Court for the District of Oregon held that
the City of Portland, Oregon had the authority to require AT&T Corp. to provide
cable modem services to competitors on a non-discriminatory basis. AT&T has
sought expedited review of this decision in the Ninth Circuit Court of Appeals.
A three-judge panel of the Ninth Circuit Court of Appeals heard oral argument on
the matter on November 1, 1999, and a decision is expected in the near future. A
number of other franchising authorities have imposed, or are considering
imposing, similar open access requirements.
OTHER MATTERS
The foregoing does not purport to describe all present and proposed
federal, state and local regulations and legislation relating to the cable
television industry. Other existing federal regulations, copyright licensing
requirements and, in many jurisdictions, state and local franchise requirements,
currently are the subject of a variety of judicial proceedings, legislative
hearings and administrative and legislative proposals which could change, in
varying degrees, the manner in which cable television systems operate. Neither
the outcome of these proceedings nor their impact upon the cable television
industry can be predicted at this time.
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MANAGEMENT
All of our outstanding capital stock is owned by our parent, Classic
Communications. The executive officers of Classic Communications are also our
executive officers and hold the same positions with us. J. Merritt Belisle and
Steven E. Seach are our only directors. The Executive officers, key operations
managers and directors of Classic Communications are as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND
DIRECTORS OF CLASSIC COMMUNICATIONS AGE POSITION
- ----------------------------------- --- --------
<S> <C> <C>
Alberto Cribiore............................. 54 Director and Chairman of the Board
J. Merritt Belisle........................... 44 Director and Chief Executive Officer
Steven E. Seach.............................. 43 Director, President and Chief Financial
Officer
Dale R. Bennett.............................. 53 Chief Operating Officer
Ronald W. Martin............................. 47 Executive Vice President of Operations
Elizabeth Kay Monigold....................... 46 Executive Vice President of
Administration
Lisa A. Hook................................. 42 Director
David Webb................................... 46 Director
Jeffery C. Garvey............................ 51 Director
James A. Kofalt.............................. 57 Director
Martin D. Payson............................. 64 Director
</TABLE>
ALBERTO CRIBIORE, founder and Managing Principal of Brera Capital Partners,
was appointed Chairman of the Board of Classic Communications upon the closing
of the Brera Classic equity investment. Prior to forming Brera in 1997, Mr.
Cribiore was Co-President and Partner at Clayton, Dubilier & Rice, Inc. which he
joined in 1985 as one of three principal shareholders. He had previously been a
Senior Vice President at Warner Communications, where he was responsible for
mergers, acquisitions and divestitures. Mr. Cribiore is a cum laude graduate of
Bocconi University in Milan, Italy and holds degrees in Business Administration
and Economics. He is currently a Director of Riverwood International Corporation
and Hansberger Group, Inc. Mr. Cribiore also serves as the Chairman of the board
of directors of Global Decisions Group, LLC, the parent company of Cambridge
Energy Research Associates, MCM Group, Inc. and Brera GAB Robbins, LLC. He is
also currently Co-Chairman of the board of directors of B-G Western, Inc., the
parent of Western Industries, Inc., and a member of the board of directors of
Western Industries, Inc. Mr. Cribiore serves as one of Brera Classic's designees
to the board of Classic Communications. See "Certain Relationships and Related
Transactions -- 1999 Stockholders' Agreement."
J. MERRITT BELISLE, our Chief Executive Officer and director, founded
Classic in March 1992. From January 1988 through August 1991, he was a Vice
President at Texas Commerce Investment Banking, a division of Texas Commerce
Bank, N.A., Houston, Texas. From April 1985 to January 1988, Mr. Belisle was
Chief Executive Officer of Community Cable Incorporated, a small multi-system
cable television operator based in Austin, Texas. Community Cable was sold to a
cable television subsidiary of Time Warner, Inc. Prior to founding Community
Cable, Mr. Belisle was a corporate and securities attorney with the Houston
office of Baker & Botts. Mr. Belisle received a BBA in 1977, an MPA in 1980, and
a JD in 1981 from The University of Texas at Austin. Mr. Belisle serves as one
of the directors of Classic Communications pursuant to his position as our Chief
Executive Officer. See "Certain Relationships and Related Transactions -- 1999
Stockholders' Agreement."
STEVEN E. SEACH, our President and Chief Financial Officer and director,
assisted Mr. Belisle in the founding of Classic in March 1992. Mr. Seach became
a member of the board of Classic in 1998. Mr. Seach became our President in
October 1996 and, through August 1998, was
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substantially responsible for our operations. From March 1992 to June 1994, Mr.
Seach served as an advisor to Classic and its board of directors for strategic,
operational and financial matters. Mr. Seach became our Chief Financial Officer
in July 1994. Prior to his association with us, Mr. Seach spent 12 years in the
corporate banking and investment banking industries, primarily with Texas
Commerce Bank, N.A., Houston, Texas. Mr. Seach received a BBA in finance from
the University of Houston in 1980. He is currently a director of The Keller
Group and serves as one of the directors of Classic Communications pursuant to
the 1999 Stockholders' Agreement. See "Certain Relationships and Related
Transactions -- 1999 Stockholders' Agreement."
DALE R. BENNETT, whom Classic Communications announced will become our
Chief Operating Officer, is Vice President of AT&T Broadband and Internet
Services, Texas Metro Region, a position he held since January of 1997. Mr.
Bennett joined the predecessor company TCI in 1990 as Texas State Manager and
held the positions of Vice President, Southwest Division, based in Walnut Creek,
CA, and Vice President, National Division, based in Denver, CO. Prior to joining
TCI, Mr. Bennett was Executive Vice President, Chief Operating Officer Columbia
Communications Corporation in Houston, TX. Columbia Communications owned and
managed cable television systems, television stations and radio stations. Before
joining Columbia Communications in 1977, Mr. Bennett was Financial Vice
President of Investors Development Corporation, a real estate development and
construction company based in Oklahoma City.
RONALD W. MARTIN, who became our Executive Vice President of Operations
upon the closing of the Buford acquisition, is responsible for all of our system
operating and marketing functions. Since 1993, he served as Buford's Executive
Vice President and Chief Operating Officer. A graduate of Dakota Wesleyan, he
joined Buford in 1973 as Business Manager for KXON-TV in Mitchell, South Dakota,
later serving in the same position at KFSM-TV in Fort Smith, Arkansas. He joined
Buford's corporate staff in 1976, serving as Internal Auditor and Personnel
Administrator. In 1981, Mr. Martin was named Vice President of Human Resources
and Administration for Buford. Mr. Martin is a board member and past Chairman of
the National Cable Television Cooperative and serves on the CTAM Digital
Committee.
ELIZABETH KAY MONIGOLD, who became our Executive Vice President of
Administration upon the closing of the Buford acquisition, is responsible for
all of our human resources, legal, information systems and risk management
functions, as well as operating responsibility for Correctional Cable
Television. Since 1993, she served as Buford's Executive Vice President and
Chief Administrative Officer. Ms. Monigold joined Buford in 1981 and served in
numerous capacities including the evaluation of new business opportunities such
as data, telephony, digital and other new technologies. Ms. Monigold earned a
BBA in Business Management from The University of Texas at Tyler.
LISA A. HOOK was appointed a director of Classic Communications upon the
closing of the Brera Classic equity investment. Since April 2000, Ms. Hook has
been President of the Wireless Business Unit of America Online, Inc. She was a
principal of Brera Capital Partners from May 1998 to April 2000. Prior to
joining Brera Capital Partners in 1998, Ms. Hook was a Managing Director of
Alpine Capital Group, a telecommunications and media venture capital firm. From
1989 to 1996, Ms. Hook served in a number of senior executive level positions at
Time Warner Inc., including Executive Vice President/Chief Operating Officer of
Time Warner Telecom and Special Advisor to the Vice Chairman. From 1987 to 1989,
Ms. Hook served as the Legal Advisor to the Chairman of the Federal
Communications Commission. From 1985 to 1987, Ms. Hook served as a senior
attorney at Viacom International, responsible for Viacom Cable. Prior to joining
Viacom, Ms. Hook was an attorney with the law firm of Hogan & Hartson. Ms. Hook
received her BA from Duke University and her JD from the Dickinson School of
Law. Ms. Hook serves as one of Brera Classic's designees to the board of Classic
Communications. She is currently a director of Time Warner Telecom, Inc. and
Roberts Radio LLC. See "Certain Relationships and Related Transactions -- 1999
Stockholders' Agreement."
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DAVID WEBB was appointed a director of Classic Communications upon the
closing of the Brera Classic equity investment. Since February 2000, Mr. Webb
has been the head of Merrill Lynch's Financial Sponsor Group. He was a principal
of Brera Capital Partners from March 1999 to February 2000. Prior to joining
Brera Classic in 1999, Mr. Webb was a Managing Director in the investment
banking division of Merrill Lynch, which he joined in 1981. Mr. Webb was the
head of the firm's Global Financial Sponsors Group, and a member of the
investment banking division's U.S. Operating Committee. Mr. Webb received a BA
with honors from the University of North Carolina, where he was a Morehead
Scholar, and an MBA from the Darden School of the University of Virginia. He is
a director of Homes for the Homeless Inc. and Brera GAB Robbins, LLC. Mr. Webb
serves as one of Brera Classic's designees to the board of Classic
Communications. See "Certain Relationships and Related Transactions -- 1999
Stockholders' Agreement."
MARTIN D. PAYSON, the Chairman of Latin Communications Group, Inc., a
privately-held Spanish language media company, was appointed a director of
Classic Communications upon the closing of the Brera Classic equity investment.
Previously, Mr. Payson was Vice Chairman of Time Warner Inc. and a member of its
board of directors. Before the merger of Warner Communications Inc. and Time,
Inc., Mr. Payson held the position of Office of the President and General
Counsel of Warner Communications. Mr. Payson is a director of Delta Financial
Corp. and Panavision Inc., as well as several privately-held companies and
philanthropic organizations. Mr. Payson received his AB from Cornell University
and his LLB cum laude from New York University School of Law. Mr. Payson serves
as one of Brera Classic's designees to the board of Classic Communications. See
"Certain Relationships and Related Transactions -- 1999 Stockholders'
Agreement."
JEFFERY C. GARVEY, a general partner of Austin Ventures, L.P., was
appointed a director of Classic Communications in November 1999 and was a
director of Classic Communications from July 1992 to July 28, 1999. Mr. Garvey
has been general partner of Austin Ventures, L.P. since 1984. Mr. Garvey is
currently a director of CelPage and Kirtland Capital Partners. From 1979 through
1986, Mr. Garvey was the Executive Vice President and President of Rust Capital,
Ltd, a small business investment company. Prior to that, Mr. Garvey was an
officer with PNC Bank in Philadelphia. Mr. Garvey received his BA with honors
from St. Lawrence University in 1971.
JAMES A. KOFALT was appointed a director of Classic Communications in
November 1999. Mr. Kofalt has held various management positions at Cablevision
Systems Corporation, including Chief Operating Officer from 1990 to 1992 and
President and Chief Operating Officer from 1992 to 1994. He is a former Chairman
of the Boards of Directors of Campuslink Communications Systems, Inc., from 1995
to 1999, and Optel, Inc., from 1995 to 1996. Mr. Kofalt is currently a director
of PaeTec Corp. and Correctnet Global Information Solutions, Inc. and a member
of the Board of Visitors of the Lineberger Comprehensive Cancer Research Center
at the University of North Carolina. Mr. Kofalt received his B.S. from the
United States Military Academy at West Point.
ELECTION OF DIRECTORS AND APPOINTMENT OF EXECUTIVE OFFICERS
The board of directors of Classic Communications is divided into three
classes, and each director serves for a staggered three-year term. The board
consists of: two Class I directors, Messrs. Seach and Webb; three Class II
directors, Messrs. Belisle and Kofalt and Ms. Hook; and three Class III
directors, Messrs. Cribiore, Garvey and Payson. At each annual meeting of
stockholders, a class of directors will be elected for a three-year term to
succeed the directors of the same class whose terms are then expiring. The terms
of the Class I directors, Class II directors and Class III directors will expire
upon the election and qualification of successor directors at the annual meeting
of stockholders held during the calendar years 2000, 2001 and 2002,
respectively.
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Each officer serves at the discretion of the board of directors. There are
no family relationships among any of the directors and executive officers.
BOARD COMMITTEES
Classic Communications has appointed an audit committee and a compensation
committee of the board of directors. The audit committee will review the
internal accounting procedures and will consider and report to the board of
directors with respect to other auditing and accounting matters, including the
selection of independent auditors, the scope of annual audits, fees to be paid
to independent auditors and the performance of independent auditors. The audit
committee consists of Mr. Webb, Mr. Kofalt and Mr. Payson. The compensation
committee will review and recommend to the board of directors the salaries,
benefits and stock option grants of all employees, consultants, directors and
other individuals compensated by us. The compensation committee also administers
the stock option and other employee benefits plans of Classic and Classic
Communications. The compensation committee consists of Ms. Hook, Mr. Garvey and
Mr. Payson.
DIRECTOR COMPENSATION
The directors of Classic Communications who are not executive officers of
Classic Communications will each be paid $15,000 as compensation for their
service as directors for the year 2000. Both of our directors are executive
officers and are compensated in their capacity as executive officers. In August
1999, Mr. Martin Payson, who is currently a member of Classic Communications'
board of directors, was granted an option to purchase 7,000 shares of the Class
A common stock of Classic Communications at an exercise price of $20 per share.
Mr. James A. Kofalt, who was appointed to the Classic Communications board in
November 1999, was granted an option on December 7, 1999 to purchase 8,000
shares of the Class A common stock of Classic Communications at an exercise
price of $25 per share, which was the initial offering price to the public per
share of Class A common stock in Classic Communications' initial public
offering. In February 2000, each of Mr. Jeffery C. Garvey, who is currently a
member of Classic Communications' board of directors, Mr. Kofalt and Mr. Payson
were granted options to purchase 3,000 shares of the Class A common stock of
Classic Communications at an exercise price of $20.875 per share, which was the
closing price per share of Classic Communications' Class A common stock on March
3, 2000. These options have a 10-year term and vest in 25% increments on each
anniversary date of the grant over four years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Historically, all compensation decisions relating to our executive officers
have been made by the board of directors of Classic Communications as a whole.
J. Merritt Belisle, our Chief Executive Officer, and Steven E. Seach, our
President and Chief Financial Officer, as board members, historically
participated in deliberations of the board of directors with respect to
compensation of all executive officers. In the future, the compensation
committee of Classic Communications will make all compensation decisions
regarding our executive officers. No interlocking relationship exists between
the compensation committee and the board of directors or compensation committee
of any other company, and no such relationship existed in the past.
1999 STOCKHOLDERS' AGREEMENT
Effective July 28, 1999, Classic Communications, Brera Classic, BT Capital
Partners, Inc., Austin Ventures, L.P., BA Capital Company, L.P., as the
successor in interest to NationsBanc Capital Corp., J. Merritt Belisle, Steven
E. Seach and certain other stockholders of Classic Communications entered into a
stockholders' agreement. The agreement was amended as of December 13, 1999 to
provide that the parties will be obligated to vote their shares of Class B
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common stock in favor of the election to the board of Classic Communications of
(1) up to six nominees chosen by Brera Classic, (2) the chief executive officer
of Classic Communications, (3) Steven Seach for as long as he is employed by
Classic Communications and (4) two nominees who are independent directors (as
defined by the rules of the Nasdaq National Market) chosen by a majority vote of
the board of directors of Classic Communications. These voting arrangements will
terminate when these stockholders hold less than 30% of all of the common stock
of Classic Communications on a fully diluted basis. See "Certain Relationships
and Related Transactions -- 1999 Stockholders' Agreement."
The amendment to the stockholders' agreement also provides, among other
things, that a party to the agreement will not be able to participate in the
nominating of directors under the agreement if such party holds less than 2% of
the outstanding common stock on a fully diluted basis, although such party will
be obligated to vote for the nominees under the agreement as long as it holds at
least 1% of the outstanding common stock of Classic Communications on a fully
diluted basis. The parties to the agreement other than Brera are not entitled to
nominate directors under the agreement if such parties, in the aggregate, hold
less than 4% of the outstanding common stock of Classic Communications on a
fully diluted basis. As a result of the sales made by the parties to the
stockholders' agreement in Classic Communications' initial public offering in
December, 1999, the parties to the agreement other than Brera, hold less than 4%
of the outstanding common stock of Classic Communications on a fully-diluted
basis and no longer have the right to nominate directors of Classic
Communications under the agreement.
OTHER CORPORATE PERSONNEL
BRYAN D. NOTEBOOM, our Vice President of Finance, has been with us since
our inception and coordinates our finance, investor relations and mergers and
acquisitions functions. Mr. Noteboom has an extensive background in cable
television, accounting, and finance through prior work experience in the cable
industry and as a senior auditor with Coopers & Lybrand. Mr. Noteboom earned a
BBA in Accounting/Finance from the University of Texas at Austin in December
1985 and is a licensed Certified Public Accountant.
RONALD G. JANSONIUS, our Vice President of Advanced Technology, has been
with us since 1996 and is responsible for directing our advanced technology
initiatives. Mr. Jansonius has over 6 years of computer, network, and broadband
technology expertise. He received a BS from Fort Hays State University in 1982.
RON ENAS, our Vice President of Engineering, joined us in September 1999
and is responsible for all technical functions, including the oversight of our
capital expenditure program. Mr. Enas has 25 years of experience in the
industry, having previously held positions of increasing responsibility with
Time Warner, Inc., Post Newsweek Cable and Harron Communications Corp. Mr. Enas
is a graduate of Tyler Junior College.
MICHELE JENKINS, our Vice President of Marketing, joined us in October 1999
and is responsible for all aspects of marketing, sales and programming. Prior to
joining us, Ms. Jenkins served as Corporate Director of Programming and PPV for
Marcus Cable. Prior to Marcus Cable, Ms. Jenkins served as Corporate Director of
Marketing at Sammons Communications, Inc. Ms. Jenkins is a graduate of Texas
Tech University.
JOHN ELLIS, our Vice President of Management Information Systems, has over
25 years experience in information technology and is responsible for the
development, implementation and operation of all software and hardware network
interfaces for us. Mr. Ellis joined Buford in 1981 and was instrumental in the
network design of the Tyler, Texas call center. Mr. Ellis is currently serving
on the CableLabs Year 2000 Committee.
MARK ROWE, our Corporate Controller, joined us in 1998 and coordinates our
accounting function, including SEC reporting and budgeting. Prior to joining us,
Mr. Rowe worked as an
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audit manager at Ernst & Young LLP, serving a number of telecommunication
industry clients. Mr. Rowe earned a BBA in Accounting from The University of
Texas at Austin in 1990 and is a licensed Certified Public Accountant.
ASHLEY M. KIMERY, our Corporate Treasurer, joined us in 1995 and currently
oversees our cash management and tax functions. Prior to joining us, Ms. Kimery
worked for seven years in both the audit and tax departments at Ernst & Young
LLP. Ms. Kimery earned a BBA in Accounting from Texas A&M University in 1987, an
MPA in Tax from The University of Texas at Austin in 1991 and is a licensed
Certified Public Accountant.
KEY OPERATIONS PERSONNEL
ARL COPE, our Vice President and Regional Manager, joined Buford in 1987
and is responsible for the oversight of all operational, technical and local
marketing aspects of certain of our systems in Oklahoma, Texas, Arkansas, and
northern Louisiana. A 30-year veteran of the cable television industry, Mr. Cope
currently serves as Secretary/Treasurer of the Arkansas Cable Telecommunications
Association and has been a board member since 1989.
WILLIAM E. FLOWERS, JR., our Vice President and Regional Manager, has over
18 years of experience in the cable television industry and oversees all
operational, technical and local marketing aspects of our systems in the western
and panhandle regions of Texas and in New Mexico. Mr. Flowers joined us in
August 1998.
STEVE LOWE, our Vice President and Regional Manager, has over 25 years
experience in the cable television industry and oversees all operational,
technical and local marketing aspects of our systems in central and east Texas
and central Louisiana. Prior to joining Buford in 1988, Mr. Lowe constructed,
owned and operated cable systems in western Oklahoma. Mr. Lowe currently serves
on the board of directors of the Texas Cable Television Association.
RON SCHAEFFER, our General Manager of Correctional Cable Television, is
responsible for the operation of existing business and the development of new
business within Correctional Cable Television. Mr. Schaeffer joined Buford in
1992 and has been instrumental in the development of the Satellite Education
Network, which is designed to provide interactive educational services to
prisons. Mr. Schaeffer is a graduate of New York University.
DAVID D. WALKER, our Vice President and Regional Manager, has over 28 years
of experience in the cable television industry and oversees all operational,
technical and local marketing aspects of certain of our systems in Kansas,
Missouri, Arkansas, Nebraska and Colorado.
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers are the executive officers of Classic Communications
and hold the same offices with us. The following table summarizes the
compensation for services rendered which Classic Communications paid to the
Chief Executive Officer, President and other most highly compensated executive
officers whose total annual compensation exceeded $100,000 in our fiscal years
ended December 31, 1999 and 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------------- -------------------------------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION AWARDS($)(1)(2) OPTIONS(#) COMPENSATION($)(3)
------------------ ---- --------- -------- ------------ --------------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Merritt Belisle....... 1999 $298,077 $ 2,305,782(4) (5) $ 0 559,748 $4,317
Chief Executive 1998 $200,000 $ 361,539(6) (5) $ 49,609 0 $4,286
Officer
Steven E. Seach.......... 1999 $350,000 $ 2,200,000(7) (5) $ 0 559,748 $5,000
President and Chief 1998 $277,084 $ 258,302(8) (5) $659,471 0 $5,000
Financial Officer
Kevin McCabe(9).......... 1999 $142,500 $ 0 (5) $ 0 0 $2,825
Executive Vice 1998 $ 0 $ 0 (5) $ 0 0 $ 0
President and Chief
Accounting Officer
</TABLE>
- ---------------
(1) The executive officers of Classic Communications received restricted stock
during 1996 under the 1996 Stock Restricted Plan. See "-- 1996 Restricted
Stock Plan." On July 29, 1998, Messrs. Belisle and Seach held 229,050 shares
and 67,283 shares of restricted stock, respectively, and each of Messrs.
Belisle and Seach exchanged their existing shares of restricted stock for
242,209 new shares of restricted stock under the 1998 Restricted Stock Plan
with revised vesting terms and other restrictions. See "-- 1998 Restricted
Stock Plan." Long-term compensation amounts are calculated by multiplying
the number of 1998 restricted shares issued by the per share value of
Classic Communications' unrestricted stock as of the date of issuance, less
an amount equal to the number of 1996 restricted shares exchanged therefor
multiplied by the per share value of Classic Communications' unrestricted
stock on the date of issuance.
(2) As of December 31, 1999, Messrs. Belisle and Seach each owned 242,209
restricted shares of Classic Communications' common stock. The total value
of all restricted stock owned by Messrs. Belisle and Seach was approximately
$8.9 million each, computed without taking into consideration any of the
restrictions. These shares vested upon the consummation of the Brera Classic
equity investment. Messrs. Belisle and Seach are entitled to dividends in
respect of these shares in the same manner as the holders of common stock,
but only to the extent that such dividends exceed the distribution
thresholds applicable thereto. See "-- 1998 Restricted Stock Plan."
(3) Represents our contribution under our 401(k) plan.
(4) Includes (a) $780,000 paid to Mr. Belisle under his former employment
agreement in connection with the consummation of the Brera Classic equity
investment, (b) $1.5 million paid to Mr. Belisle under such agreement in
connection with the consummation of the Buford acquisition and (c) $25,782
paid to Mr. Belisle under such agreement in connection with a smaller
acquisition.
(5) Such Named Executive Officer did not receive personal benefits during the
listed years in excess of the lesser of $50,000 or 10% of his annual salary
and bonus.
(6) Includes a transaction fee of $300,000 paid pursuant to a pre-existing
employment agreement in connection with the acquisition of certain
properties from Cable One in July 1998, and the related financings.
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(7) Includes (a) $700,000 paid to Mr. Seach under his former employment
agreement in connection with the consummation of the Brera Classic equity
investment and (b) $1.5 million paid to Mr. Seach under such agreement in
connection with the consummation of the Buford acquisition.
(8) Includes a transaction fee of $250,000 paid pursuant to a pre-existing
employment agreement in connection with the acquisition of certain
properties from Cable One in July 1998, and the related financings.
(9) Mr. McCabe joined the company on February 1, 1999 and resigned effective
October 15, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows, as to each of the officers named in the Summary
Compensation Table, information concerning stock options granted during the
fiscal year ended December 31, 1999:
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(3)
-------------------------------------------------- -------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE($) DATE 5% 10%
- ---- ---------- ------------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
J. Merritt Belisle... 279,874(1) 16.3% $14.57 7/28/09 $ 6,642,248 $10,576,670
279,874(2) 16.3% $25.00 7/28/09 $11,397,131 $18,148,027
Steven E. Seach...... 279,874(1) 16.3% $14.57 7/28/09 $ 6,642,248 $10,576,670
279,874(2) 16.3% $25.00 7/28/09 $11,397,131 $18,148,027
Kevin McCabe......... -- -- $ -- -- $ -- $ --
</TABLE>
- ---------------
(1) Option is for Class B common stock. Options vest monthly over a three-year
period which began July 28, 1999. In addition, all of the shares will vest
in full immediately upon the closing of (a) the sale of all of Classic
Communications' common stock for cash, by merger, tender offer, stock
purchase or otherwise or (b) the sale of all or substantially all of Classic
Communications' assets for cash. Upon the closing of Classic Communications'
initial public offering, 139,937 of these shares vested and the remaining
shares continue to vest as described in the previous two sentences. Options
granted are incentive stock options or nonqualified stock options and have
exercise prices equal to the fair market value of Classic Communications'
Common Stock on the date of grant, as determined by the Board of Directors
on the date of grant.
(2) Option is for Class B common stock. Options vest monthly over a three-year
period which began December 8, 1999. In addition, all of the shares will
vest in full immediately upon the closing of (a) the sale of all of Classic
Communications' common stock for cash, by merger, tender offer, stock
purchase or otherwise or (b) the sale of all or substantially all of Classic
Communications' assets for cash. Options granted are incentive stock options
or nonqualified stock options and have exercise prices equal to the fair
market value of Classic Communications' Common Stock on the date of grant,
as determined by the Board of Directors on the date of grant.
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(3) The 5% and 10% rates of appreciation are specified by the rules of the
Securities and Exchange Commission and do not represent our estimates or
projections of Classic Communications' future stock prices.
YEAR-END OPTION VALUES
The following table sets forth, for each of the officers in the Summary
Compensation Table, certain information concerning the number of shares subject
to both exercisable and unexercisable stock options as of December 31, 1999.
Also reported are values for "in-the-money" options, which represent the
positive spread between the respective exercise prices of outstanding stock
options and the fair market value of Classic Communications' stock as of
December 31, 1999. No options were exercised during the year ended December 31,
1999.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED OPTIONS MONEY OPTIONS AT
AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
------------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
J. Merritt Belisle................ 174,435 105,439 $3,836,349 $2,318,920
0 279,874 $ 0 $3,236,183
Steven E. Seach................... 174,435 105,439 $3,836,349 $2,318,920
0 279,874 $ 0 $3,236,183
Kevin McCabe...................... 0 0 $ 0 $ 0
</TABLE>
- ---------------
(1) Market value of underlying securities based on the closing price of Classic
Communications' Common Stock on December 31, 1999 (the last trading day of
fiscal 1999) on the Nasdaq National Market of $36.563 minus the exercise
price.
1996 RESTRICTED STOCK PLAN
Certain current and former members of management own Classic
Communications' restricted stock subject to the terms of Classic Communications'
1996 Restricted Stock Plan. Pursuant to the 1996 Plan, Classic Communications
may, from time to time, grant restricted stock to officers and other key
employees of Classic Communications or its subsidiaries upon the terms,
conditions and provisions of the 1996 Plan. Concurrent with the adoption of the
1996 Plan, Classic Communications granted a total of 517,626 shares of common
stock as of such date, of which only 144,940 shares were outstanding as of
December 31, 1999. These shares vested upon the consummation of the Brera
Classic equity investment. One-half of such shares of common stock is subject to
a distribution threshold equal to $9.93 per share, i.e., the first $9.93 of
distributions with respect to such shares is to be withheld. One-fourth of the
shares is subject to a distribution threshold of $19.06 per share and one-fourth
to a distribution threshold of $29.78 per share.
1998 RESTRICTED STOCK PLAN
Classic Communications has adopted the 1998 Restricted Stock Plan. The
terms of the 1998 Plan are similar in all material respects to the 1996 Plan. In
July 1998, each of Messrs. Seach and Belisle exchanged all of his existing
shares under the 1996 Plan for 242,209 shares of Classic Communications common
stock pursuant to the 1998 Plan. These shares vested upon the consummation of
the Brera Classic equity investment. All of such shares of common stock are
subject to a distribution threshold equal to $3.77 per share, i.e., the first
$3.77 of distributions with respect to such shares is to be withheld.
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1999 OMNIBUS STOCK INCENTIVE PLAN
The following description of Classic Communications' 1999 Omnibus Stock
Incentive Plan is a summary and is qualified in its entirety by reference to the
text of the 1999 Omnibus Stock Incentive Plan, which is filed as an exhibit to
the annual report on Form 10-K of Classic Communications for their fiscal year
ended December 31, 1999.
Classic Communications' 1999 Omnibus Stock Incentive Plan was adopted by
its board of directors in October 1999 for the benefit of the officers,
directors, key employees, advisors and consultants of Classic Communications and
its subsidiaries. An aggregate of 2,000,000 shares of Classic Communications'
Class A common stock is reserved for issuance under the plan. The plan provides
for the issuance of stock-based incentive awards, including stock options, stock
appreciation rights, restricted stock, deferred stock and performance shares. An
award may consist of one or any combination of benefits. Under this plan, awards
covering no more than 80% of the shares reserved for issuance under the plan may
be granted to any participant in any one year.
The plan is administered by the compensation committee of the board of
directors of Classic Communications, although it may be administered by either
the board of directors of Classic Communications or by any committee of the
board of directors. The board or a committee of the board, acting as the plan
administrator, may interpret this plan, may prescribe, amend and rescind rules
governing the plan, and may otherwise supervise the administration of this plan.
This plan permits the plan administrator to select the officers, directors, key
employees, advisors and consultants, including directors who are also employees,
who will receive awards and generally to determine the terms and conditions of
those awards. Notwithstanding the foregoing, the grant of any award intended to
qualify as performance-based compensation under Section 162(m) of the Internal
Revenue Code, and any administrative determinations made in connection
therewith, must be carried out by a committee of the board or a board committee,
consisting of at least two "outside directors," as defined under Section 162(m),
in a manner consistent with the rules governing performance-based compensation
under Section 162(m).
We may issue two types of stock options under this plan: incentive stock
options or ISO's, which are intended to qualify for favorable tax treatment
under the Code, and non-qualified stock options. The option price of each ISO
granted under this plan must be at least equal to the fair market value of a
share of Classic Communications' Class A common stock on the date the ISO is
granted.
Stock appreciation rights, or SARs, may be granted under this plan either
alone or in conjunction with all or part of any stock option granted under this
plan. A SAR granted under this plan entitles its holder to receive, at the time
of exercise, an amount per share equal to the excess of the fair market value,
at the date of exercise, of a share of Classic Communications' Class A common
stock over a specified price fixed by the plan administrator.
Restricted stock, deferred stock and performance shares may be granted
under this plan. The plan administrator will determine the purchase price,
performance period and performance goals, if any, for any grant of restricted
stock, deferred stock and performance shares. Participants with restricted stock
and performance shares generally have all of the rights of a stockholder. For
deferred stock, during the deferral period and subject to the terms and
conditions that the plan administrator imposes, the deferred stock units may be
credited with dividend equivalent rights. The plan administrator may, in its
discretion, provide for the lapse of these restrictions in installments and may
accelerate or waive these restrictions, in whole or in part, based on such facts
as the attainment of performance goals or the participant's termination of
employment or service, death or disability.
In the event of a merger, consolidation, reorganization, recapitalization,
stock dividend or other change in corporate structure affecting the number of
issued shares of Classic
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Communications' Class A voting common stock, the plan administrator may make an
equitable substitution or proportionate adjustment in the number and type of
shares authorized by this plan, and the number and exercise price of shares
subject to outstanding awards. In addition, the plan administrator, in its
discretion, may terminate all awards providing for payment of cash or in-kind
consideration.
In the event of a change of control of Classic Communications, unless
otherwise determined by the administrator of the plan or the board of directors
of Classic Communications before the change of control,
(1) any stock appreciation rights outstanding for at least six months
and any stock options awarded under the plan not previously vested will
vest in full;
(2) the restrictions applicable to any restricted stock, deferred
stock or performance share awards under the plan shall lapse and such
shares and awards will vest in full; and
(3) any loans by us to a participant of the plan to purchase or
exercise awards under the plan will be forgiven and the collateral pledged
in connection with any such loan shall be released.
For purposes of the plan, a change of control will be deemed to have occurred
if:
(1) any person (other than Classic Communications or any of its
subsidiaries, or certain other related parties as specified in the plan) is
or becomes after the effective date of the plan the beneficial owner of
securities (not including securities acquired directly from Classic
Communications or its affiliates) representing 50% or more of the voting
power of Classic Communications;
(2) upon completion of a merger or consolidation of Classic
Communications with any other corporation or entity (other than (a) a
merger or consolidation whereby the holders of at least 50% of the voting
power of Classic Communications prior to the merger or consolidation
continue to own at least 50% of the voting power of Classic Communications
or the surviving entity after the merger or consolidation or (b) a merger
or consolidation that implements a recapitalization of Classic
Communications and no person (other than existing stockholders) acquires
more than 50% of the voting power of Classic Communications); or
(3) upon completion of a plan of complete liquidation of Classic
Communications or an agreement for the sale or disposition by Classic
Communications of all or substantially all of its assets.
The terms of this plan provide that Classic Communications' board of
directors may amend, suspend or terminate this plan at any time, provided that
some amendments require approval of Classic Communications' stockholders under
the Internal Revenue Code of 1986, as amended. Furthermore, no action may be
taken that adversely affects any rights under outstanding awards without the
holder's consent.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND 1999
NON-QUALIFIED STOCK OPTION GRANTS
At the closing of the Brera Classic equity investment, J. Merritt Belisle
and Steven E. Seach each entered into an employment agreement with Classic
Communications on substantially similar terms with their former employment
agreements. In connection with the consummation of the Brera Classic equity
investment, Mr. Belisle was paid $780,000 and Mr. Seach was paid $700,000 under
their former employment agreements. Each of the new employment agreements
provides for their employment with Classic Communications for a continuing two
year period. Messrs. Belisle and Seach are each to be paid an annual salary of
$350,000 per year. Each new employment agreement provides that upon termination
by Classic Communications without "good
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cause" (as defined in each agreement) or termination by the employee for certain
reasons, the employee will be entitled to two years' worth of base compensation
and benefits. In addition, Messrs. Belisle and Seach's employment agreements
contain provisions under which Classic Communications may be required to
purchase and they may be required to sell to us their shares if their employment
is terminated. Each employment agreement also prohibits the employee from
competing with Classic Communications during his term of employment and for a
period of two years thereafter.
The employment agreements of Messrs. Belisle and Seach in effect prior to
the consummation of the Brera Classic equity investment provided for a
transaction fee of 1% to be paid on the value of all mergers, acquisitions, or
dispositions of assets or subsidiaries by Classic Communications that were
consummated during their term of employment. Messrs. Belisle and Seach each
received a transaction fee of $1.5 million related to the consummation of the
Buford acquisition. The new employment agreements do not contain a provision for
transaction fees to be paid to Messrs. Belisle and Seach.
Under their option agreements entered into in connection with their
employment agreements, Messrs. Belisle and Seach were each granted a stock
option with a 10-year exercise period to purchase 279,874 shares of Classic
Communications' Class B common stock at an exercise price of $14.57 per share,
which will vest monthly over a three-year period which began July 28, 1999. In
addition, all of the shares will vest in full immediately upon the closing of
(1) the sale of all of Classic Communications' common stock for cash, by merger,
tender offer, stock purchase or otherwise or (2) the sale of all or
substantially all of Classic Communications' assets for cash. Upon the closing
of Classic Communications' initial public offering, 139,937 of these shares
vested and the remaining shares continue to vest as described in the previous
two sentences.
In addition, upon the closing of Classic Communications' initial public
offering, Messrs. Belisle and Seach each also received a second stock option
with a 10-year exercise period to purchase 279,874 shares of Class B common
stock. This option is vesting monthly over a three-year period commencing on the
date of the closing of the initial public offering. In addition, all of the
shares will vest in full immediately upon the closing of (1) the sale of all of
Classic Communications' common stock for cash, by merger, tender offer, stock
purchase or otherwise or (2) the sale of all or substantially all of Classic
Communications' assets. The exercise price of the second option is $25 per
share, which is the initial offering price to the public per share of Class A
common stock in Classic Communications' initial public offering.
We have entered into employment agreements with Ronald W. Martin and
Elizabeth Kay Monigold. These employment agreements relate to their employment
by us as the Executive Vice President of Operations and the Executive Vice
President of Administration, respectively, and each are for a continuing
one-year period. Ronald W. Martin is to be paid an annual salary of $175,000 and
Elizabeth Kay Monigold is to be paid an annual salary of $120,000. Each
employment agreement provides that upon termination by us without "good cause,"
as defined in each agreement, the employee will be entitled to one year's worth
of base compensation and benefits. Each employment agreement also prohibits the
employee from competing with us during the term of employment and for a period
of two years thereafter.
In addition, Classic Communications granted stock options to purchase
589,500 shares of its Class A common stock at an exercise price of $20 per
share. The options were granted in August 1999 to Martin Payson, a director, and
to Ronald W. Martin, Elizabeth Kay Monigold and several of other officers and
key employees. These options, which have 10-year terms, vest in 25% increments
over each of the first four anniversaries of the grants.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOANS TO AFFILIATES
During 1998, Classic Communications and Classic had outstanding
subordinated indebtedness, including accrued interest, in the amount of
approximately $4.5 million to Austin Ventures, L.P., The Texas Growth Fund, and
BT Capital Partners, Inc. and preferred stock, including accrued and unpaid
dividends, in the amount of approximately $29.4 million to BA Capital Company,
L.P. and BT Capital Partners, Inc., each a stockholder. Approximately $3.9
million of such indebtedness bore interest at the rate of 15.0% per annum and
the remainder bore interest at the rate of 7.5% per annum. All of such
subordinated indebtedness and preferred stock had been incurred or issued to
fund the acquisition of various cable properties acquired by us. Classic
Communications repaid such indebtedness and redeemed the preferred stock from
the holders thereof out of the proceeds received from a previous issuance of
senior subordinated notes.
In 1997, we advanced approximately $200,000 to Mr. Belisle, which has been
forgiven.
1999 STOCKHOLDERS' AGREEMENT
Effective July 28, 1999, Classic, Brera Classic, BT Capital Partners, Inc.,
Austin Ventures, L.P., BA Capital Company, L.P., as the successor in interest to
NationsBanc Capital Corp., J. Merritt Belisle, Steven E. Seach and certain other
stockholders of Classic entered into a stockholders' agreement. The agreement
was amended as of December 13, 1999 to provide that the parties will be
obligated to vote their shares of Class B common stock in favor of the election
to the board of Classic Communications of (1) up to six nominees chosen by Brera
Classic, (2) the chief executive officer of Classic Communications, (3) Steven
Seach for as long as he is employed by Classic Communications and (4) two
nominees who are independent directors (as defined by the rules of the Nasdaq
National Market) chosen by a majority vote of the board of directors of Classic
Communications. These voting arrangements will terminate when these stockholders
hold less than 30% of all of the common stock of Classic Communications on a
fully diluted basis.
The amendment to the stockholders' agreement also provides, among other
things, that a party to the agreement will not be able to participate in the
nominating of directors under the agreement if such party holds less than 2% of
the outstanding common stock on a fully diluted basis, although such party will
be obligated to vote for the nominees under the agreement as long as it holds at
least 1% of the outstanding common stock of Classic Communications on a fully
diluted basis. The parties to the agreement other than Brera are not entitled to
nominate directors under the agreement if such parties, in the aggregate, hold
less than 4% of the outstanding common stock of Classic Communications on a
fully diluted basis. As a result of the sales made by the parties to the
stockholders' agreement in Classic Communications' initial public offering in
December, 1999, the parties to the agreement other than Brera, hold less than 4%
of the outstanding common stock of Classic Communications on a fully-diluted
basis and no longer have the right to nominate directors of Classic
Communications under the agreement.
MANAGEMENT AND ADVISORY FEE AGREEMENT
As part of the Brera Classic equity investment, Classic Communications and
Brera Classic entered into an agreement pursuant to which Brera Classic was paid
a transaction fee of $3 million upon closing of the Brera Classic equity
investment in consideration for arranging the equity investment. The agreement
further provided that Classic Communications would pay Brera Classic an annual
fee of $250,000 in consideration for transactional assistance and advice
provided to Classic Communications until Classic Communications completed an
initial public offering, payment of which was made at the closing of the Buford
acquisition. Brera Classic was
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paid a transaction fee of $1.3 million upon the closing of the Star acquisition
in consideration for transactional advisory services.
BRERA CLASSIC INVESTMENT AGREEMENT
Classic Communications and Brera Classic entered into an Investment
Agreement whereby Classic Communications agreed to issue and sell 6,490,734
shares of Classic Communications voting common stock for an aggregate purchase
price of $100 million. Pursuant to the Investment Agreement, Classic
Communications agreed to pay all fees and expenses of Brera Classic's legal
counsel, financial advisors, accountants and third party consultants in an
amount up to $750,000. In addition to the $750,000 paid to Brera Classic at the
closing of the Buford acquisition for its fees and expenses of counsel,
accountants, advisors and consultants, Classic Communications reimbursed Brera
for $252,000 of closing costs incurred by Brera on Classic Communications'
behalf.
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PRINCIPAL STOCKHOLDERS
All of our outstanding capital stock is owned by Classic Communications.
The following table sets forth certain information regarding the beneficial
ownership of Classic Communications' common stock by (1) each named executive
officer and each director of Classic Communications, (2) each stockholder known
by us to beneficially own 5.0% or more of the common stock of Classic
Communications and (3) all directors and officers of Classic Communications as a
group, as of April 10, 2000.
<TABLE>
<CAPTION>
PERCENT OF VOTE
CLASS A CLASS B AS A SINGLE
BENEFICIAL OWNER(1) COMMON STOCK COMMON STOCK CLASS(2)
------------------- --------------- ------------ ---------------
<S> <C> <C> <C>
Brera Classic(3)....................................... -- 6,490,734 73.3%
J. Merritt Belisle(4).................................. -- 475,175 5.4
Steven E. Seach(5)..................................... -- 475,175 5.4
Dale Bennett........................................... -- -- *
Ronald W. Martin....................................... 1,000 -- *
Elizabeth Kay Monigold................................. 3,000 -- *
Lisa A. Hook........................................... -- -- *
Alberto Cribiore(6).................................... -- 6,490,734 73.3
David Webb............................................. -- -- *
Jeffery C. Garvey(7)................................... -- 46,888 *
James Kofalt........................................... -- -- *
Martin Payson.......................................... 5,000 -- *
All directors and executive officers as a group (11
persons)............................................. 9,000 7,487,972 84.5%
</TABLE>
- ---------------
* Less than 1%
(1) The address for Brera Classic and Alberto Cribiore is 712 Fifth Avenue,
34th Floor, New York, New York 10019. The address for J. Merritt Belisle,
Steven E. Seach, Ronald W. Martin, Elizabeth Kay Monigold, Jeffery C.
Garvey, James Kofalt, Lisa A. Hook, David Webb and Martin Payson is c/o
Classic Cable, Inc., 515 Congress Ave., Suite 2626, Austin, Texas 78701.
Unless otherwise indicated below, the persons and entities named in the
table above have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws, where
applicable.
(2) Each share of Class A common stock entitles its holder to one vote and each
share of Class B common stock entitles its holder to ten votes. Holders of
both classes of voting common stock will vote together as a single class on
all matters to be presented for a vote of stockholders, unless otherwise
required by law. Excludes nonvoting common stock.
(3) Brera Classic has sold nonvoting equity interests in Brera Classic equal to
19.85% of its investment in Classic Communications to certain institutions
and individuals, including affiliates of Goldman, Sachs & Co., who
purchased 9.0% of such investment, and The Chase Manhattan Bank.
(4) Mr. Belisle's totals include 230,313 shares of Class B common stock
purchasable within 60 days of April 10, 2000 pursuant to the exercise of
options.
(5) Mr. Seach's totals include an option to purchase 230,313 shares of Class B
common stock purchasable within 60 days of April 10, 2000 pursuant to the
exercise of options.
(6) Alberto Cribiore is a director of Classic and a manager of Brera Classic.
Mr. Cribiore is not the registered holder of any shares and disclaims the
beneficial ownership of the shares listed above except to the extent of his
indirect interest in the assets of the nominal stockholder, if any.
(7) Jeffery C. Garvey is a general partner of Austin Ventures, L.P., a
stockholder of Classic Communications holding 46,888 shares of Class B
common stock and a party to the 1999 Stockholders' Agreement. Mr. Garvey is
not the registered holder of any shares and disclaims the beneficial
ownership of the shares listed above except to the extent of his indirect
interest in the assets of the nominal stockholder, if any.
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DESCRIPTION OF OTHER INDEBTEDNESS
CREDIT FACILITY
In order to finance a portion of the Buford acquisition purchase price, we
entered into a credit facility amended as of November 5, 1999, agented by
Goldman Sachs Credit Partners L.P., Union Bank of California, N.A. and The Chase
Manhattan Bank pursuant to which we may borrow up to $450.0 million. The credit
facility consists of the following:
<TABLE>
<CAPTION>
MAXIMUM
MAXIMUM ALTERNATE
LIBOR BASE RATE
CREDIT FACILITY AMOUNT TENOR SPREAD(1) SPREAD(1)
- --------------- ------ ----- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Revolving credit facility.......... $ 75.0 July 31, 2007 250 bps 150 bps
Term loan A facility............... 75.0 July 31, 2007 250 bps 150 bps
Term loan B facility............... 100.0 January 31, 2008 275 bps 175 bps
Term loan C facility............... 200.0 January 31, 2008 275 bps 175 bps
------
Total facility........... $450.0
======
</TABLE>
- ---------------
(1) Pricing subject to a leverage-based pricing grid.
The $75.0 million eight year revolving credit facility is available to
Classic for working capital, capital expenditures, refinancing debt and general
corporate purposes, including acquisitions. The $75.0 million eight year term
loan A facility and the $100.0 million eight and one-half year term loan B
facility were drawn at the closing of the Buford acquisition to fund our
purchase of Buford and to refinance debt and pay certain other costs associated
with the Buford acquisition. The $200.0 million eight and one-half year term
loan C facility, of which $110 million is uncommitted, may be used for working
capital, capital expenditures, general corporate purposes, including
acquisitions, and to redeem our 2008 notes put by the noteholders as a result of
a change of control. On September 8, 1999, the Company borrowed $90.0 million
under the term loan C facility to redeem our 2008 notes put by the noteholders
as a result of a change of control.
In connection with the offering of the old notes, we entered into an
amendment to our credit facility, which (1) allowed for the offering of the old
notes, (2) modified some of the covenants in the credit facility to provide us
more flexibility (i.e., maximum total debt ratio, total interest coverage ratio,
maximum capital expenditures, limitations on investments, permitted
acquisitions, and lines of business), (3) restructured the term loan A facility
so that following a prepayment in full of the term loan A facility, and subject
to certain additional conditions, we have the ability to reborrow in one or more
advances under the term loan A facility until February 10, 2001, and (4)
increased the term loan A facility so that up to an additional $25.0 million may
be made available under that facility. In addition, the term loan A facility
provides for the payment of an unused commitment fee based upon the average
daily amount of the unused term loan A commitments. This fee is payable
quarterly in arrears on the last day of each March, June, September and
December, commencing on the first such date after the date the term loan A
facility is prepaid in full, calculated on the same basis as the unused
commitment fee for the revolving credit facility, as set forth below. On
February 16, 2000, we prepaid the term loan A facility in full and increased the
term loan A facility by $10.0 million.
The credit facility is secured by a perfected first priority security
interest in substantially all of our personal property, including, without
limitation, the capital stock of our direct and indirect subsidiaries. The
credit facility is unconditionally guaranteed by each of our direct and indirect
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domestic subsidiaries. In addition, the credit facility contains several
customary negative covenants as well as financial covenants, including
- a maximum total debt ratio,
- a maximum senior debt ratio,
- a minimum interest coverage ratio,
- a pro forma debt service coverage ratio, and
- a maximum capital expenditures amount.
The amendment to the credit facility modified these amounts and ratios.
In addition, the revolving credit facility provides for the payment of an
unused commitment fee based on the average daily amount of the unused revolving
credit commitment. This fee is payable quarterly in arrears on the last day of
each March, June, September and December, commencing on September 30, 1999. From
February 16, 2000 until the earlier of the date the new term loan A facility is
fully drawn (without regard to any increases) or February 10, 2001 the amount of
the unused commitment fee is equal to .750% per annum, and thereafter is based
on the maximum total debt ratio. If this ratio is less than 5.50:1, the fee is
equal to 0.375% per annum. If the ratio is more than 5.50:1, the fee is equal to
0.500% per annum.
2009 SENIOR SUBORDINATED NOTES
A portion of the Buford acquisition price was financed by our issuance of
$150.0 million in principal amount of 9 3/8% senior subordinated notes due 2009.
These notes, which were issued pursuant to an exemption from registration under
the Securities Act, were exchanged for an identical principal amount of 2009
subordinated notes registered under the Securities Act. The 2009 subordinated
notes have the following basic terms:
Maturity...................... August 1, 2009.
Interest...................... Annual rate -- 9 3/8%.
Payment frequency -- every six months on
February 1 and August 1.
First payment -- February 1, 2000.
Guarantors.................... The 2009 subordinated notes are guaranteed by
each of our current and future domestic
restricted subsidiaries. Each guarantor is a
wholly owned subsidiary of us. If we cannot
make payments on the notes when they are due,
the guarantors must make them instead.
Ranking....................... The 2009 subordinated notes and the subsidiary
guarantees are senior subordinated debts and
rank equally with our 2008 subordinated notes.
The 2009 subordinated notes rank behind all of
our and the subsidiary guarantors' current and
future indebtedness, except:
- trade payables; and
- indebtedness that expressly provides that it
is not senior to the 2009 subordinated notes
and the related subsidiary guarantees.
Optional Redemption........... On or after August 1, 2004, we may redeem some
or all of the 2009 subordinated notes at any
time at the respective redemption
price(expressed as a percentage of principal
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<PAGE> 89
amount as follows), together with accrued and
unpaid interest and special interest, if any,
to the date of redemption: if redeemed during
the 12-month period beginning August 1,
2004 -- 104.688%; August 1, 2005 -- 103.125%;
August 1, 2006 -- 101.562%; and August 1, 2007
and thereafter -- 100.000%. In addition, at any
time prior to August 1, 2002, we may redeem up
to 35% of the 2009 subordinated notes ever
issued under the indenture with the cash
proceeds of one or more public equity offerings
by, or strategic equity investments in, us or
Classic Communications at the redemption price
of 109.375% of the principal amount of the
notes to be redeemed together with accrued and
unpaid interest and special interest, if any,
to the date of redemption. We would still be
required to keep at least 65% of the original
aggregate principal amount of the 2009
subordinated notes outstanding after such a
redemption.
Change of Control............. Upon the occurrence of a change of control, the
holders of the 2009 subordinated notes have the
right to require us to repurchase the notes at
a price equal to 101% of the aggregate
principal amount, together with accrued and
unpaid interest and special interest, if any,
to the date of repurchase. In addition, upon
the occurrence of a change in control, we will
have the option to redeem any amount of the
2009 subordinated notes prior to August 1,
2004, at a redemption price equal to 100% of
the principal amount thereof, together with
accrued and unpaid interest and special
interest, if any, to the date of repurchase,
plus the applicable premium.
Restrictive Covenants......... The indenture restricts, among other things,
our ability and the ability of our subsidiaries
to:
- borrow money;
- make certain investments;
- pay dividends on and redeem capital stock and
subordinated obligations;
- distribute proceeds from asset sales;
- engage in certain transactions with
affiliates;
- incur liens;
- engage in sale/leaseback transactions; and
- sell certain assets or merge with or into
other companies.
All of these limitations and prohibitions are
subject to a number of important qualifications
and exceptions.
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2008 SUBORDINATED NOTES
In connection with the Cable One acquisition and the recapitalization of
Classic Communications, we issued $125.0 million in principal amount of 9 7/8%
senior subordinated notes due 2008, of which approximately $3.0 million is
currently outstanding. These notes, which were issued pursuant to an exemption
from registration under the Securities Act, were exchanged for an identical
principal amount of 2008 subordinated notes registered under the Securities Act.
The 2008 subordinated notes have the following basic terms:
Maturity................... August 1, 2008.
Interest................... Annual rate -- 9 7/8%.
Payment frequency -- every six months on February 1
and August 1.
First payment -- February 1, 1999.
Guarantors................. The 2008 subordinated notes are guaranteed by each
of our current and future domestic restricted
subsidiaries. Each guarantor is a wholly owned
subsidiary of us. If we cannot make payments on the
2008 subordinated notes when they are due, the
guarantors must make them instead.
Optional Redemption........ We may not redeem the notes prior to August 1,
2003. After August 1, 2003, we may redeem any
amount of the 2008 subordinated notes at any time
at the respective redemption price (expressed as a
percentage of principal amount as follows),
together with accrued and unpaid interest, if any,
to the date of redemption: if redeemed during the
12-month period beginning August 1,
2003 -- 104.938%; August 1, 2004 -- 103.292%;
August 1, 2005 -- 101.646%; and August 1, 2006 and
thereafter -- 100.000%. In addition, at any time
prior to August 1, 2001, we may redeem up to 35% of
the original aggregate principal amount of the 2008
subordinated notes with the cash proceeds of one or
more public equity offerings by, or a strategic
equity investment in, us or Classic Communications.
Should we do so, we would be required to pay a
redemption price equal to 109.875% of the principal
amount of the 2008 subordinated notes to be
redeemed, together with accrued and unpaid
interest, if any, to the date of redemption.
Classic would still be required to keep at least
65% of the original aggregate principal amount of
the 2008 subordinated notes outstanding after such
a redemption.
Change of Control.......... Upon the occurrence of a change of control, the
holders of the 2008 subordinated notes have the
right to require us to repurchase the notes at a
price equal to 101% of the original aggregate
principal amount, together with accrued and unpaid
interest, if any, to the date of repurchase. In
addition, upon the occurrence of a change of
control, we will have the option to redeem the
notes prior to August 1, 2003, at a redemption
price equal to 100% of the principal amount
thereof, together with accrued and unpaid interest,
if any, to the date of redemption plus the
applicable premium.
On July 28, 1999, a change of control of Classic
Communications occurred. Accordingly, we offered to
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<PAGE> 91
repurchase all outstanding notes at a price equal
to 101% of the original aggregate principal amount
together with accrued and unpaid interest to the
date of repurchase. As a result of this offer,
which closed on September 9, 1999, we purchased
$86.0 million in principal amount of the 2008
subordinated notes.
Ranking.................... The notes are unsecured and are subordinated to all
of our existing and future senior indebtedness. The
notes rank without preference with all of our
existing and future senior subordinated
indebtedness.
Guarantees................. The guarantees are general unsecured obligations of
the subsidiary guarantors and are subordinated in
right of payment to all existing and future
guarantor senior indebtedness. The guarantees are
joint and several.
Restrictive Covenants...... The indenture under which the 2008 subordinated
notes were issued restricts, among other things,
our ability and the ability of our subsidiaries to:
- borrow money;
- make certain investments;
- pay dividends on and redeem capital stock and
subordinated obligations;
- distribute proceeds from asset sales;
- engage in certain transactions with affiliates;
- incur liens;
- engage in sale/leaseback transactions; and
- sell certain assets or merge with or into other
companies.
All of these limitations and prohibitions are
subject to a number of important qualifications and
exceptions.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
At the time we issued the old notes, we agreed to file a registration
statement to register the exchange of the old notes for the exchange notes on or
prior to April 16, 2000 and to use our best efforts to cause the exchange offer
registration statement to become effective under the Securities Act on or before
September 13, 2000. In the event that applicable interpretations of the staff of
the SEC do not permit Classic to effect the exchange offer, or if certain
holders of the old notes notify Classic that they are not eligible to
participate in, or would not receive freely tradeable exchange notes in exchange
for tendered old notes pursuant to, the exchange offer, Classic will use its
best efforts to cause to become effective a shelf registration statement with
respect to the resale of the old notes and to keep the shelf registration
statement effective until two years after the issue date. If the exchange offer
registration statement is not declared effective by September 13, 2000, Classic
will be obligated to pay certain interest rate increases to holders of the old
notes until the exchange offer registration statement is declared effective.
Each holder of the old notes that wishes to exchange old notes for exchange
notes will be required to represent that
- any exchange notes received will be acquired in the ordinary course of
its business,
- it has no arrangement with any person to participate in the distribution
of the exchange notes, and
- it is not an "affiliate," as defined in Rule 405 of the Securities Act,
of Classic or, if it is an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
RESALE OF EXCHANGE NOTES
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third-parties, Classic believes that, except as described
below, exchange notes issued pursuant to the exchange offer in exchange for old
notes may be offered for resale, resold and otherwise transferred by any holder
thereof, other than a holder which is an "affiliate" of Classic within the
meaning of Rule 405 under the Securities Act, without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such exchange notes are acquired in the ordinary course of such holder's
business and such holder does not intend to participate and has no arrangement
or understanding with any person to participate in the distribution of such
exchange notes. Any holder who tenders in the exchange offer with the intention
or for the purpose of participating in a distribution of the exchange notes
cannot rely on such interpretation by the staff of the SEC and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing the selling security
holder's information required by Item 507 of Regulation S-K under the Securities
Act. This prospectus may be used for an offer to resell, resale or other
retransfer of exchange notes only as specifically set forth herein. Each
broker-dealer that receives exchange notes for its own account in exchange for
old notes, where such old notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such exchange
notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, Classic will accept for exchange any and all
old notes properly tendered and not
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<PAGE> 93
withdrawn prior to 5:00 p.m., New York City time, on , 2000. Classic will
issue $1,000 principal amount of exchange notes in exchange for each $1,000
principal amount of outstanding old notes surrendered pursuant to the exchange
offer. Old notes may be tendered only in $1,000 increments.
The form and terms of the exchange notes will be the same as the form and
terms of the old notes except that the exchange notes will be registered under
the Securities Act and will not bear legends restricting their transfer. The
exchange notes will evidence the same debt as the old notes. The exchange notes
will be issued under and entitled to the benefits of the indenture, which also
authorized the issuance of the old notes, such that both series will be treated
as a single class of debt securities under the indenture. See "Description of
Notes."
The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered for exchange.
As of the date of this prospectus, $225.0 million of the old notes are
outstanding. This prospectus, together with the letter of transmittal, is being
sent to all registered holders of old notes. There will be no fixed record date
for determining registered holders of old notes entitled to participate in the
exchange offer.
Classic intends to conduct the exchange offer in accordance with the
provisions of the exchange and registration rights agreement and the applicable
requirements of the Securities Exchange Act of 1934, and the rules and
regulations of the SEC thereunder. Old notes that are not tendered for exchange
in the exchange offer will remain outstanding and continue to accrue interest
and will be entitled to the rights and benefits such holders have under the
indenture and the exchange and registration rights agreement.
Classic will be deemed to have accepted for exchange properly tendered
notes when, as and if Classic shall have given oral or written notice of
acceptance to the exchange agent and complied with the provisions of the
exchange and registration rights agreement. The exchange agent will act as agent
for the tendering holders for the purposes of receiving the exchange notes from
Classic. Classic expressly reserves the right to amend or terminate the exchange
offer, and not to accept for exchange any old notes not accepted for exchange,
upon the occurrence of any of the conditions specified below under "-- Certain
Conditions to the Exchange Offer."
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes
pursuant to the exchange offer. Classic will pay all charges and expenses, other
than certain applicable taxes described below, in connection with the exchange
offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date is 5:00 p.m., New York City time on ,
2000, unless Classic, in its reasonable discretion, extends the exchange offer,
in which case the expiration date will mean the latest date and time to which
the exchange offer is extended.
In order to extend the exchange offer, Classic will notify the exchange
agent of any extension by oral or written notice and will issue a press release
notifying the registered holders of old notes of such extension, each prior to
9:00 a.m., New York City time, on the next business day after the expiration
date.
Classic reserves the right, in its reasonable discretion,
- to delay accepting any old notes for exchange, to extend the exchange
offer or to terminate the exchange offer if any of the conditions set
forth below under "-- Certain
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<PAGE> 94
Conditions to the Exchange Offer" have not been satisfied, by giving oral
or written notice of such delay, extension or termination to the exchange
agent, or
- to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of old notes. If the exchange offer is amended in a manner
determined by Classic to constitute a material change, Classic will promptly
disclose such amendment by means of a prospectus supplement that will be
distributed to the registered holders, and Classic will extend the exchange
offer, depending upon the significance of the amendment and the manner of
disclosure to the registered holders, if the exchange offer would otherwise
expire during such period.
Without limiting the manner in which Classic may choose to make a public
announcement of any delay, extension, amendment or termination of the exchange
offer, Classic has no obligation to publish, advertise or otherwise communicate
any such public announcement, other than by making a timely release to an
appropriate news agency.
If Classic extends the period of time during which the exchange offer is
open, or if Classic is delayed in accepting for exchange of, or in issuing and
exchanging the exchange notes for, any old notes, or is unable to accept for
exchange of, or issue exchange notes for, any old notes pursuant to the exchange
offer for any reason, then, without prejudice to Classic's rights under the
exchange offer, the exchange agent may, on our behalf, retain all old notes
tendered, and such old notes may not be withdrawn except as otherwise provided
below in "-- Withdrawal of Tenders." The right to delay acceptance for exchange
of, or the issuance and the exchange of the exchange notes for, any old notes is
subject to applicable law, including Rule 14e-1(c) under the Exchange Act, which
requires that Classic either deliver the exchange notes or return the old notes
deposited by or on behalf of the holders thereof promptly after termination or
withdrawal of the exchange offer.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest at a rate of 10 1/2% per annum,
payable semi-annually, on March 1 and September 1 of each year. Holders of
exchange notes will receive interest on September 1, 2000 from the date of
initial issuance of the exchange notes, plus an amount equal to the accrued
interest on the old notes through such date. Interest on the old notes accepted
for exchange will cease to accrue upon issuance of the exchange notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the exchange offer, Classic will not be
required to accept for exchange, or exchange any exchange notes for, any old
notes, and may terminate the exchange offer before the expiration date, if:
- any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in Classic's reasonable judgment, might materially impair the
ability of Classic to proceed with the exchange offer; or
- any law, statute, rule or regulation is proposed, adopted or enacted, or
any existing law, statute, rule or regulation is interpreted by the staff
of the SEC, which, in Classic's reasonable judgment, might materially
impair the ability of Classic to proceed with the exchange offer; or
- any governmental approval has not been obtained, which approval Classic
shall, in its reasonable discretion, deem necessary for the consummation
of the exchange offer as contemplated hereby.
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If Classic determines in its reasonable discretion that any of these
foregoing conditions are not satisfied, Classic may
- refuse to accept any old notes and return all old notes to the tendering
holders;
- extend the exchange offer and retain all old notes tendered prior to the
expiration of the exchange offer, subject, however, to the rights of
holders to withdraw such old notes; or
- waive such unsatisfied conditions with respect to the exchange offer and
accept all properly tendered old notes which have not been withdrawn.
If such waiver constitutes a material change to the exchange offer, Classic
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered holders of the old notes and Classic will
extend the exchange offer for a period of five to ten business days, depending
on the significance of the waiver and the manner of disclosure to the registered
holders, if the exchange offer would otherwise expire during such five to ten
day business period.
The foregoing conditions are for the sole benefit of Classic and may be
asserted by Classic regardless of the circumstances giving rise to any such
condition or may be waived by Classic in whole or in part at any time and from
time to time in its reasonable discretion. The failure by Classic at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, Classic will not accept for exchange any old notes tendered,
and no exchange notes will be issued in exchange for any such old notes, if at
such time any stop order shall be threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939.
PROCEDURES FOR TENDERING
Subject to the terms and conditions hereof and the letter of transmittal,
only a holder of old notes may tender such old notes in the exchange offer. To
tender in the exchange offer, a holder must complete, sign and date the letter
of transmittal, or facsimile thereof, have the signature thereon guaranteed if
required by the letter of transmittal, and mail or otherwise deliver such letter
of transmittal or such facsimile to the exchange agent prior to 5:00 p.m., New
York City time, on the expiration date or, in the alternative, comply with The
Depository Trust Corporation's Automated Tender Offer Program procedures
described below. In addition, either:
- old notes must be received by the exchange agent along with the letter of
transmittal; or
- a timely confirmation of book-entry transfer, which we call a book-entry
confirmation, of such old notes, if such procedure is available, into the
exchange agent's account at The Depository Trust Corporation, which we
call the book-entry transfer facility, pursuant to the procedure for
book-entry transfer described below or properly transmitted agent's
message, as defined below, must be received by the exchange agent prior
to the expiration date; or
- the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the letter of transmittal and other required
documents must be received by the exchange agent at the address set forth below
under "-- Exchange Agent" prior to 5:00 p.m., New York City time, on the
expiration date.
The tender by a holder which is not withdrawn prior to the expiration date
will constitute an agreement between such holder and Classic in accordance with
the terms and subject to the conditions set forth herein and in the letter of
transmittal.
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The method of delivery of old notes, the letter of transmittal and all
other required documents to the exchange agent is at the election and risk of
the holder. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the exchange agent before the expiration date. No
letter of transmittal or old notes should be sent to Classic. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
other nominees to effect the above transactions for such holders.
Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder of old notes to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such owner's own behalf, such owner
must, prior to completing and executing the letter of transmittal and delivering
such owner's old notes, either make appropriate arrangements to register
ownership of the old notes in such owner's name or obtain a properly completed
bond power from the registered holder of old notes. The transfer of registered
ownership may take considerable time and may not be able to be completed prior
to the Expiration Date.
Signatures on a letter of transmittal and a notice of withdrawal described
below must be guaranteed by an eligible institution, as defined below, unless
the old notes are tendered (A) by a registered holder who has not completed the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on the letter of transmittal, or (B) for the account of an eligible institution.
In the event that signatures on a letter of transmittal or a notice of
withdrawal are required to be guaranteed, such guarantor must be an eligible
institution, which means a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act which is a member of one of the recognized signature
guarantee programs identified in the letter of transmittal.
If the letter of transmittal is signed by a person other than the
registered holder of any old notes listed therein, such old notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such old notes
with the signature thereon guaranteed by an eligible institution.
If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by Classic, provide
evidence satisfactory to Classic of their authority so to act must be submitted
with the letter of transmittal.
The exchange agent and The Depository Trust Corporation have confirmed that
any financial institution that is a participant in The Depository Trust
Corporation's system may utilize The Depository Trust Corporation's Automated
Tender Offer Program to tender. Accordingly, participants in The Depository
Trust Corporation's Automated Tender Offer Program may, in lieu of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, electronically transmit their acceptance of the exchange offer
by causing The Depository Trust Corporation to transfer the old notes to the
exchange agent in accordance with The Depository Trust Corporation's Automated
Tender Offer Program procedures for transfer. The Depository Trust Corporation
will then send an agent's message to the exchange agent. The term "agent's
message" means a message transmitted by The Depository Trust Corporation
received by the exchange agent and forming part of the book-entry confirmation,
which states
- that The Depository Trust Corporation has received an express
acknowledgment from a participant in The Depository Trust Corporation's
Automated Tender Offer Program that is tendering old notes which are the
subject of such book entry confirmation;
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- that such participant has received and agrees to be bound by the terms of
the letter of transmittal, or, in the case of an agent's message relating
to guaranteed delivery, that such participant has received, and agrees to
be bound by the applicable notice of guaranteed delivery; and
- that the agreement may be enforced against such participant.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered old notes and withdrawal of tendered old notes
will be determined by Classic in its reasonable discretion, which determination
will be final and binding. Classic reserves the absolute right to reject any and
all old notes not properly tendered or any old notes Classic's acceptance of
which would, in the opinion of counsel for Classic, be unlawful. Classic also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular old notes. Classic's interpretation of the terms and conditions
of the exchange offer, including the instructions in the letter of transmittal,
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of old notes must be cured within such
time as Classic shall determine. Although Classic intends to notify holders of
defects or irregularities with respect to tenders of old notes, neither Classic,
the exchange agent nor any other person shall incur any liability for failure to
give such notification. Tenders of old notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any old
notes received by the exchange agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the exchange agent to the tendering holder, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration date.
In all cases, issuance of exchange notes for old notes that are accepted
for exchange pursuant to the exchange offer will be made only after timely
receipt by the exchange agent of old notes or a timely book-entry confirmation
of such old notes into the exchange agent's account at the book-entry transfer
facility, a properly completed and duly executed letter of transmittal and all
other required documents. If any tendered old notes are not accepted for
exchange for any reason set forth in the terms and conditions of the exchange
offer or if old notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged old notes will be
returned without expense to the tendering holder thereof, or, in the case of old
notes tendered by book-entry transfer into the exchange agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described below, such non-exchanged notes will be credited to an account
maintained with such book-entry transfer facility, as promptly as practicable
after the expiration or termination of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the old notes at the book-entry transfer facility for purposes of the
exchange offer within two business days after the date of this prospectus, and
any financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of old notes by causing the
book-entry transfer facility to transfer such old notes into the exchange
agent's account at the book-entry transfer facility in accordance with such
book-entry transfer facility's procedures for transfer. However, although
delivery of notes may be effected through book-entry transfer at the book-entry
transfer facility, the letter of transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the exchange agent at the address set
forth below under "-- Exchange Agent" on or prior to the expiration date or, if
the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the book-entry transfer facility does not constitute delivery to the exchange
agent.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their old notes and (a) whose old notes are not
immediately available, or (b) who cannot deliver their old notes, the letter of
transmittal or any other required documents to the exchange agent prior to the
expiration date, may effect a tender if:
- The tender is made through an eligible institution;
- Prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of
guaranteed delivery by facsimile transmission, mail or hand delivery,
setting forth the name and address of the holder, the registered
number(s) of such old notes and the principal amount of old notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three (3) New York Stock Exchange trading days after the
expiration date, the letter of transmittal, or facsimile thereof,
together with the old notes or a book-entry confirmation, as the case may
be, and any other documents required by the letter of transmittal will be
deposited by the eligible institution with the exchange agent; and
- Such properly completed and executed letter of transmittal, or facsimile
thereof, or properly transmitted agent's message as well as all tendered
old notes in proper form for transfer or a book-entry confirmation, as
the case may be, and all other documents required by the letter of
transmittal, are received by the exchange agent within three (3) New York
Stock Exchange trading days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their old notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of old notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the expiration date.
For a withdrawal to be effective, (a) a written notice of withdrawal must
be received by the exchange agent at one of the addresses set forth below under
"-- Exchange Agent," or (b) holders must comply with the appropriate procedures
of The Depository Trust Company's Automated Tender Offer Program system. Any
such notice of withdrawal must specify the name of the person having tendered
the old notes to be withdrawn, identify the old notes to be withdrawn, including
the principal amount of such old notes, and, where certificates for old notes
have been transmitted, specify the name in which such old notes were registered,
if different from that of the withdrawing holder. If certificates for old notes
have been delivered or otherwise identified to the exchange agent, then, prior
to the release of such certificates, the withdrawing holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an eligible institution
unless such holder is an eligible institution. If old notes have been tendered
pursuant to the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn old notes and otherwise
comply with the procedures of such facility. All questions as to the validity,
form and eligibility, including time of receipt, of such notices will be
determined by Classic, whose determination shall be final and binding on all
parties. Any old notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the exchange offer. Any old notes which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder, or, in the case
of old notes tendered by book-entry transfer into the exchange agent's account
at the book-entry transfer facility pursuant to the book-entry transfer
procedures described above, such old notes will be credited to an account
maintained with such book-entry transfer facility for the old notes, as soon
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as practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn old notes may be retendered by following one
of the procedures described under "-- Procedures for Tendering" above at any
time prior to the expiration date.
EXCHANGE AGENT
All executed letters of transmittal should be directed to the exchange
agent. Chase Bank of Texas, National Association has been appointed as exchange
agent for the exchange offer. Questions, requests for assistance and requests
for additional copies of this prospectus or of the letter of transmittal should
be directed to the exchange agent addressed as follows:
Deliver to:
Chase Bank of Texas, National Association, Exchange Agent
<TABLE>
<S> <C> <C>
By Registered or Certified By Overnight Courier: By Hand Delivery:
Mail:
600 Travis, Suite 1150 600 Travis, Suite 1150 600 Travis, Suite 1150
Houston, Texas 77002 Houston, Texas 77002 Houston, Texas 77002
Attention: Mauri J. Cowen Attention: Mauri J. Cowen Attention: Mauri J. Cowen
</TABLE>
Facsimile Transmission Number:
713/216-5476
---------------------
Confirm Receipt of Facsimile by Telephone:
713/216-6686
---------------------
(Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
FEES AND EXPENSES
Classic will not make any payments to brokers, dealers, or others
soliciting acceptances of the exchange offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of Classic.
The estimated cash expenses to be incurred in connection with the exchange
offer will be paid by Classic and are estimated in the aggregate to be $350,000,
which includes fees and expenses of the exchange agent, accounting, legal,
printing, and related fees and expenses.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
Classic to register exchange notes in the name of, or request that old notes not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
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DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, "Classic"
refers only to Classic Cable, Inc. and not to any of its subsidiaries.
Classic will issue the notes under an indenture among itself, the
Guarantors and Chase Bank of Texas, National Association, as trustee. The terms
of the notes include those stated in the indenture and those made part of the
indenture by reference to the Trust Indenture Act.
The following description is a summary of the material provisions of the
indenture and the registration rights agreement. It does not restate those
agreements in their entirety. We urge you to read the indenture and the
registration rights agreement because they, and not this description, define
your rights as holders of the notes. We have filed a copy of the indenture and
the registration rights agreement as exhibits to the registration statement
which includes this prospectus. Certain defined terms used in this description
but not defined below under "-- Certain Definitions" have the meanings assigned
to them in the indenture.
The registered Holder of a note will be treated as the owner of it for all
purposes. Only registered Holders will have rights under the indenture.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
THE NOTES
The notes:
- are general obligations of Classic;
- are subordinated in right of payment to all existing and future Senior
Debt of Classic;
- are pari passu in right of payment with any future senior subordinated
Indebtedness of Classic; and
- are unconditionally guaranteed by the Guarantors.
THE GUARANTEES
The notes are guaranteed by all of our current and future Domestic
Subsidiaries.
Each guarantee of the notes:
- is a general unsecured obligation of the Guarantor;
- is subordinated in right of payment to all existing and future Senior
Debt of the Guarantor; and
- is pari passu in right of payment with any future senior subordinated
Indebtedness of the Guarantor.
As of the date of the indenture, all of our subsidiaries will be
"Restricted Subsidiaries." However, under the circumstances described below
under the subheading "-- Certain Covenants -- Designation of Restricted and
Unrestricted Subsidiaries," we will be permitted to designate certain of our
subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will
not be subject to many of the restrictive covenants in the indenture. Our
Unrestricted Subsidiaries will not guarantee the notes.
PRINCIPAL, MATURITY AND INTEREST
The indenture provides for the issuance by Classic of notes with a maximum
aggregate principal amount of $300 million, of which $225.0 million was issued
in the offering of the old
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notes. Classic may issue additional notes (the "Additional Notes") from time to
time after this offering. Any offering of Additional Notes is subject to the
covenant described below under the caption "-- Certain Covenants -- Incurrence
of Indebtedness and Issuance of Preferred Stock." The notes and any Additional
Notes subsequently issued under the indenture would be treated as a single class
for all purposes under the indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. Classic issues notes in
denominations of $1,000 and integral multiples of $1,000. The notes will mature
on March 1, 2010.
Interest on the notes accrues at the rate of 10 1/2% per annum and will be
payable semi-annually in arrears on March 1 and September 1, commencing on
September 1, 2000. Classic will make each interest payment to the Holders of
record on the immediately preceding February 15 and August 15.
Interest on the notes accrues from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a Holder of more than $5.0 million in principal amount of the notes has
given wire transfer instructions to Classic, Classic will pay all principal,
interest and premium and Special Interest, if any, on that Holder's notes in
accordance with those instructions. All other payments on notes will be made at
the office or agency of the paying agent and registrar for the notes within the
City and State of New York unless Classic elects to make interest payments by
check mailed to the Holders at their addresses set forth in the register of
Holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. Classic may
change the paying agent or registrar without prior notice to the Holders, and
Classic or any of its Subsidiaries may act as paying agent or registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and Classic may require
a Holder to pay any taxes and fees required by law or permitted by the
indenture. Classic is not required to transfer or exchange any note selected for
redemption. Also, Classic is not required to transfer or exchange any note for a
period of 15 days before a selection of notes to be redeemed.
SUBSIDIARY GUARANTEES
The Guarantors will jointly and severally guarantee Classic's obligations
under the notes. Each Subsidiary Guarantee will be subordinated to the prior
payment in full of all Senior Debt of that Guarantor. The obligations of each
Guarantor under its Subsidiary Guarantee will be limited as necessary to prevent
that Subsidiary Guarantee from constituting a fraudulent conveyance under
applicable law. See "Risk Factors -- The incurrence of this indebtedness may be
voided by a court if the court determines that the incurrence of this
indebtedness resulted in a fraudulent transfer."
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person, other than Classic or
another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
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(2) either:
(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such consolidation
or merger assumes all the obligations of that Guarantor under the
indenture, its Subsidiary Guarantee and the registration rights
agreement pursuant to a supplemental indenture satisfactory to the
trustee; or
(b) the Net Proceeds of such sale or other disposition are applied
in accordance with the "Asset Sale" provisions of the indenture.
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation) to a Person that is not (either before or after
giving effect to such transaction) a Subsidiary of Classic, if the
Guarantor applies the Net Proceeds of that sale or other disposition in
accordance with the "Asset Sale" provisions of the indenture;
(2) in connection with any sale of all of the Capital Stock of a
Guarantor to a Person that is not (either before or after giving effect to
such transaction) a Subsidiary of Classic, if Classic applies the Net
Proceeds of that sale in accordance with the "Asset Sale" provisions of the
indenture; or
(3) if Classic properly designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary in accordance with the applicable
provisions of the indenture.
See "-- Repurchase at the Option of Holders -- Asset Sales."
SUBORDINATION
The payment of principal, interest and premium and Special Interest, if
any, on the notes will be subordinated to the prior payment in full of all
Senior Debt of Classic, including Senior Debt incurred after the date of the
indenture.
The holders of Senior Debt will be entitled to receive payment in full of
all Obligations due in respect of Senior Debt (including interest after the
commencement of any bankruptcy proceeding at the rate specified in the
applicable Senior Debt) before the Holders of notes will be entitled to receive
any payment with respect to the notes (except that Holders of notes may receive
and retain Permitted Junior Securities and payments made from the trust
described under "-- Legal Defeasance and Covenant Defeasance"), in the event of
any distribution to creditors of Classic:
(1) in a liquidation or dissolution of Classic;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to Classic or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of Classic's assets and liabilities.
Classic also may not make any payment in respect of the notes (except in
Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is
continuing beyond any applicable grace period; or
(2) any other default occurs and is continuing on any series of
Designated Senior Debt that permits holders of that series of Designated
Senior Debt to accelerate its maturity and
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the trustee receives a notice of such default (a "Payment Blockage Notice")
from Classic or the holders of any Designated Senior Debt.
Payments on the notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the delivery of the immediately prior
Payment Blockage Notice; and
(2) all scheduled payments of principal, interest and premium and
Special Interest, if any, on the notes that have come due have been paid in
full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 90 days.
If the trustee or any Holder of the notes receives a payment in respect of
the notes (except in Permitted Junior Securities or from the trust described
under "-- Legal Defeasance and Covenant Defeasance") when:
(1) the payment is prohibited by these subordination provisions; and
(2) the trustee or the Holder has actual knowledge that the payment is
prohibited;
the trustee or the Holder, as the case may be, shall hold the payment in trust
for the benefit of the holders of Senior Debt. Upon the proper written request
of the holders of Senior Debt, the trustee or the Holder, as the case may be,
shall deliver the amounts in trust to the holders of Senior Debt or their proper
representative.
Classic must promptly notify holders of Senior Debt if payment of the notes
is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of Classic, Holders of notes may
recover less, ratably, than creditors of Classic who are holders of Senior Debt.
See "Risk Factors -- Your rights to payment on the notes are subordinate to our
senior debt."
OPTIONAL REDEMPTION
At any time prior to March 1, 2003 Classic may on any one or more occasions
redeem up to 35% of the aggregate principal amount of notes ever issued under
the indenture at a redemption price of 110.50% of the principal amount of the
notes redeemed, plus accrued and unpaid interest and Special Interest, if any,
to the redemption date, with the net cash proceeds of one or more Public Equity
Offerings by Classic or the net cash proceeds of a Strategic Equity Investment
in Classic or a capital contribution to Classic's common equity made with the
net
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cash proceeds of a concurrent Public Equity Offering by, or Strategic Equity
Investment in, Classic's direct parent; provided that:
(1) at least 65% of the notes ever issued under the indenture remain
outstanding immediately after each such redemption (excluding notes held by
Classic and its Subsidiaries); and
(2) the redemption occurs within 60 days of the date of the closing of
such Public Equity Offering or Strategic Equity Investment.
At any time, Classic may also redeem all or a part of the notes upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Special Interest, if any, to the date of redemption.
Except as described above, the notes will not be redeemable at Classic's
option prior to March 1, 2005. After March 1, 2005, Classic may redeem all or a
part of the notes upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Special Interest, if any, thereon, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on March 1, of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2005..................................................... 105.25%
2006..................................................... 103.50%
2007..................................................... 101.75%
2008 and thereafter...................................... 100.00%
</TABLE>
MANDATORY REDEMPTION
Classic is not required to make mandatory redemption or sinking fund
payments with respect to the notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of notes will have the right to
require Classic to repurchase all or any part (equal to $1,000 or an integral
multiple of $1,000) of that Holder's notes pursuant to an offer to purchase the
notes (a "Change of Control Offer") on the terms set forth in the indenture. In
the Change of Control Offer, Classic will offer a Change of Control Payment in
cash equal to 101% of the aggregate principal amount of notes repurchased plus
accrued and unpaid interest and Special Interest, if any, on the notes
repurchased, to the date of purchase. Within 30 days following any Change of
Control, Classic will mail a notice to the trustee and each Holder offering to
repurchase notes on the date specified in the notice (the "Change of Control
Payment Date"), which date shall be no later than 30 business days from the date
such notice is mailed, pursuant to the procedures required by the indenture and
described in such notice. Classic will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent those laws and regulations are applicable in connection
with the repurchase of the notes as a result of a Change of Control. To the
extent that the provisions of any securities laws or regulations conflict with
the Change of Control provisions of the indenture, Classic will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Change of Control provisions of the indenture
by virtue of such conflict.
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On the Change of Control Payment Date, Classic will, to the extent lawful:
(1) accept for payment all notes or portions of notes properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions of notes properly
tendered; and
(3) deliver or cause to be delivered to the trustee the notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of notes or portions of notes being purchased by Classic.
The paying agent will promptly mail to each Holder of notes properly
tendered the Change of Control Payment for such notes, and Classic will execute
and issue and the trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new note equal in principal amount
to any unpurchased portion of the notes surrendered, if any; provided that each
such new note will be in a principal amount of $1,000 or an integral multiple of
$1,000.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, Classic
will either repay all outstanding Senior Debt or obtain the requisite consents,
if any, under all agreements governing outstanding Senior Debt to permit the
repurchase of notes required by this covenant. Classic will publicly announce
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
The provisions described above that require Classic to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether any other provisions of the indenture are applicable. Except as
described above with respect to a Change of Control, the indenture does not
contain provisions that permit the Holders of the notes to require that Classic
repurchase or redeem the notes in the event of a takeover, recapitalization or
similar transaction.
Classic will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by Classic and
purchases all notes or portions of notes properly tendered and not withdrawn
under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of Classic and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of notes to require Classic to repurchase such notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of Classic and its Subsidiaries taken as a whole to another Person or
group may be uncertain.
ASSET SALES
Classic will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) Classic (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) such fair market value is determined by Classic's board of
directors and evidenced by a resolution of the board of directors set forth
in an Officers' Certificate delivered to the trustee; and
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(3) at least 75% of the consideration received in such Asset Sale by
Classic or such Restricted Subsidiary is in the form of cash or Cash
Equivalents. For purposes of this provision, each of the following shall be
deemed to be cash:
(a) any Indebtedness or other liabilities, as shown on Classic's or
such Restricted Subsidiary's most recent balance sheet, of Classic or
any Restricted Subsidiary (other than contingent liabilities and
Indebtedness that is by its terms subordinated to the notes or any
Subsidiary Guarantee) that are assumed by the transferee of any such
assets pursuant to an agreement that releases Classic or such Restricted
Subsidiary from further liability; and
(b) any securities, notes or other obligations received by Classic
or any such Restricted Subsidiary from such transferee that are
converted within 60 days of the applicable Asset Sale by Classic or such
Restricted Subsidiary into cash or Cash Equivalents, to the extent of
the cash received in that conversion.
Notwithstanding the foregoing, Classic and its Restricted Subsidiaries may
consummate Asset Swaps; provided that, immediately after giving effect to such
Asset Swap, Classic would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Debt to Cash Flow Ratio test set forth in the first
paragraph of the covenant described below under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock."
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
including any cash received in an Asset Swap, Classic or any of its Restricted
Subsidiaries may apply those Net Proceeds at its option:
(1) to prepay, repay, redeem or purchase Senior Debt and, if the
Senior Debt repaid is revolving credit Indebtedness, to correspondingly
reduce commitments with respect thereto;
(2) to acquire all or substantially all of the assets of a Permitted
Business;
(3) to acquire Voting Stock of a Permitted Business from a Person that
is not a Subsidiary of Classic; provided, that (a) after giving effect
thereto, Classic and its Restricted Subsidiaries collectively own a
majority of such Voting Stock and (b) such acquisition is otherwise made in
accordance with the indenture, including, without limitation, the
"Restricted Payments" covenant;
(4) to make a capital expenditure; or
(5) to acquire other long-term assets that are used or useful in a
Permitted Business;
provided that in the event Classic would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt to Cash Flow Ratio test set forth
in the first paragraph of the covenant described below under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock" at the time it consummates a Permitted Tower Sale and Leaseback, then the
365-day period referred to above shall be extended for an additional 365 days as
to the Net Proceeds from the Permitted Tower Sale and Leaseback only.
Pending the final application of any Net Proceeds, Classic may temporarily
reduce revolving credit borrowings or otherwise invest the Net Proceeds in any
manner that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $15.0 million, Classic will make an
offer (an "Asset Sale Offer") to all Holders of notes and all holders of other
Indebtedness that is pari passu with the notes containing provisions similar to
those set forth in the indenture relating to the notes with respect to offers to
purchase or redeem with the proceeds of sales of assets to purchase the maximum
principal
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amount of notes and such other pari passu Indebtedness that may be purchased out
of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to
100% of principal amount plus accrued and unpaid interest and Special Interest,
if any, to the date of purchase, and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, Classic may use such
Excess Proceeds for any purpose not otherwise prohibited by the indenture. If
the aggregate principal amount of notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
trustee will select the notes and such other pari passu Indebtedness to be
purchased on a pro rata basis based on the principal amount of notes and such
other pari passu Indebtedness tendered. Upon completion of each Asset Sale
Offer, the amount of Excess Proceeds will be reset at zero.
Classic will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with each repurchase of notes
pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the Asset Sales provisions of the
indenture, Classic will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
Asset Sale provisions of the indenture by virtue of such conflict.
The agreements governing Classic's outstanding Senior Debt currently
prohibit Classic from purchasing any notes, and also provides that certain
change of control or asset sale events with respect to Classic would constitute
a default under these agreements. Any future credit agreements or other
agreements relating to Senior Debt to which Classic becomes a party may contain
similar restrictions and provisions. In the event a Change of Control or Asset
Sale occurs at a time when Classic is prohibited from purchasing notes, Classic
could seek the consent of its senior lenders to the purchase of notes or could
attempt to refinance the borrowings that contain such prohibition. If Classic
does not obtain such a consent or repay such borrowings, Classic will remain
prohibited from purchasing notes. In such case, Classic's failure to purchase
tendered notes would constitute an Event of Default under the indenture which
would, in turn, constitute a default under such Senior Debt. In such
circumstances, the subordination provisions in the indenture would likely
restrict payments to the Holders of notes.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the notes are listed; or
(2) if the notes are not listed on any national securities exchange,
on a pro rata basis, by lot or by such method as the trustee shall deem
fair and appropriate.
No notes of $1,000 or less will be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of notes to be redeemed at its registered
address.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that note
that is to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note will be issued in the name of the Holder thereof
upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on notes or portions of them called for redemption.
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CERTAIN COVENANTS
RESTRICTED PAYMENTS
Classic will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of Classic's or any of its Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in connection
with any merger or consolidation involving Classic or any of its Restricted
Subsidiaries) or to the direct or indirect holders of Classic's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of Classic or to Classic or a Restricted
Subsidiary of Classic);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving Classic) any Equity Interests of Classic or any
direct or indirect parent of Classic;
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the notes or the Subsidiary Guarantees, except a payment of
interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above being collectively
referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof; and
(2) Classic would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable three-month period, have been permitted
to incur at least $1.00 of additional Indebtedness (other than Permitted
Debt) pursuant to the Debt to Cash Flow Ratio test set forth in the first
paragraph of the covenant described below under the caption "-- Incurrence
of Indebtedness and Issuance of Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after July 28, 1999 (excluding
Restricted Payments permitted by clauses (2), (3) and (4) of the next
succeeding paragraph) shall not exceed, at the date of determination, the
sum, without duplication, of:
(a) an amount equal to Classic's Consolidated Cash Flow from July
28, 1999 to the end of Classic's most recently ended three-month period
for which internal financial statements are available, taken as a single
accounting period, less the product of 1.4 times Classic's Consolidated
Interest Expense from July 28, 1999 to the end of Classic's most
recently ended three-month period for which internal financial
statements are available, taken as a single accounting period; plus
(b) an amount equal to the net cash proceeds received by Classic
from the sale of Equity Interests after July 28, 1999(other than (i)
sales of Disqualified Stock, (ii) Equity Interests sold to any of
Classic's Subsidiaries, (iii) Equity Interests sold in the Private
Equity Sale and (iv) Equity Interests that are applied to make a
Permitted Investment pursuant to clause (10) of the definition of
Permitted Investments) or from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt
securities of Classic that have been converted into or exchanged for
such Equity
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Interests (other than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of Classic); plus
(c) to the extent that any Restricted Investment that was made
after July 28, 1999 is sold for cash or otherwise liquidated or repaid
for cash, the lesser of: (i) the cash return of capital with respect to
such Restricted Investment (less the cost of disposition, if any); and
(ii) the initial amount of such Restricted Investment.
The preceding provisions will not prohibit:
(1) so long as no Default has occurred and is continuing or would be
caused thereby, the payment of any dividend or distribution within 60 days
after the date of declaration thereof, if at the date of declaration such
payment would have complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of Classic or any Guarantor or
of any Equity Interests of Classic in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Subsidiary
of Classic or an employee stock ownership plan or to a trust established by
Classic or any Subsidiary of Classic for the benefit of its employees) of,
Equity Interests of Classic (other than Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition will be
excluded from clause (3)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of Classic or any Guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of Classic
to the holders of its Equity Interests on a pro rata basis; and
(5) so long as no Default has occurred and is continuing or would be
caused thereby, the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of CCI, Classic or any
Restricted Subsidiary of Classic held by any member of Classic's (or any of
its Restricted Subsidiaries') management pursuant to any employment
agreement, management equity subscription agreement or stock option
agreement in effect as of the date of the indenture; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $1.5 million in any twelve-month
period.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by Classic or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant will be determined by Classic's board of directors whose resolution
with respect thereto shall be delivered to the trustee. The board of directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $5.0 million. Not later than the date of making any
Restricted Payment, Classic will deliver to the trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this "Restricted Payments" covenant were
computed, together with a copy of any fairness opinion or appraisal required by
the indenture.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
Classic will not, and will not permit any of its Subsidiaries to, directly
or indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and Classic
will not issue any Disqualified Stock and will not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that
Classic may incur Indebtedness (including Acquired Debt) or issue Disqualified
Stock, and the Guarantors may incur Indebtedness or issue preferred stock, if
Classic's Debt to Cash Flow Ratio at the time of incurrence of such Indebtedness
or the issuance of such Disqualified Stock or preferred stock, after giving pro
forma effect to such incurrence or issuance as of such date and to the use of
proceeds therefrom as if the same had occurred at the beginning of the most
recently ended three-month period of Classic for which internal financial
statements are available, would have been no greater than 7.0 to 1.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by Classic and any Guarantor of additional
Indebtedness and letters of credit under Credit Facilities in an aggregate
principal amount at any one time outstanding under this clause (1) (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of Classic and its Restricted Subsidiaries
thereunder) not to exceed $350.0 million;
(2) the incurrence by Classic and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by Classic and the Guarantors of Indebtedness
represented by the notes and the related Subsidiary Guarantees to be issued
on the date of the indenture and the exchange notes and the related
Subsidiary Guarantees to be issued pursuant to the registration rights
agreement;
(4) the incurrence by Classic or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations or letters of credit, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of Classic or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (4), not to exceed $15.0 million at any time outstanding;
(5) the incurrence by Classic or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the indenture to be
incurred under the first paragraph of this covenant or clauses (2), (3),
(4) or (5) of this paragraph;
(6) the incurrence by Classic or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Classic and any of its
Restricted Subsidiaries; provided, however, that:
(a) if Classic or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the
notes, in the case of Classic, or the Subsidiary Guarantee, in the case
of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than
Classic or a Restricted Subsidiary
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thereof and (ii) any sale or other transfer of any such Indebtedness to
a Person that is not either Classic or a Restricted Subsidiary of
Classic, will be deemed, in each case, to constitute an incurrence of
such Indebtedness by Classic or such Restricted Subsidiary, as the case
may be, that was not permitted by this clause (6);
(7) the incurrence by Classic or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the indenture to be outstanding;
(8) the guarantee by Classic or any of the Guarantors of Indebtedness
of Classic or a Subsidiary of Classic that was permitted to be incurred by
another provision of this covenant;
(9) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness
or an issuance of Disqualified Stock for purposes of this covenant;
(10) the incurrence of Indebtedness of a Restricted Subsidiary that
was outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by Classic (other than Indebtedness incurred in connection
with, or to provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related transactions
pursuant to which such Restricted Subsidiary became a Restricted Subsidiary
or was acquired by Classic); provided, however, that on the date of such
acquisition and after giving effect to that acquisition, the Debt to Cash
Flow Ratio would have been less than or equal to the Debt to Cash Flow
Ratio immediately prior to that acquisition;
(11) the incurrence by Classic or any of the Guarantors of
Indebtedness in addition to any Indebtedness described in clauses (1)
through (10) and (12) of this covenant in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (11), not to exceed $25.0
million; and
(12) the incurrence by Classic's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, that event will be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of Classic that was not permitted by this clause (12).
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (12) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant,
Classic will be permitted to classify such item of Indebtedness on the date of
its incurrence or later reclassify all or a portion of such item of Indebtedness
in any manner that complies with this covenant and the items will be treated as
having been incurred pursuant only to the first paragraph or clause (1) through
(12) of this covenant. Indebtedness under Credit Facilities outstanding on the
date on which notes are first issued and authenticated under the indenture shall
be deemed to have been incurred on such date in reliance on the exception
provided by clause (1) of the definition of Permitted Debt.
NO SENIOR SUBORDINATED DEBT
Classic will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of Classic and
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senior in any respect in right of payment to the notes. No Guarantor will incur,
create, issue, assume, guarantee or otherwise become liable for any Indebtedness
that is subordinate or junior in right of payment to the Senior Debt of such
Guarantor and senior in any respect in right of payment to such Guarantor's
Subsidiary Guarantee.
LIENS
Classic will not, and will not permit any Restricted Subsidiary to, incur
any Indebtedness secured by a Lien against or on any of its property or assets
now owned or hereafter acquired by the Company or any Restricted Subsidiary
unless contemporaneously therewith effective provision is made to secure the
notes equally and ratably with such secured Indebtedness. This restriction does
not, however, apply to Indebtedness secured by (1) Liens securing Senior Debt or
Indebtedness of a Restricted Subsidiary of Classic, (2) Liens, if any, in effect
on the date of the indenture; (3) Liens in favor of governmental bodies to
secure progress or advance payments; (4) Liens on Equity Interests or
Indebtedness existing at the time of the acquisition thereof (including
acquisition through merger or consolidation), provided that such Liens were not
incurred in anticipation of such acquisition; (5) Liens securing the notes; (6)
other Liens, in addition to those described in clauses (1) through (5), (7) or
(8) of this paragraph, securing Indebtedness of Classic in an amount not to
exceed $10.0 million at any time outstanding; (7) Other Permitted Liens; and (8)
any extension, renewal or replacement of any Lien referred to in the foregoing
clauses (1) through (7), inclusive.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
Classic will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Equity
Interests to Classic or any of its Restricted Subsidiaries, or pay any
indebtedness owed to Classic or any of its Restricted Subsidiaries;
(2) make loans or advances or guarantee any such loans or advances to
Classic or any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets to Classic or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) encumbrances and restrictions as in effect on the date of the
indenture pursuant to Existing Indebtedness or Credit Facilities, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive, taken as
a whole, with respect to such dividend and other payment restrictions than
those contained in such Existing Indebtedness or Credit Facilities, as in
effect on the date of the indenture;
(2) the indenture, the notes and the Subsidiary Guarantees;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Classic or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness or
Capital Stock was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to
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any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired, provided
that, in the case of Indebtedness, such Indebtedness was permitted by the
terms of the indenture to be incurred;
(5) customary non-assignment provisions in contracts of Classic or any
of its Restricted Subsidiaries;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Subsidiary pending its sale
or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements,
stock sale agreements and other similar agreements entered into in the
ordinary course of business;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(12) restrictions that are not materially more restrictive than
customary provisions in comparable financings if the management of Classic
determines that such restrictions will not materially impair Classic's
ability to make payments as required under the notes; and
(13) restrictions contained in Indebtedness under Credit Facilities
permitted to be incurred under the covenant described above under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock,"
provided that the restrictions are not more restrictive than the terms
contained in the existing Credit Facilities as of the date of the
indenture.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Classic may not, directly or indirectly: (1) consolidate or merge with or
into another Person (whether or not Classic is the surviving corporation); or
(2) sell, assign, transfer, convey or otherwise dispose of all or substantially
all of the properties or assets of Classic and its Restricted Subsidiaries taken
as a whole, in one or more related transactions, to another Person; unless:
(1) either: (a) Classic is the surviving corporation; or (b) the
Person formed by or surviving any such consolidation or merger (if other
than Classic) or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made is a corporation, limited liability
company or limited partnership organized or existing under the laws of the
United States, any state thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger
(if other than Classic) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes all
the obligations of Classic under the notes, the indenture and the
registration rights agreement pursuant to agreements reasonably
satisfactory to the trustee;
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(3) immediately after such transaction no Default or Event of Default
exists; and
(4) Classic or the Person formed by or surviving any such
consolidation or merger (if other than Classic), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
will, on the date of such transaction after giving pro forma effect thereto
and any related financing transactions as if the same had occurred at the
beginning of the applicable three-month period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow
Ratio test set forth in the first paragraph of the covenant described above
under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock."
In addition, Classic may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among Classic and any of the Guarantors.
TRANSACTIONS WITH AFFILIATES
Classic will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, make any payment to, or sell, lease, transfer,
exchange or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction or
series of transactions, contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate, officer or director or
Classic (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to Classic or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by Classic or such Restricted
Subsidiary with an unrelated Person; and
(2) Classic delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the board of directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with clause (1) of this covenant and that such Affiliate
Transaction has been approved by a majority of the disinterested members
of the board of directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) employment agreements entered into by Classic or any of its
Subsidiaries on or prior to the date of the indenture and any employment
agreement entered into by Classic or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of
Classic or such Restricted Subsidiary;
(2) transactions between or among Classic and/or its Restricted
Subsidiaries;
(3) transactions with a Person that is an Affiliate of Classic solely
because Classic owns an Equity Interest in such Person;
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(4) payment of reasonable fees to directors who are not employees of
Classic or any of its Restricted Subsidiaries, and customary
indemnification and insurance arrangements in favor of any director;
(5) sales or issuances of Equity Interests (other than Disqualified
Stock) to Affiliates of Classic;
(6) Restricted Payments that are permitted by the provisions of the
indenture described above under the caption "-- Restricted Payments;"
(7) loans or advances, not to exceed $2.0 million in the aggregate at
any time outstanding, to employees in the ordinary course of business in
accordance with past practice; and
(8) management fees, deal fees or transaction fees paid to employees,
directors and their respective affiliates, in accordance with the
provisions of the Management and Advisory Fee Agreement or the
Stockholders' Agreement, as applicable, as the same are in effect on the
date of the indenture.
ADDITIONAL SUBSIDIARY GUARANTEES
If Classic or any of its Subsidiaries acquires or creates another Domestic
Subsidiary after the date of the indenture, then that newly acquired or created
Domestic Subsidiary must become a Guarantor and execute a Subsidiary Guarantee
in the form of a Supplemental Indenture and deliver an Opinion of Counsel to the
trustee within 10 Business Days of the date on which it was acquired or created,
unless such Domestic Subsidiary has properly been designated as an Unrestricted
Subsidiary in accordance with the indenture, for so long as such Domestic
Subsidiary continues to constitute an Unrestricted Subsidiary.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The board of directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by Classic and its
Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will either reduce the
amount available for Restricted Payments under the first paragraph of the
covenant described above under the caption "-- Restricted Payments" or reduce
the amount available for future Investments under one or more clauses of the
definition of Permitted Investments, as Classic shall determine. That
designation will only be permitted if such Investment would be permitted at that
time and if such Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. The board of directors may redesignate any Unrestricted
Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a
Default.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
Classic will not, and will not permit any of its Restricted Subsidiaries
to, enter into any sale and leaseback transaction, unless:
(1) Classic or that Restricted Subsidiary, as applicable, could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under the Debt to Cash Flow
Ratio test in the first paragraph of the covenant described above under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock" and
(b) created a Lien on such property securing Attributable Debt without
equally and ratably securing the notes pursuant to the covenant described
above under the caption "-- Liens;"
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(2) the net cash proceeds of that sale and leaseback transaction are
at least equal to the fair market value, as determined in good faith by the
board of directors and set forth in an Officers' Certificate delivered to
the trustee, of the property that is the subject of that sale and leaseback
transaction; and
(3) the transfer of assets in that sale and leaseback transaction is
permitted by, and Classic or that Restricted Subsidiary applies the
proceeds of such transaction in compliance with, the covenant described
above under the caption "-- Repurchase at the Option of Holders -- Asset
Sales."
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN WHOLLY OWNED
SUBSIDIARIES
Classic will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, transfer, convey, sell, lease or otherwise dispose
of any Equity Interests in any Wholly Owned Restricted Subsidiary of Classic to
any Person (other than Classic or a Wholly Owned Restricted Subsidiary of
Classic), unless:
(1) such transfer, conveyance, sale, lease or other disposition is of
all the Equity Interests in such Wholly Owned Restricted Subsidiary; and
(2) the cash Net Proceeds from such transfer, conveyance, sale, lease
or other disposition are applied in accordance with the covenant described
above under the caption "-- Repurchase at the Option of Holders -- Asset
Sales."
In addition, Classic will not permit any Wholly Owned Restricted Subsidiary
of Classic to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to any
Person other than to Classic or a Wholly Owned Restricted Subsidiary of Classic.
REPORTS
Whether or not required by the Commission, so long as any notes are
outstanding, Classic will furnish to the Holders of notes, within 15 days of the
time periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if Classic were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by Classic's certified independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if Classic were required to file such reports.
In addition, following the consummation of the exchange offer contemplated
by the registration rights agreement, whether or not required by the Commission,
Classic will file a copy of all of the information and reports referred to in
clauses (1) and (2) above with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing, in which case Classic will make such
information available to securities analysts and prospective investors upon
request). In addition, Classic and the Guarantors have agreed that, for so long
as any notes remain outstanding, unless Classic is filing periodic reports
pursuant to the Exchange Act, Classic and the Guarantors will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
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EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Special Interest with respect to, the notes whether or not prohibited by
the subordination provisions of the indenture;
(2) default in payment when due of the principal of, or premium, if
any, on the notes, whether or not prohibited by the subordination
provisions of the indenture;
(3) failure by Classic or any of its Subsidiaries to comply with the
provisions applicable to them described under the caption "-- Certain
Covenants -- Merger, Consolidation or Sale of Assets;"
(4) failure by Classic or any of its Subsidiaries for 30 days after
notice to comply with the provisions applicable to them described under the
captions "-- Repurchase at the Option of Holders -- Change of Control" or
"-- Certain Covenants" (in each case, other than a failure to purchase
notes);
(5) failure by Classic or any of its Subsidiaries for 60 days after
notice to comply with any of the other agreements applicable to them in the
indenture;
(6) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Classic or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by Classic or any of
its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the indenture, if that default:
(a) is caused by a failure to pay principal of such Indebtedness at
final maturity; or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
if the total principal amount of such Indebtedness unpaid or accelerated
exceeds $5.0 million;
(7) any judgment or decree for the payment of money in excess of $5.0
million is rendered against Classic or any Restricted Subsidiary of Classic
and either (a) an enforcement proceeding has been commenced by any creditor
upon such judgment or decree or (b) such judgment or decree remains
outstanding for a period of 60 days following such judgment and is not
discharged, waived or stayed within 10 days of notice;
(8) except as permitted by the indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any Guarantor,
or any Person acting on behalf of any Guarantor, shall deny or disaffirm
its obligations under its Subsidiary Guarantee; and
(9) certain events of bankruptcy or insolvency described in the
indenture with respect to Classic or any of its Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Classic, any Subsidiary that is a
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding notes will become due and
payable immediately without further action or notice. If any other Event of
Default occurs and is continuing, the trustee or the Holders of at least 25% in
principal amount of the then outstanding notes may declare all the notes to be
due and payable immediately.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding notes may direct the trustee in its
exercise of any trust or power. The trustee may
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withhold from Holders of the notes notice of any continuing Default or Event of
Default if it determines that withholding notice is in their interest, except a
Default or Event of Default relating to the payment of principal or interest.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the trustee, the Holders of a
majority in aggregate principal amount of notes outstanding by written notice to
Classic and the trustee, may rescind and annul such declaration and its
consequences if (a) Classic has paid or deposited with the trustee a sum
sufficient to pay (1) all sums paid or advanced by the trustee under the
indenture and the reasonable compensation, expenses, disbursements and advances
of the trustee, its agents and counsel, (2) all overdue interest on all notes
then outstanding, (3) the principal of and premium, if any, on any notes then
outstanding which have become due otherwise than by such declaration of
acceleration and interest thereon (including Special Interest) at the rate borne
by the notes and (4) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the notes; (b) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction; and (c) all Events of Default, other than the
non-declaration of acceleration, have been cured or waived as provided in the
indenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
The Holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the Holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except (1) a continuing Default or Event of Default in the payment
of interest or Special Interest on, or the principal of, the notes or (2) in
respect of a covenant or provision which under the indenture cannot be modified
or amended without the consent of the Holder of each note affected by such
modification or amendment.
Classic is required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default or
Event of Default, Classic is required to deliver to the trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator, manager, member, partner or
stockholder of Classic or any Guarantor, as such, shall have any liability for
any obligations of Classic or the Guarantors under the notes, the exchange
notes, the indenture, the Subsidiary Guarantees or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
notes by accepting a note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the notes. The waiver may
not be effective to waive liabilities under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Classic may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and all obligations
of the Guarantors discharged with respect to their Subsidiary Guarantees ("Legal
Defeasance") except for:
(1) the rights of Holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and Special Interest,
if any, on such notes when such payments are due from the trust referred to
below;
(2) Classic's obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
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(3) the rights, powers, trusts, duties and immunities of the trustee,
and Classic's and the Guarantor's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, Classic may, at its option and at any time, elect to have the
obligations of Classic and the Guarantors released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with those covenants shall not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Classic must irrevocably deposit with the trustee, in trust, for
the benefit of the Holders of the notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium and Special Interest,
if any, and interest on the outstanding notes on the stated date for
payment or on the applicable redemption date, as the case may be and
Classic must specify whether the notes are being defeased to maturity or to
a particular redemption date;
(2) in the case of Legal Defeasance, Classic shall have delivered to
the trustee an Opinion of Counsel reasonably acceptable to the trustee
confirming that (a) Classic has received from, or there has been published
by, the Internal Revenue Service a ruling or (b) since the date of the
indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Classic shall have delivered
to the trustee an Opinion of Counsel reasonably acceptable to the trustee
confirming that the Holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to
such deposit); or (b) insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which Classic or any
of its Subsidiaries is a party or by which Classic or any of its
Subsidiaries is bound;
(6) Classic must have delivered to the trustee an Opinion of Counsel
(which may be subject to customary exceptions) to the effect that, on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally;
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(7) Classic must deliver to the trustee an Officers' Certificate
stating that the deposit was not made by Classic with the intent of
preferring the Holders of notes over the other creditors of Classic with
the intent of defeating, hindering, delaying or defrauding creditors of
Classic or others; and
(8) Classic must deliver to the trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent relating
to the Legal Defeasance or the Covenant Defeasance have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the indenture
or the notes may be amended or supplemented with the consent of the Holders of
at least a majority in aggregate principal amount of the notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the Holders of a majority in aggregate principal amount of the
then outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting Holder):
(1) reduce the principal amount of notes whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note
or alter the provisions with respect to the redemption of the notes (other
than provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on
any note;
(4) waive a Default or Event of Default in the payment of principal
of, or interest or premium, or Special Interest, if any, on the notes
(except a rescission of acceleration of the notes by the Holders of at
least a majority in aggregate principal amount of the notes and a waiver of
the payment default that resulted from such acceleration);
(5) make any note payable in money other than that stated in the
notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of Holders of notes to receive
payments of principal of, or interest or premium or Special Interest, if
any, on the notes;
(7) waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders");
(8) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or the indenture, except in accordance with the terms
of the indenture; or
(9) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination that adversely affects the rights of the
Holders of the notes will require the consent of the Holders of at least 75% in
aggregate principal amount of the notes then outstanding.
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Notwithstanding the preceding, without the consent of any Holder of notes,
Classic, the Guarantors and the trustee may amend or supplement the indenture or
the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of Classic's obligations to Holders
of notes in the case of a merger or consolidation or sale of all or
substantially all of Classic's assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of notes or that does not adversely affect the
legal rights under the indenture of any such Holder; or
(5) to comply with requirements of the Commission in order to effect
or maintain the qualification of the indenture under the Trust Indenture
Act.
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect as
to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated (except lost, stolen or
destroyed notes that have been replaced or paid and notes for whose
payment money has theretofore been deposited in trust and thereafter
repaid to Classic) have been delivered to the trustee for cancellation;
or
(b) all notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the making of a
notice of redemption or otherwise or will become due and payable within
one year and Classic or any Guarantor has irrevocably deposited or
caused to be deposited with the trustee, as trust funds in trust solely
for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will
be sufficient without consideration of any reinvestment of interest, to
pay and discharge the entire indebtedness on the notes not delivered to
the trustee for cancellation for principal, premium and Special
Interest, if any, and accrued interest to the date of maturity or
redemption;
(2) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which Classic or any
Guarantor is a party or by which Classic or any Guarantor is bound;
(3) Classic or any Guarantor has paid or caused to be paid all sums
payable by it under the indenture; and
(4) Classic has delivered irrevocable instructions to the trustee
under the indenture to apply the deposited money toward the payment of the
notes at maturity or the redemption date, as the case may be.
In addition, Classic must deliver an Officers' Certificate and an Opinion of
Counsel to the trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
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CONCERNING THE TRUSTEE
If the trustee becomes a creditor of Classic or any Guarantor, the
indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur and be continuing, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
Holder of notes, unless such Holder shall have offered to the trustee security
and indemnity satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement without charge by writing to Classic Cable, Inc.,
515 Congress Avenue, Suite 2626, Austin, Texas 78701, Attention: Corporate
Secretary.
BOOK-ENTRY, DELIVERY AND FORM
The notes will be represented by one or more permanent global notes in
definitive, fully registered form without interest coupons (each a "Global
Note") and will be deposited with the trustee as custodian for, and registered
in the name of a nominee of, The Depository Trust Corporation ("DTC").
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee, with respect to interests of
participants, and the records of participants, with respect to interests of
persons other than participants. Qualified Institutional Buyers may hold their
interests in a Global Note directly through DTC if they are participants in such
system, or indirectly through organizations which are participants in such
system.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the notes represented by such Global Note for all
purposes under the Indenture and the notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture and, if applicable, those of Euroclear and Cedel Bank.
Payments of the principal of, and interest on, a Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither Classic, the trustee nor any Paying Agent will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Classic expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. Classic also expects that payments by participants to owners
of beneficial interests in such Global Note held through such participants
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will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
Classic expects that DTC will take any action permitted to be taken by a
holder of notes, including the presentation of notes for exchange as described
below, only at the direction of one or more participants to whose account the
DTC interests in a Global Note are credited and only in respect of such portion
of the aggregate principal amount of notes as to which such participant or
participants has or have given such direction. However, if there is an Event of
Default under the Notes, DTC will exchange the applicable Global Note for
Certificated Notes, which it will distribute to its participants.
Classic understands that DTC is
- a limited purpose trust company organized under the laws of the State of
New York,
- a "banking organization" within the meaning of New York Banking Law,
- a member of the Federal Reserve System,
- a "clearing corporation" within the meaning of the Uniform Commercial
Code, and
- a "Clearing Agency" registered pursuant to the provisions of Section 17A
of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes
in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Indirect access to the DTC system is
available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interest in a Global Note among participants of DTC, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither Classic nor the Trustee
will have any responsibility for the performance by DTC, Euroclear or Cedel Bank
or their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by Classic within
90 days, Classic will issue Certificated Notes in exchange for the Global Notes.
Holders of an interest in a Global Note may receive Certificated Notes in
accordance with the DTC's rules and procedures in addition to those provided for
under the indenture.
SAME DAY SETTLEMENT AND PAYMENT
Classic will make payments in respect of the notes represented by the
Global notes (including principal, premium, if any, interest and Special
Interest, if any) by wire transfer of immediately available funds to the
accounts specified by the Global note Holder. Classic will make all payments of
principal, interest and premium and Special Interest, if any, with respect to
Certificated notes by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address. The notes
represented by the Global notes are expected to be eligible to trade in the
PORTAL market and to trade in DTC's Same-day Funds Settlement System, and any
permitted secondary market trading activity in such notes will, therefore, be
required by DTC to be settled in immediately available funds. Classic expects
that secondary trading in any Certificated notes will also be settled in
immediately available funds.
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Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised Classic that cash received in Euroclear
or Cedel as a result of sales of interests in a Global note by or through a
Euroclear or Cedel participant to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
REGISTRATION RIGHTS; SPECIAL INTEREST
The following description is a summary of the material provisions of the
registration rights agreement. It does not restate that agreement in its
entirety. We urge you to read the proposed form of registration rights agreement
in its entirety because it, and not this description, defines your registration
rights as Holders of these notes. We have filed a copy of the registration
rights agreement as an exhibit to the registration statement which includes this
prospectus. See "-- Additional Information."
Classic, the Guarantors and the initial purchasers entered into the
registration rights agreement on February 16, 2000. Pursuant to the registration
rights agreement, Classic and the Guarantors agreed to file with the Commission
the exchange offer registration statement on the appropriate form under the
Securities Act with respect to the exchange notes. Upon the effectiveness of the
exchange offer registration statement, Classic and the Guarantors will offer to
the Holders of Transfer Restricted Securities pursuant to the exchange offer who
are able to make certain representations the opportunity to exchange their
Transfer Restricted Securities for exchange notes.
If:
(1) Classic and the Guarantors are not
(a) required to file the exchange offer registration statement; or
(b) permitted to consummate the Exchange Offer because the exchange
offer is not permitted by applicable law or Commission policy; or
(2) any Holder of Transfer Restricted Securities notifies Classic
prior to the 20th day following consummation of the exchange offer that:
(a) it is prohibited by law or Commission policy from participating
in the exchange offer; or
(b) that it may not resell the Exchange notes acquired by it in the
exchange offer to the public without delivering a prospectus and the
prospectus contained in the exchange offer registration statement is not
appropriate or available for such resales; or
(c) that it is a broker-dealer and owns notes acquired directly
from Classic or an affiliate of Classic,
Classic and the Guarantors will file with the Commission a Shelf Registration
Statement to cover resales of the notes by the Holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the shelf registration statement.
Classic and the Guarantors will use their best efforts to cause the
applicable registration statement to be declared effective as promptly as
possible by the Commission.
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For purposes of the preceding, "Transfer Restricted Securities" means each
note until:
(1) the date on which such note has been exchanged by a Person other
than a broker-dealer for an exchange note in the exchange offer;
(2) following the exchange by a broker-dealer in the exchange offer of
a note for an exchange note, the date on which such exchange note is sold
to a purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of the prospectus contained in the exchange offer
registration statement;
(3) the date on which such note has been effectively registered under
the Securities Act and disposed of in accordance with the shelf
registration statement;
(4) the date on which such note is distributed to the public pursuant
to Rule 144 under the Securities Act; or
(5) the date such note shall cease to be outstanding.
The registration rights agreement provides:
(1) Classic and the Guarantors will file an Exchange Offer
Registration Statement with the Commission on or prior to April 16, 2000;
(2) Classic and the Guarantors will use their best efforts to have the
exchange offer registration statement declared effective by the Commission
on or prior to September 13, 2000;
(3) unless the exchange offer would not be permitted by applicable law
or Commission policy, Classic and the Guarantors will
(a) commence the exchange offer; and
(b) use their best efforts to issue on or prior to 45 days, or
longer, if required by the federal securities laws, after the date on
which the exchange offer registration statement was declared effective
by the Commission, exchange notes in exchange for all notes tendered
prior thereto in the exchange offer; and
(4) if obligated to file the shelf registration statement, Classic and
the Guarantors will use their best efforts to file the shelf registration
statement with the Commission on or prior to 45 days after such filing
obligation arises and to cause the shelf registration to be declared
effective by the Commission on or prior to 120 days after such obligation
arises.
If:
(1) Classic and the Guarantors fail to file any of the registration
statements required by the registration rights agreement on or before the
date specified for such filing; or
(2) any of such registration statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness
(the "Effectiveness Target Date"); or
(3) Classic and the Guarantors fail to consummate the exchange offer
within 45 days of the Effectiveness Target Date with respect to the
exchange offer registration statement; or
(4) the shelf registration statement or the exchange offer
registration statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the registration rights
agreement (each such event referred to in clauses (1) through (4) above, a
"Registration Default"),
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then Classic and the Guarantors will pay special interest ("Special Interest")
to each Holder of notes with respect to the first 90-day period immediately
following the occurrence of the first Registration Default in an amount equal to
$0.05 per week per $1,000 principal amount of notes held by such Holder.
The amount of the Special Interest will increase by an additional $0.05 per
week per $1,000 principal amount of notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Special Interest for all Registration Defaults of $0.50 per week per $1,000
principal amount of notes.
All accrued Special Interest will be paid by Classic and the Guarantors on
each Special Interest Payment Date to the Global note Holder by wire transfer of
immediately available funds or by federal funds check and to Holders of
Certificated notes by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified.
Following the cure of all Registration Defaults, the accrual of Special
Interest will cease.
Holders of notes will be required to make certain representations to
Classic (as described in the registration rights agreement) in order to
participate in the exchange offer and will be required to deliver certain
information to be used in connection with the shelf registration statement and
to provide comments on the shelf registration statement within the time periods
set forth in the registration rights agreement in order to have their notes
included in the shelf registration statement and benefit from the provisions
regarding Special Interest set forth above. By acquiring Transfer Restricted
Securities, a Holder will be deemed to have agreed to indemnify Classic and the
Guarantors against certain losses arising out of information furnished by such
Holder in writing for inclusion in any shelf registration statement. Holders of
notes will also be required to suspend their use of the prospectus included in
the shelf registration statement under certain circumstances upon receipt of
written notice to that effect from Classic.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of more than 5% of
the Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
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"Applicable Premium" means, with respect to any note on any redemption
date, the greater of:
(1) 1.0% of the principal amount of the note; or
(2) the excess of:
(a) the present value at such redemption date of (i) the redemption
price of the note at March 1, 2005 (such redemption price being set
forth in the table appearing above under the caption "-- Optional
Redemption") plus (ii) all required interest payments due on the note
through March 1, 2005 (excluding accrued but unpaid interest), computed
using a discount rate equal to the Treasury Rate as of such redemption
date plus 50 basis points; over
(b) the principal amount of the note, if greater.
"Asset Acquisition" means (a) an Investment by Classic or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated or merged with or into Classic or
any Restricted Subsidiary, or (b) any acquisition by Classic or any Restricted
Subsidiary of the assets of any Person that constitute substantially all of an
operating unit, a division or line of business of such Person or that is
otherwise outside of the ordinary course of business.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than in the ordinary course of business consistent with past
practices; provided that the sale, conveyance or other disposition of all
or substantially all of the assets of Classic and its Subsidiaries taken as
a whole will be governed by the provisions of the indenture described above
under the caption "-- Repurchase at the Option of Holders -- Change of
Control" and/or the provisions described above under the caption
"-- Certain Covenants -- Merger, Consolidation or Sale of Assets" and not
by the provisions of the Asset Sale covenant; and
(2) the issuance or sale of Equity Interests in any of Classic's
Restricted Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million or
results in net proceeds to Classic and its Restricted Subsidiaries of less
than $1.0 million;
(2) transfers of assets between or among Classic and its Wholly Owned
Restricted Subsidiaries,
(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to Classic or to another Wholly Owned Restricted Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
(6) a Restricted Payment or Permitted Investment that is permitted by
the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments;" and
(7) the sale of property or equipment that has become worn out,
damaged or otherwise unsuitable for use in the business of Classic or any
of its Restricted Subsidiaries.
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"Asset Swap" means an exchange of assets by Classic or a Restricted
Subsidiary of Classic for:
(1) one or more Permitted Businesses;
(2) a controlling equity interest in any Person whose assets consist
primarily of one or more Permitted Businesses;
(3) cash; and/or
(4) long-term assets that are used in a Permitted Business.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest, other than any straight debt obligation, or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than six months from the
date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank that is either
(x) a party to the Credit Agreement or (y) a member of the Federal Reserve
Bank having capital and surplus in excess of $500.0 million and a Thompson
Bank Watch Rating of "B" or better;
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(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having a P-1 rating from Moody's Investors
Service, Inc. or an A-1 rating from Standard & Poor's Rating Services and
in each case maturing within six months after the date of acquisition; and
(6) money market funds having assets in excess of $100.0 million, at
least 95% of the assets of which constitute Cash Equivalents of the kinds
described in clauses (1) through (5) of this definition.
"CCI" means Classic Communications, Inc., a Delaware corporation, and the
direct parent of Classic.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
properties or assets of CCI, Classic and its Restricted Subsidiaries, taken
as a whole, to any "person" (as that term is used in Section 13(d)(3) of
the Exchange Act), other than Classic or any of its Restricted
Subsidiaries;
(2) the adoption of a plan relating to the liquidation or dissolution
of Classic;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties or a Permitted Group, becomes the Beneficial Owner, directly or
indirectly, of more than 35% of the Voting Stock of CCI, measured by voting
power rather than number of shares;
(4) the first day on which a majority of the members of the board of
directors of CCI or Classic are not Continuing Directors;
(5) CCI or Classic consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into, CCI or
Classic, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of CCI or Classic or such other Person is
converted into or exchanged for cash, securities or other property, other
than any such transaction where the Voting Stock of CCI or Classic
outstanding immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving
or transferee Person constituting a majority of the outstanding shares of
such Voting Stock of such surviving or transferee Person (immediately after
giving effect to such issuance); or
(6) the first day on which the CCI ceases to own 100% of the
outstanding Equity Interests of Classic.
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss
realized by such Person or any of its Restricted Subsidiaries in connection
with an Asset Sale, to the extent such losses were deducted in computing
such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and
its Subsidiaries for such period, to the extent that such provision for
taxes was deducted in computing such Consolidated Net Income; plus
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(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net of the effect of all payments made or received pursuant
to Hedging Obligations), to the extent that any such expense was deducted
in computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income; plus
(5) all transaction fees paid or accrued on or prior to the date of
the indenture, to officers of Classic, in connection with transactions
consummated prior to or on the date of the indenture; plus
(6) all fees paid to officers of Classic after July 28, 1999 in
connection with acquisitions or dispositions, provided that not more than
an aggregate of $1.0 million of such fees may be included pursuant to this
clause (6) in any twelve-month period; minus
(7) non-cash items increasing such Consolidated Net Income (including
the partial or entire reversal of reserves taken in prior periods) for such
period, other than the accrual of revenue in the ordinary course of
business,
in each case, on a consolidated basis and determined in accordance with
GAAP.
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the
aggregate liquidation value of all Disqualified Stock of such Person and all
preferred stock of Restricted Subsidiaries of such Person, less (iii) Hedging
Obligations that would be a liability on the balance sheet, in each case,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (i) the consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, all calculated after taking into
account the effect of all Hedging Obligations, and (ii) the consolidated
interest expense of such Person and its Subsidiaries that was capitalized during
such period, and (iii) any interest expense on Indebtedness of another Person
that is guaranteed by such Person or one of its Subsidiaries or secured by a
Lien on assets of such Person or one of its Subsidiaries (whether or not such
Guarantee or Lien is called upon) and (iv) the product of (a) all dividend
payments on any series of preferred stock of such Person or any of its
Subsidiaries, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
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"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends
or distributions paid in cash to the specified Person or a Wholly Owned
Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(4) the cumulative effect of a change in accounting principles shall
be excluded; and
(5) the Net Income (but not loss) of any Unrestricted Subsidiary shall
be excluded, whether or not distributed to the specified Person or one of
its Subsidiaries.
"Continuing Directors" means, as of any date of determination, any member
of the board of directors of Classic or CCI, as the case may be, who:
(1) was a member of such board of directors on the date of the
indenture; or
(2) was nominated for election or elected to such board of directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election; or
(3) is a representative of or was approved by Brera Classic, L.L.C.,
or one of its Affiliates.
"Credit Agreement" means that certain Credit Agreement, dated as of July
28, 1999, as amended, by and among Classic and Goldman Sachs Credit Partners
L.P., The Chase Manhattan Bank and Union Bank of California providing for $200.0
million in term loan facilities, up to $75.0 million of revolving credit
borrowings, and an additional $200.0 million incremental facility on a term loan
basis including any related notes, guarantees, collateral documents, instruments
and agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Debt to Cash Flow Ratio" means, as of any date of determination (the
"Determination Date"), the ratio of (a) the Consolidated Indebtedness of Classic
as of such Determination Date to (b) four times the Consolidated Cash Flow of
Classic for the latest three months for which financial information is available
preceding such Determination Date (the "Measurement Period"), determined on a
pro forma basis after giving effect to all acquisitions or dispositions of
assets made by Classic and its Subsidiaries from the beginning of such
three-month period through and including such Determination Date (including any
related financing transactions) as if such
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acquisitions and dispositions had occurred at the beginning of such three-month
period. For purposes of calculating Consolidated Cash Flow for the Measurement
Period immediately prior to the relevant Determination Date, (i) any Person that
is a Restricted Subsidiary on the Determination Date (or would become a
Restricted Subsidiary on such Determination Date in connection with the
transaction that requires the determination of such Consolidated Cash Flow) will
be deemed to have been a Restricted Subsidiary at all times during the
Measurement Period; (ii) any Person that is not a Restricted Subsidiary on such
Determination Date (or would cease to be a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Consolidated Cash Flow) will be deemed not to have been a
Restricted Subsidiary at any time during such Measurement Period; and (iii) if
Classic or any Restricted Subsidiary shall have in any manner (x) acquired
(including through an Asset Acquisition or the commencement of activities
constituting such operating business) or (y) disposed of (including by way of an
Asset Sale or the termination or discontinuance of activities constituting such
operating business) any operating business during such Measurement Period or
after the end of such period and on or prior to such Determination Date, such
calculation will be made on a pro forma basis in accordance with generally
accepted accounting principles consistently applied, as if, in the case of an
Asset Acquisition or the commencement of activities constituting such operating
business, all such transactions had been consummated on the first day of such
Measurement Period, and, in the case of an Asset Sale or termination or
discontinuance of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Credit Agreement; and
(2) any other Senior Debt permitted under the indenture the principal
amount of which is $50.0 million or more and that has been designated by
Classic as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the earlier of the date on which
the notes mature and the date on which no notes remain outstanding.
Notwithstanding the preceding sentence, any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require
Classic to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale shall not constitute Disqualified Stock if the terms of
such Capital Stock provide that Classic may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption
complies with the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."
"Domestic Subsidiary" means any Restricted Subsidiary that was formed under
the laws of the United States or any state thereof or the District of Columbia
or that guarantees or otherwise provides direct credit support for any
Indebtedness of Classic.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
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"Existing Indebtedness" means Indebtedness of Classic and its Subsidiaries,
including refinancings thereof, (other than Indebtedness under the Credit
Agreement) in existence on the date of the indenture, until such amounts are
repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness, measured as the lesser of the
aggregate outstanding amount of the Indebtedness so guaranteed and the face
amount of the guarantee.
"Guarantors" means each of:
(1) Classic's Domestic Subsidiaries on the date of the indenture; and
(2) any other subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"Holder" means a Person in whose name a note is registered.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations of such Person and all
Attributable Debt in respect of sale and leaseback transactions entered
into by such Person;
(5) in respect of the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person.
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The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the outstanding principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other extensions of credit), advances or
capital contributions (excluding commission, travel, moving and similar advances
to officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP and include the
designation of a Restricted Subsidiary as an Unrestricted Subsidiary. If Classic
or any Restricted Subsidiary of Classic sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of Classic such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of Classic, Classic shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "-- Certain Covenants -- Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, hypothecation, assignment for security or encumbrance
of any kind in respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law, including any conditional sale or
capital lease or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
"Management and Advisory Fee Agreement" means the agreement by and between
CCI and Brera Classic, L.L.C., dated as of May 24, 1999.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale; or (b) the disposition of any securities by such Person or any
of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by Classic or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of:
(1) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Sale;
(2) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Sale, in accordance with the terms of any Lien
upon or other security
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arrangement of any kind with respect to such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Sale, or by
applicable law, be repaid out of the proceeds from such Asset Sale;
(3) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries or joint ventures as a
result of such Asset Sale; and
(4) the deduction of appropriate amounts to be provided by the seller
as a reserve, in accordance with GAAP, against any liabilities associated
with the assets disposed of in such Asset Sale and retained by Classic or
any Restricted Subsidiary after such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither Classic nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the notes) of Classic or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of Classic or any of its
Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Other Permitted Liens" means:
(1) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure payment of obligations that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and for which an appropriate reserve or
provision shall have been made in accordance with generally accepted
accounting principles consistently applied;
(2) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and
for which an appropriate reserve or provision shall have been made in
accordance with generally accepted accounting principles consistently
applied;
(3) easements, rights of way, and other restrictions on use of
property or minor imperfections of title that in the aggregate are not
material in amount and do not in any case materially detract from the
property subject thereto or interfere with the ordinary conduct of the
business of Classic or its Subsidiaries;
(4) Liens related to Capital Lease Obligations, mortgage financings or
purchase money obligations (including refinancings thereof), in each case
incurred for the purpose of financing all or any part of the purchase price
or cost of construction or improvement of property, plant or equipment used
in the business of Classic or any Restricted Subsidiary or a Permitted
Business, provided that any such Lien encumbers only the asset or assets so
financed, purchased, constructed or improved;
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(5) Liens resulting from the pledge by Classic of Equity Interests in
a Restricted Subsidiary in connection with a Credit Facility or in an
Unrestricted Subsidiary in any circumstance, where recourse to Classic is
limited to the value of the Equity Interests so pledged;
(6) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(7) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds, deposits to secure the performance of
bids, trade contracts, government contracts, leases or licenses or other
obligations of a like nature incurred in the ordinary course of business
(including without limitation, landlord Liens on leased properties);
(8) leases or subleases granted to third Persons not interfering with
the ordinary course of business of Classic;
(9) deposits made in the ordinary course of business to secure
liability to insurance carriers;
(10) Liens securing reimbursement obligations with respect to letters
of credit which encumber documents and other property relating to such
letters of credit and the products and proceeds thereof;
(11) Liens on the assets of Classic to secure Hedging Obligations with
respect to Indebtedness permitted by the Indenture to be incurred;
(12) attachment or judgment Liens not giving rise to a Default or an
Event of Default; and
(13) any interest or title of a lessor under any capital lease or
operating lease.
"Permitted Business" means a cable television, media and communications,
telecommunications, internet service provider or data transmission business, and
businesses ancillary, complementary or reasonably related to those businesses.
"Permitted Group" means any group of investors that is deemed to be a
"person" (as that term is used in Section 13(d)(3) of the Exchange Act) by
virtue of the Stockholders' Agreement, as the same may be amended, modified or
supplemented from time to time, provided that no single Person (other than the
Principals and their Related Parties) Beneficially Owns (together with its
Affiliates) more of the Voting Stock of Classic that is Beneficially Owned by
such group of investors than is then collectively Beneficially Owned by the
Principals and their Related Parties in the aggregate.
"Permitted Investments" means:
(1) any Investment in Classic or in a Restricted Subsidiary of Classic
that is a Guarantor;
(2) any Investment in Cash Equivalents;
(3) any Investment by Classic or any Subsidiary of Classic in a
Person, if as a result of or concurrently with such Investment:
(a) such Person becomes a Restricted Subsidiary of Classic and a
Guarantor; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, Classic or a Restricted Subsidiary of Classic that is a
Guarantor; provided that such Person's primary business is a Permitted
Business;
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(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales;"
(5) any Investment in prepaid expenses, negotiable instruments held
for collection and lease, utility and workers' compensation, performance
and other similar deposits;
(6) the extension of credit to vendors, suppliers and customers in the
ordinary course of business;
(7) any Investment existing as of the date of the indenture, and any
amendment, modification, extension or renewal thereof to the extent such
amendment, modification, extension or renewal does not require Classic or
any Restricted Subsidiary to make any additional cash or non-cash payments
or provide additional services in connection therewith;
(8) any Investment consisting of a Guarantee permitted under clause
(1) of the second paragraph of the covenant described above under the
caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock."
(9) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of Classic;
(10) any Investment made with the net cash proceeds received by
Classic after July 28, 1999 from the sale of Equity Interests of Classic
(other than (i) sales of Disqualified Stock, (ii) Equity Interests sold to
any of Classic's Subsidiaries and (iii) Equity Interests sold in the
Private Equity Sale); provided that the amount of any such net cash
proceeds that are utilized for such Investment will be excluded from clause
3(b) of the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments;"
(11) Hedging Obligations; and
(12) other Investments, in addition to those in clauses (1) through
(11) of this definition, in any Person, other than CCI or an Affiliate of
CCI that is not also a Subsidiary of Classic, having an aggregate fair
market value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (12) since the date
of the indenture, not to exceed $10.0 million at any one time outstanding.
"Permitted Junior Securities" means:
(1) Equity Interests in Classic or any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt and any
debt securities issued in exchange for Senior Debt to substantially the
same extent as, or to a greater extent than, the notes and the Subsidiary
Guarantees are subordinated to Senior Debt under the indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of Classic or
any of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Indebtedness
of Classic or any of its Subsidiaries (other than intercompany Indebtedness);
provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest thereon
and the amount of all expenses and premiums incurred in connection
therewith);
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(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
notes on terms at least as favorable to the Holders of notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by Classic or by the
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Permitted Tower Sale and Leaseback" means the sale and leaseback by
Classic or any of its Restricted Subsidiaries, in one or more transactions, for
aggregate consideration of up to $50.0 million, of any communications towers
used to facilitate the transmission of telecommunication, voice, data and video
signals.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Principals" means Brera Classic, L.L.C., so long as that entity is an
Affiliate of Brera Capital Partners Limited Partnership, Austin Ventures, L.P.,
BT Capital Partners, Inc., The Texas Growth Fund, BA SBIC Management, L.L.C., J.
Merritt Belisle and Steven E. Seach.
"Private Equity Sale" means the sale for $100.0 million in cash of common
stock of CCI, which was consummated on July 28, 1999, the proceeds of which were
contributed by CCI to Classic.
"Public Equity Offering" means an underwritten public offering by Classic
or its direct parent for cash (in an amount not less than $25.0 million) of its
common stock pursuant to the Securities Act registration statement (not
including Forms S-4 or S-8).
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or
immediate family member (in the case of an individual) of any Principal; or
(2) any trust, corporation, partnership or other entity, whose
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of such entity consist of any
one or more Principals and/or such other Persons referred to in the
immediately preceding clause (1).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means:
(1) all Indebtedness of Classic or any Guarantor outstanding under
Credit Facilities and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of Classic or any Guarantor permitted to be
incurred under the terms of the indenture (which Indebtedness includes
interest, whether or not allowable, accruing after the filing of a petition
initiating any proceeding under any state, federal or
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foreign bankruptcy law), unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the notes or any Subsidiary Guarantee;
and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or
owing by Classic;
(2) any Indebtedness of Classic to any of its Subsidiaries or other
Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of
the indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the closing of this offering.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Stockholders' Agreement" means the agreement by and between Brera Classic,
L.L.C., CCI, BT Capital Partners, Inc., Austin Ventures, L.P., BA SBIC
Management, L.L.C., as the successor in interest to NationsBanc Capital Corp.,
J. Merritt Belisle, Steven E. Seach and certain other stockholders of CCI, dated
as of the date of the consummation of the Private Equity Sale.
"Strategic Equity Investment" means an investment in CCI or Classic by a
company which is primarily engaged in the media and communications industry or
the telecommunications industry and which has a market capitalization (if a
public company) on the date of such investment in CCI of more than $1.0 billion
or, if not a public company, had total revenues of more than $1.0 billion during
its previous fiscal year.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Treasury Rate" means, as of any redemption date, the yield to maturity as
of such redemption date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the redemption date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the redemption date to March 1, 2005; provided,
however, that if the period from the redemption date to March 1, 2005 is less
than one year, the weekly average
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yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"Unrestricted Subsidiary" means any Subsidiary of Classic (or any successor
to any of them) that is designated by the board of directors as an Unrestricted
Subsidiary pursuant to a Board Resolution, but only to the extent that such
Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with Classic or any Restricted Subsidiary of Classic unless
the terms of any such agreement, contract, arrangement or understanding are
no less favorable to Classic or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not Affiliates of
Classic;
(3) is a Person with respect to which neither Classic nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of Classic or any of its Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of Classic or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director
or executive officer of Classic or any of its Restricted Subsidiaries.
Any designation of a Subsidiary of Classic as an Unrestricted Subsidiary
shall be evidenced to the trustee by filing with the trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of Classic as of such date and,
if such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," Classic shall be in default of
such covenant. The board of directors of Classic may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Classic of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the three-month reference period; and (2) no Default or Event of
Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any specified Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person or by such Person and one or more Wholly
Owned Restricted Subsidiaries of such Person.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
This is a general discussion of certain United States federal tax
consequences associated with the exchange of the old notes for the exchange
notes pursuant to the exchange offer. This summary applies only to a holder of
an exchange note who acquired an old note at the initial offering from Goldman
Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Chase
Securities Inc. or Donaldson, Lufkin & Jenrette Securities Corporation for the
original offering price thereof and who acquires the exchange notes pursuant to
the exchange offer and we assume in this discussion that you will hold the
exchange notes as a capital asset (generally, property held for investment). We
do not discuss all aspects of U.S. federal taxation that may be important to you
in light of your individual investment circumstances, such as special tax rules
that would apply to you, for example, if you are a dealer in securities,
financial institution, bank, insurance company, tax-exempt organization or
partnership. Our discussion is based on current provisions of the Internal
Revenue Code of 1986, as amended, Treasury regulations, judicial opinions,
published positions of the U.S. Internal Revenue Service and other applicable
authorities, all as in effect on the date of this prospectus and all of which
are subject to differing interpretations or change, possibly with retroactive
effect. We have not sought, and will not seek, any ruling from the IRS with
respect to the tax consequences discussed in this prospectus, and there can be
no assurance that the IRS will not take a position contrary to the tax
consequences discussed below or that any position taken by the IRS would not be
sustained. We urge you to consult your tax advisor about the U.S. federal tax
consequences of acquiring, holding, and disposing of our notes, as well as any
tax consequences that may arise under the laws of any foreign, state, local, or
other taxing jurisdiction.
The exchange of old notes for exchange notes pursuant to the exchange offer
should not constitute a taxable exchange for U.S. federal income tax purposes.
Accordingly, a U.S. Holder should not recognize gain or loss upon the receipt of
exchange notes pursuant to the exchange offer, and a U.S. holder should be
required to include interest on the exchange notes in gross income in the manner
and to the extent interest income was includible under the old notes. A U.S.
holder's holding period for the exchange notes should include the holding period
of the old notes exchanged therefor, and such holder's adjusted basis in the
exchange notes should be the same as the basis of the old notes exchanged
therefor immediately before the exchange.
The foregoing discussion is included herein for general information only.
Accordingly, each holder should consult with its own tax advisors concerning the
tax consequences of the exchange offer with respect to its particular situation,
including the application and effect of state, local and foreign income and
other tax laws.
PLAN OF DISTRIBUTION
Broker-dealers receiving exchange notes in the exchange offer will be
subject to a prospectus delivery requirement with respect to resales of such
exchange notes. To date, the SEC has taken the position that these
broker-dealers may fulfill their prospectus delivery requirements with respect
to transactions involving an exchange of securities such as the exchange
pursuant to the exchange offer, other than a resale of an unsold allotment from
the sale of the old notes to the initial purchasers, with the prospectus
contained in the exchange offer registration statement. Pursuant to the exchange
and registration rights agreement, Classic has agreed to permit these
broker-dealers to use this prospectus in connection with the resale of such
exchange notes. Classic has agreed that, for a period of 120 days after the
expiration date, it will make this prospectus, and any amendment or supplement
to this prospectus, available to any broker-dealer that requests such documents
in the letter of transmittal.
Each holder of the old notes who wishes to exchange its old notes for
exchange notes in the exchange offer will be required to make certain
representations to Classic as set forth in "The Exchange Offer -- Purpose and
Effect of the Exchange Offer."
138
<PAGE> 143
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for old notes where such old notes were acquired as a result of
market-making activities or other trading activities. Classic has agreed that,
for a period of 120 days after the consummation of the exchange offer, it will
use its commercially reasonable efforts to make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until , 2000, all dealers effecting transactions in
the exchange notes may be required to deliver a prospectus.
Classic will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of exchange
notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The letter of
transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 120 days after the consummation of the exchange offer,
Classic will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal. Classic has agreed to pay all
expenses incident to the exchange offer, including the expenses of one counsel
for the holders of the notes, other than commissions or concessions of any
broker-dealers and will indemnify the holders of the Securities, including any
broker-dealers, against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the exchange notes will be passed upon for us by Skadden,
Arps, Slate, Meagher & Flom (Illinois), Chicago, Illinois.
EXPERTS
The financial statements of Classic Cable, Inc. as of December 31, 1999 and
1998 and for each of the three years in the period ended December 31, 1999 as
well as the financial statements of Star Cable Associates as of December 31,
1999 and 1998 and for each of the three years in the period ended December 31,
1999, included in this prospectus, have been so included in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Buford Group, Inc. and
subsidiaries as of December 31, 1998 and 1997, and for each of the years in the
three-year period ended December 31, 1998, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
139
<PAGE> 144
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CLASSIC CABLE, INC.
Audited Annual Financial Statements
Report of Independent Accountants...................... F-2
Consolidated Balance Sheets as of December 31, 1999 and
1998.................................................. F-3
Consolidated Statements of Operations for the years
ended December 31, 1999, 1998, and 1997............... F-4
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 1999, 1998, and 1997......... F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998, and 1997............... F-6
Notes to Consolidated Financial Statements............. F-7
BUFORD GROUP, INC.
Audited Annual Financial Statements
Independent Auditors' Report........................... F-18
Consolidated Balance Sheets as of December 31, 1998 and
1997.................................................. F-19
Consolidated Statements of Operations for the years
ended December 31, 1998, 1997, and 1996............... F-20
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1998, 1997, and 1996......... F-21
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997, and 1996............... F-22
Notes to Consolidated Financial Statements............. F-23
Unaudited Interim Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of
June 30, 1999......................................... F-31
Unaudited Condensed Consolidated Statements of
Operations for the three and six months ended June 30,
1999 and 1998......................................... F-32
Unaudited Condensed Consolidated Statements of Cash
Flows for the six months ended June 30, 1999 and
1998.................................................. F-33
Notes to Unaudited Condensed Consolidated Financial
Statements............................................ F-34
STAR CABLE ASSOCIATES
Audited Annual Financial Statements
Report of Independent Accountants...................... F-36
Balance Sheets as of December 31, 1999 and 1998........ F-37
Statements of Operations and Changes in Partners'
Capital (Deficiency) for the years ended December 31,
1999, 1998, and 1997.................................. F-38
Statements of Cash Flows for the years ended December
31, 1999, 1998, and 1997.............................. F-39
Notes to the Financial Statements...................... F-40
</TABLE>
F-1
<PAGE> 145
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
Classic Cable, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, changes in stockholder's equity
and cash flows present fairly, in all material respects, the financial position
of Classic Cable, Inc. and its subsidiaries at December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Austin, Texas
February 23, 2000
F-2
<PAGE> 146
CLASSIC CABLE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 85,855 $ 2,779
Accounts receivable, net.................................... 9,803 5,474
Prepaid expenses............................................ 1,131 424
Property, plant and equipment............................... 274,864 127,169
Less accumulated depreciation............................... (60,939) (39,977)
-------- --------
213,925 87,192
Deferred financing costs, net............................... 20,136 6,454
Advances to parent.......................................... 908 357
Intangible assets:
Customer relationships.................................... 156,567 95,180
Franchise marketing rights................................ 158,105 71,464
Noncompete agreements..................................... 25,425 8,425
Goodwill.................................................. 102,261 40,435
Other..................................................... -- 140
-------- --------
442,358 215,644
Less accumulated amortization............................. (96,428) (65,828)
-------- --------
345,930 149,816
-------- --------
Total assets...................................... $677,688 $252,496
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable.......................................... $ 3,254 $ 647
Subscriber deposits and unearned income................... 6,675 4,846
Other accrued expenses.................................... 15,606 7,174
Accrued interest.......................................... 10,676 5,883
Long-term debt, net....................................... 454,332 220,804
Deferred taxes, net....................................... 28,965 --
-------- --------
Total liabilities................................. 519,508 239,354
Stockholder's equity:
Common stock: $.01 par value per share; 1,000 shares
authorized, issued and outstanding..................... -- --
Additional paid-in capital.................................. 267,241 86,142
Accumulated deficit......................................... (109,061) (73,000)
-------- --------
Total stockholder's equity........................ 158,180 13,142
-------- --------
Total liabilities and stockholder's equity........ $677,688 $252,496
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 147
CLASSIC CABLE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues.................................................. $111,410 $ 69,802 $ 60,995
Operating expenses:
Programming............................................. 29,906 17,840 14,916
Plant and operating..................................... 12,744 8,437 7,622
General and administrative.............................. 17,126 11,295 9,257
Marketing and advertising............................... 1,929 850 438
Corporate overhead...................................... 9,721 3,648 4,322
Depreciation and amortization........................... 51,484 30,531 27,832
-------- -------- --------
Total operating expenses........................ 122,910 72,601 64,387
-------- -------- --------
Loss from operations...................................... (11,500) (2,799) (3,392)
Interest expense.......................................... (31,201) (20,688) (20,759)
Gain on sale of cable system.............................. -- -- 3,644
Write-off of abandoned telephone operations and accrual of
related costs........................................... -- (220) (500)
Other income.............................................. 605 192 71
-------- -------- --------
Loss before income taxes and extraordinary item........... (42,096) (23,515) (20,936)
Income tax benefit........................................ 10,128 2,339 7,149
-------- -------- --------
Loss before extraordinary item............................ (31,968) (21,176) (13,787)
Extraordinary loss on extinguishment of debt, net of taxes
of $2,539 in 1999 and none in 1998...................... (4,093) (5,524) --
-------- -------- --------
Net loss.................................................. $(36,061) $(26,700) $(13,787)
======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 148
CLASSIC CABLE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL TOTAL
SHARES PAID-IN ACCUMULATED STOCKHOLDER'S
ISSUED AMOUNT CAPITAL DEFICIT EQUITY
------ ------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996....... 1,000 $-- $ 61,381 $ (32,513) $ 28,868
Dividends on preferred stock..... -- -- (101) -- (101)
Capital contribution from
parent........................ -- -- 1,058 -- 1,058
Net loss......................... -- -- -- (13,787) (13,787)
----- --- -------- --------- --------
Balance at December 31, 1997....... 1,000 -- 62,338 (46,300) 16,038
Dividends on preferred stock..... -- -- (67) -- (67)
Capital contribution from
parent........................ -- -- 23,871 -- 23,871
Net loss......................... -- -- -- (26,700) (26,700)
----- --- -------- --------- --------
Balance at December 31, 1998....... 1,000 -- 86,142 (73,000) 13,142
Capital contribution from
parent........................ -- -- 181,099 -- 181,099
Net loss......................... -- -- -- (36,061) (36,061)
----- --- -------- --------- --------
Balance at December 31, 1999....... 1,000 $-- $267,241 $(109,061) $158,180
===== === ======== ========= ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 149
CLASSIC CABLE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................ $ (36,061) $ (26,700) $(13,787)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Provision for doubtful accounts....................... 1,585 971 1,248
Depreciation.......................................... 20,884 12,041 10,285
Amortization of intangibles........................... 30,600 18,352 17,547
Amortization of deferred financing costs.............. 1,273 1,119 1,373
Discount accretion on bank debt....................... 53 227 457
Gain on sales of cable systems........................ -- -- (3,644)
Non-cash compensation................................. 1,920 1,108 1,058
Deferred tax benefit.................................. (10,128) (2,259) (7,404)
Extraordinary loss, net of taxes...................... 4,093 5,524 --
Changes in working capital, net of acquisition
amounts:
Change in accounts receivable...................... (3,005) (1,841) (321)
Change in prepaid and other assets................. (709) (84) 135
Change in other accruals and payables.............. 2,072 1,099 413
Change in accrued interest......................... 4,793 4,439 532
--------- --------- --------
Net cash provided by (used in) operating activities..... 17,370 13,996 7,892
INVESTING ACTIVITIES
Acquisition of cable television systems, net of cash
acquired.............................................. (292,601) (43,486) --
Purchases of property, plant and equipment.............. (32,435) (13,759) (10,135)
Payments for other intangibles.......................... (425) -- (323)
Net proceeds from sale of cable systems................. -- -- 6,189
Net proceeds from litigation settlement................. -- -- 2,928
--------- --------- --------
Net cash provided by (used in) investing activities..... (325,461) (57,245) (1,341)
FINANCING ACTIVITIES
Proceeds from long-term debt............................ 420,500 221,227 759
Repayments of long-term debt............................ (187,385) (190,292) (7,246)
Financing costs......................................... (20,267) (6,928) --
Redemption of preferred stock........................... -- (1,267) --
Cash dividends paid on preferred stock.................. -- (92) (101)
Payment of premium on redeemed notes.................... (860) -- --
Capital contribution from parent........................ 179,179 22,764 --
--------- --------- --------
Net cash provided by (used in) financing activities..... 391,167 45,412 (6,588)
--------- --------- --------
Increase (decrease) in cash and cash equivalents........ 83,076 2,163 (37)
Cash and cash equivalents at beginning of year.......... 2,779 616 653
--------- --------- --------
Cash and cash equivalents at end of year................ $ 85,855 $ 2,779 $ 616
========= ========= ========
Cash taxes paid......................................... $ 87 $ 166 $ 1
Cash interest paid...................................... $ 25,051 $ 15,039 $ 18,397
</TABLE>
See accompanying notes.
F-6
<PAGE> 150
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION
Classic Cable, Inc., through its subsidiaries (collectively, the
"Company"), acquires, develops and operates cable television systems throughout
the United States. The Company is a holding company with no assets or operations
other than its investments in its subsidiaries. The Company is a wholly owned
subsidiary of Classic Communications, Inc. ("CCI").
2. ACQUISITIONS AND DISPOSITIONS OF CABLE TELEVISION SYSTEMS
Acquisitions
In July 1999, the Company acquired Buford Group, Inc., for approximately
$300 million in cash. Buford Group, Inc. operates cable television systems in
four states. The acquisition was financed from a) a $95.7 million capital
contribution from CCI, b) proceeds of the Company's 1999 credit facility and c)
proceeds of the Company's $150 million private debt offering of 9.375% senior
subordinated notes.
In December 1998, the Company acquired certain assets of TCA Cable Partners
in exchange for a cable television system in Texas (with a fair value of
approximately $0.6 million) and cash consideration of $2.4 million.
In July 1998, the Company acquired certain assets of Cable One, Inc.
serving communities in four states for approximately $41.7 million in cash and
the assumption of $0.2 million in net operating liabilities. The purchase was
financed from proceeds of the Company's private debt offering of 9.875% senior
subordinated notes.
The above acquisitions were accounted for using the purchase method and,
accordingly, the operating results of the systems acquired have been included in
the Company's consolidated financial statements since the date of acquisition.
The following summarized unaudited pro forma financial information assumes
the above acquisitions, all related financing and changes to our debt structure
had occurred on January 1, 1999 and 1998, respectively. The following pro forma
information is not necessarily indicative of the results that would have
occurred had the transactions been completed at the beginning of the periods
indicated, nor is it indicative of future operating results (in thousands,
except per share data):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Revenues.................................................... $156,311 $149,897
Loss before extraordinary item.............................. (59,893) (45,499)
Net loss.................................................... (63,986) (51,023)
</TABLE>
Dispositions
During 1998, the Company sold or disposed of some smaller systems that did
not fit into the Company's long-term strategic plans.
In April and May 1997, the Company sold certain cable television systems in
Kansas and Oklahoma for $5.7 million, net of selling expenses. The net pretax
gain from the sales was approximately $3.6 million.
F-7
<PAGE> 151
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned and majority-owned subsidiaries. Minority
interests are inconsequential. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Revenue Recognition
Service income includes subscriber service revenues and charges for
installations and connections and is recognized in the period in which the
services are provided to the customers. Subscriber services paid for in advance
are recorded as income when earned.
Initial installation revenue is recognized as revenue when the service is
performed, to the extent of direct selling costs, with any balance deferred and
taken into income over the estimated average period that subscribers are
expected to remain connected to the system.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is computed
using the straight-line method over the following estimated useful lives of the
assets:
<TABLE>
<S> <C>
Buildings.............................................. 30 years
Cable television distribution systems.................. 3-12 years
Office furniture and equipment......................... 3-7 years
Vehicles............................................... 5 years
</TABLE>
Leasehold improvements are amortized over the shorter of their estimated
life or the period of the related leases.
Initial subscriber connection costs are capitalized as part of cable
television distribution systems. Costs related to disconnects and reconnects of
customers are expensed as incurred.
Deferred Financing Costs
Deferred financing costs are being amortized to interest expense using the
interest method over the terms of the related debt.
Intangible Assets
The useful lives of the specific intangible assets are as follows:
<TABLE>
<S> <C>
Customer relationships................................. 5-15 years
Franchise marketing rights............................. 5-10 years
Noncompete agreements.................................. 5 years
Goodwill............................................... 5-40 years
</TABLE>
Intangible assets are being amortized using the straight-line method over
their estimated useful lives. The Buford acquisition increased intangible assets
$226.3 million.
Impairment of Long-Lived Assets
The Company periodically reviews the carrying amounts of property, plant
and equipment, identifiable intangible assets and goodwill both purchased in the
normal course of business and
F-8
<PAGE> 152
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquired through acquisition to determine whether current events or
circumstances, as defined in Financial Accounting Standards Board ("FASB")
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, warrant adjustments to such carrying
amounts by considering, among other things, the future cash inflows expected to
result from the use of the asset and its eventual disposition less the future
cash outflows expected to be necessary to obtain those inflows. An impairment
loss would be measured by comparing the fair value of the asset with its
carrying amount. Any write-down is treated as a permanent reduction in the
carrying amount of the assets. Management reviews the valuation and amortization
periods of goodwill on a periodic basis, taking into consideration any events or
circumstances that might result in diminished fair value or revised useful life.
No events or circumstances have occurred to warrant a diminished fair value or
reduction in the useful life of goodwill.
Income Taxes
The Company's operations are included in consolidated income tax returns
filed by CCI. The consolidated amount of current and deferred income tax expense
is allocated to the Company by applying the principles of FASB Statement No.
109, Accounting for Income Taxes, to the Company as if it were a separate
taxpayer. As such, the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the tax rates that are expected to be in
effect when the differences are expected to reverse, based upon current laws and
regulations.
Cash and Cash Equivalents
For financial reporting purposes, the Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are primarily cash, cash equivalents and accounts
receivable. Excess cash is invested in high quality short-term liquid money
instruments issued by highly rated financial institutions. Concentrations of
credit risk with respect to the Company's receivables are limited due to the
large number of customers, individually small balances, short payment terms and
required deposits.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts of certain of the Company's financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable and
other accrued liabilities, approximate fair value because of their short
maturities. All bank debt agreements carry variable interest rates and their
carrying value is considered to approximate fair value. The estimated fair value
of the Company's bonds is based on quoted market prices. The carrying amount of
the
F-9
<PAGE> 153
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's bonds was $189.0 million and the fair value was $185.2 million at
December 31, 1999.
The Company utilizes interest rate cap and interest rate swap agreements to
manage interest rate exposures. The principal objective of such agreements is to
minimize the risks and/or costs associated with financial activities. The
Company does not utilize financial instruments for trading or other speculative
purposes. The counterparties to these contractual arrangements are major
financial institutions with which the Company also has other financial
relationships. These counterparties expose the Company to credit loss in the
event of nonperformance. However, the Company does not anticipate nonperformance
by the other parties, and no material loss would be expected from their
nonperformance. The carrying amount of such instruments approximates fair value
at December 31, 1999.
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by FASB Statement No. 137, which
the Company is required to adopt effective January 1, 2001. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the Statement will have a significant effect on earnings or the
financial position of the Company.
Reclassifications
Certain reclassifications have been made in the 1998 financial statements
to conform to the 1999 presentation.
4. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1999 1998
------ ------
<S> <C> <C>
Accounts receivable, trade.................................. $8,435 $5,211
Accounts receivable, other.................................. 1,783 588
Less allowance for doubtful accounts........................ (415) (325)
------ ------
Accounts receivables, net of allowance...................... $9,803 $5,474
====== ======
</TABLE>
The activity in the Company's allowance for doubtful accounts for the
periods ending December 31, 1999, 1998 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
FOR THE PERIOD ENDED OF PERIOD EXPENSES ACQUIRED DEDUCTIONS PERIOD
- -------------------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1999............. $325 $1,585 $412 $(1,907) $415
December 31, 1998............. 262 971 -- (908) 325
December 31, 1997............. 513 1,248 -- (1,499) 262
</TABLE>
F-10
<PAGE> 154
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Land........................................................ $ 2,390 $ 1,152
Buildings and improvements.................................. 7,738 3,262
Vehicles.................................................... 9,138 6,061
Cable television distribution systems....................... 236,612 106,373
Office furniture, tools and equipment....................... 12,930 3,858
Construction in progress.................................... 6,056 6,463
-------- --------
274,864 127,169
Less accumulated depreciation............................... (60,939) (39,977)
-------- --------
$213,925 $ 87,192
======== ========
</TABLE>
6. LONG-TERM DEBT
Balances of amounts outstanding under the Company's various debt agreements
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
1999 credit facility
Term loan A............................................... $ 75,000 $ --
Term loan B............................................... 100,000 --
Term loan C............................................... 90,000 --
9.375% senior subordinated notes............................ 150,000 --
9.875% senior subordinated notes............................ 39,005 125,000
Unamortized discount...................................... (151) (563)
1998 credit facility
Term loans................................................ -- 75,000
Revolving loans........................................... -- 20,800
Other....................................................... 478 567
-------- --------
$454,332 $220,804
======== ========
</TABLE>
In July 1999, the Company issued $150 million of 9.375% senior subordinated
notes due 2009. Interest payments on these Notes begin in 2000. Concurrent with
the offering, the Company entered into the 1999 credit facility. The 1999 credit
facility, as amended in November 1999, consists of a $75 million revolving
credit facility, a $75 million term A loan, a $100 million term B loan, and a
$200 million term C loan. Principal payments on the facility commence in 2001
with final maturity in 2008. The Company may be subject to mandatory prepayments
based upon operating results, sales of assets, equity or debt offerings or other
events. Interest is based upon either a LIBOR rate plus an applicable margin or,
at the option of the Company, a base rate plus an applicable margin. At December
31, 1999, the weighted average interest rate of the credit facility was 8.91%.
Proceeds from the 1999 credit facility totaled $265 million and were, in part,
used to pay off the 1998 credit facility. This resulted in a pre-tax
extraordinary loss from the early extinguishment of debt of $2.3 million.
F-11
<PAGE> 155
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the 1999 credit facility, the Company is required to pay
a quarterly commitment fee that can range from 0.375% to 0.500% per annum on the
unused portion of the revolving loan commitment.
Pursuant to the change of control resulting from the July 1999 Brera
investment in CCI, and in accordance with the indentures of the respective note
agreements, the Company offered to redeem all of its outstanding 9.875%
subordinated notes and CCI all of its 13.25% senior discount notes. The Company
redeemed $86 million of the 9.875% senior subordinated notes at 101% of face
value plus accrued interest. This resulted in a pre-tax extraordinary loss from
the early extinguishment of debt of $4.3 million. The Company borrowed $90
million under its 1999 credit facility to repurchase the tendered 2008
subordinated notes and to pay associated fees and expenses incurred as a result
of the change of control offer. None of the 13.25% senior discount notes were
tendered for redemption.
In July 1998, CCI issued $114 million of 13.25% senior discount notes due
2009 and the Company issued $125 million of 9.875% senior subordinated notes due
2008. Net of the applicable discounts and the fair value of the CCI common stock
sold along with the senior discount notes, proceeds from these issues were $60
million and $124.4 million, respectively. Interest payments on the senior
discount notes do not commence until 2004. Interest payments on the senior
subordinated notes began in 1999. Concurrent with the offering, the Company
entered into the 1998 credit facility. The 1998 credit facility consisted of a
$50 million revolving credit facility and a $75 million term loan facility.
Proceeds from the 1998 credit facility totaled $95.8 million. The proceeds of
these transactions were, in part, used to pay off the 1995 credit facility. This
resulted in an extraordinary loss from the early extinguishment of debt of $5.5
million.
The 1995 credit facility consisted of a $20 million term A loan, a $65
million term B loan and line of credit notes not to exceed $130 million.
Interest was based upon either a LIBOR rate plus an applicable margin or, at the
option of the Company, a base rate plus an applicable margin. The 1995 credit
facility was amended in 1997. A fee of approximately $1 million was paid to the
bank equal to 0.5% of the outstanding term loans and line of credit notes. This
amount is included as a component of interest expense in 1997.
The senior discount notes are unsecured and rank without preference with
all existing and future unsecured indebtedness of CCI, and senior to all future
subordinated indebtedness of CCI. The notes are also subordinate to all existing
and future liabilities of the Company and its subsidiaries. The senior
subordinated notes are unsecured and are subordinated to all existing and future
senior indebtedness of the Company. The notes rank without preference with all
existing and future senior subordinated indebtedness of the Company. Both the
senior discount notes and the senior subordinated notes may be redeemed
contingent on certain events and/or the passage of time at the redemption price,
which may include a premium. Restrictive covenants associated with these notes
limit the Company's ability to enter into certain transactions.
The 1999 credit facility is collateralized by essentially all the assets of
the Company. CCI has no operations of its own. Consequently, it will rely on
dividends and cash flow of the Company to meet its debt service obligations. The
terms of the credit facility restrict certain activities of the Company,
including the incurrence of additional indebtedness and the payment of certain
dividends. Accordingly, substantially all the assets and operations of the
Company are restricted as to transfer to CCI and may not be available for
dividends and/or debt service of CCI.
The Company is a holding company with no assets or operations other than
its investments in its subsidiaries. The Company's debt is fully and
unconditionally guaranteed by substantially all
F-12
<PAGE> 156
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of the Company's wholly owned direct and indirect subsidiaries on a joint and
several basis. Other than inconsequential subsidiaries, all of the Company's
subsidiaries are wholly owned. The Company is not presenting separate financial
statements and other disclosures concerning these subsidiaries as management has
determined that such information is not material to investors.
The Company utilizes interest rate cap and interest rate swap agreements to
limit the impact of increases in interest rates on its floating rate debt. The
agreements require premium payments to counterparties based upon a notional
principal amount. At December 31, 1999, an interest rate collar for a notional
amount of $75 million was outstanding. No such agreements were outstanding at
December 31, 1998. The impact of interest rate risk management activities on
income in 1999, 1998 and 1997, and the amount of deferred gains and losses from
interest rate risk management transactions at December 31, 1999 and 1998 were
not material. Interest rate cap agreements entitle the Company to receive from
the counterparties the amounts, if any, by which the selected market interest
rates exceed the strike rates stated in the agreements. Interest rate swap
agreements are used by the Company to change the interest rate of their debt
from variable rate to fixed rate. The swap is a contractual agreement between
the Company and another party to exchange payments periodically over the life of
the agreement based upon the interest rates of the underlying debt over the
period of the agreement. The differential to be paid or received is accrued and
recognized as an adjustment of interest expense related to the debt (the accrual
accounting method). The premium paid for both types of agreements is amortized
to interest expense using the interest method over the life of the agreement.
Maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
2000.................................................... $ 478
2001.................................................... 2,350
2002.................................................... 7,525
2003.................................................... 9,400
2004.................................................... 13,150
Thereafter.............................................. 421,580
--------
454,483
Less discount........................................... (151)
--------
$454,332
========
</TABLE>
In the first quarter of 2000, the Company redeemed certain debt and
restructured its credit facility. See Note 15 -- Subsequent Events.
7. EQUITY
Stock Option Plan
Our employees participate in the Classic Communications 1999 Omnibus Stock
Incentive Plan whereby employees, officers, directors, consultants or advisors
may be granted stock options, stock appreciation rights, restricted stock,
performance shares or preferred stock. Pro forma information regarding the 1999
net loss is required by Financial Accounting Standards Board Statement No. 123,
and has been determined as if we had accounted for our employee stock options
under the fair value method of that Statement. Our 1999 pro forma net
stock-based compensation expense was $2.4 million and the pro forma net loss was
$38.5 million.
F-13
<PAGE> 157
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Stock
In July 1998, the Company redeemed the outstanding shares of a subsidiary's
preferred stock at a redemption price per share of $100 plus accrued and unpaid
dividends.
8. INCOME TAXES
Significant components of income tax benefit from continuing operations are
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Current:
Federal.......................................... $ -- $ (80) $ 255
State............................................ -- -- --
-------- ------- -------
Total current............................ -- (80) 255
Deferred:
Federal.......................................... (8,409) (1,876) (6,573)
State............................................ (1,719) (383) (831)
-------- ------- -------
Total deferred........................... (10,128) (2,259) (7,404)
-------- ------- -------
Income tax benefit....................... $(10,128) $(2,339) $(7,149)
======== ======= =======
</TABLE>
The Company's provision for income taxes differs from the expected tax
expense (benefit) amount computed by applying the statutory federal income tax
rate of 34% to income before income taxes and extraordinary items as a result of
the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Tax at U.S. statutory rate............................... (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit...................... (3.7) (3.9) (3.8)
Increase in valuation allowance.......................... 9.2 25.1 --
Other nondeductible items................................ 4.4 2.9 3.7
----- ----- -----
(24.1)% (9.9)% (34.1)%
===== ===== =====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used
F-14
<PAGE> 158
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for income tax purposes. Significant components of the Company's deferred tax
liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Book over tax basis of depreciable assets................ $ 15,850 $ 698
Book over tax basis of assets that are amortizable for
tax................................................... 40,047 2,056
-------- --------
Total deferred tax liabilities................... 55,897 2,754
Deferred tax assets:
Net operating loss carryforwards:
Restricted............................................ 28,552 4,880
Other................................................. 10,716 12,839
Alternative minimum tax credit carryforwards............. 5,858 166
Other...................................................... 1,353 543
-------- --------
Total deferred tax assets........................ 46,479 18,428
Less valuation allowance................................... (19,547) (15,674)
-------- --------
Net deferred tax assets.......................... 26,932 2,754
-------- --------
Net deferred tax liabilities..................... $ 28,965 $ --
======== ========
</TABLE>
At December 31, 1999, the Company had net operating loss carryforwards of
$102.5 million for federal income tax purposes, which begin to expire in 2002 if
not utilized. Approximately $74.6 million of the loss carryforwards is subject
to various limitations under the Internal Revenue Code (including limitations of
Section 382 of the Internal Revenue Code), which could result in expiration of
the loss carryforward before utilization.
During 1999, the Company recorded a net deferred tax liability of $41.6
million and a corresponding increase to goodwill related to the acquisition of
Buford Group, Inc.
Approximately $7.6 million of the total valuation allowance as of December
31, 1999 was previously recorded for certain acquisition net operating loss
carryforwards and other acquisition deferred tax assets due to restrictions on
their utilization under the tax law and other uncertainties regarding their
realization. When, and if, realized, the tax benefit associated with these
deferred tax assets will be applied to reduce goodwill and other noncurrent
intangibles related to the acquisitions.
9. EMPLOYEE BENEFIT PLAN
The Company sponsors a defined contribution pension plan, a 401(k) plan.
Participation in this plan is available to substantially all employees.
Employees may contribute up to 15% of their pay. The Company may match employee
contributions for an amount up to 6% of each employee's base salary. Costs of
the plan, including the Company's matching contributions, were $269,000,
$149,000 and $114,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
10. ABANDONMENT OF TELEPHONE OPERATIONS
At December 31, 1995, the Company was negotiating an agreement to purchase
four telephone exchanges in Kansas. For various reasons, the Company did not
complete the acquisitions and hence, did not enter the telephone business. Net
assets of the telephone business, when abandoned in 1996, consisted primarily of
property, plant and equipment. In
F-15
<PAGE> 159
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
connection therewith, the Company recorded a $2,994,000 charge in 1996 related
to the termination of the purchase agreement and operations associated with the
proposed acquisition. Items included in the charge were the write-off of certain
costs capitalized in connection with the proposed acquisition, legal and
consulting fees and estimated severance for personnel reductions. The Company
revised their estimate of costs associated with the abandonment and took an
additional charge of $500,000 in 1997.
In November 1998, the Company settled certain litigation related to these
transactions. Terms of the settlement included the sale of certain cable
television systems in Kansas, the granting of a five year right of first refusal
for the sale of certain other cable television systems in Kansas, and a five
year non-competition agreement. In addition, the Company received cash
consideration of $348,000 in 1999 in connection with the settlement. The
settlement resulted in a loss of approximately $220,000.
11. SETTLEMENT OF CLAIMS
In February 1998, CCI settled claims that arose in conjunction with divorce
proceedings of an officer of CCI. CCI purchased certain of its stock in which
the officer's wife held a community property interest and provided monetary
consideration for the release of the claims. The related expenses, including
legal, consultant and other fees of approximately $1,411,000 are included in
corporate overhead expenses in 1997.
In March 1997, the Company settled certain litigation in which the Company
was seeking damages related to a previous year's acquisition. The Company
received approximately $3.5 million in the settlement. The net proceeds of $3
million were recorded as a reduction of goodwill.
12. COMMITMENTS AND CONTINGENCIES
Obligations of Parent
The Company's parent, CCI, has certain obligations that would require
resources of the Company if CCI were to satisfy these obligations. At December
31, 1999, these obligations primarily consisted of the $114.0 million of 13.25%
Senior Discount Notes issued in July 1998. These notes were redeemed in January
2000. CCI used proceeds of its initial public offering of common stock to pay
off this debt.
Standby Letters of Credit
The Company had outstanding at December 31, 1999, $3 million in standby
letters of credit maturing through August 2000.
Lease Arrangements
The Company, as an integral part of its cable operations, has entered into
short-term lease contracts for microwave service, pole use and office space. At
December 31, 1999, future minimum lease payments were $470,000 in 2000, $370,000
in 2001, $290,000 in 2002, $250,000 in 2003, $190,000 in 2004 and $480,000
thereafter. Rent expense was $2,230,000, $1,285,000 and $1,160,000 for the years
ended December 31, 1999, 1998 and 1997, respectively.
F-16
<PAGE> 160
CLASSIC CABLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Litigation
The Company is involved in various legal proceedings that have arisen in
the normal course of business. While the ultimate results of these matters
cannot be predicted with certainty, management does not expect them to have a
material adverse effect on the consolidated financial position, results of
operations or cash flows of the Company.
13. RELATED PARTY TRANSACTIONS
In accordance with various provisions of executive management's employment
agreements, the Company made payments totaling approximately $5 million in
relation to the Buford acquisition and change of control that resulted from the
Brera equity investment. All payments to management were treated as a current
period cost in the third quarter of 1999.
In connection with the Buford acquisition, CCI paid a transaction fee of
$300,000 to The Austin Advisory, a financial consulting firm in which a former
member of executive management is a principal.
In July 1998, CCI paid all outstanding principal and accrued interest
balances on various subordinated debt agreements held by affiliates of CCI. The
debt bore interest at 7.5% and 15% and the amount paid was $397,000 and
$4,061,000, respectively.
14. QUARTERLY FINANCIAL SUMMARY
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
1999
Revenues..................................... $19,576 $19,710 $ 33,105 $39,019
Operating loss............................... (893) (677) (7,021) (2,909)
Net loss before extraordinary item*.......... (6,186) (6,044) (17,511) (2,227)
Net loss*.................................... (6,186) (6,044) (24,143) 312
1998
Revenues..................................... 16,072 16,142 18,190 19,398
Operating loss............................... (547) (446) (720) (1,086)
Net loss before extraordinary item........... (4,725) (5,056) (5,131) (6,264)
Net loss..................................... (4,725) (5,056) (10,655) (6,264)
</TABLE>
- ---------------
* Includes a fourth quarter adjustment of $9.4 million related to the income
tax benefit in the third quarter due to a change in the estimate related to
the purchase accounting of the Buford acquisition.
15. SUBSEQUENT EVENTS
In February 2000, the Company acquired certain assets of Star Cable
Associates ("Star") serving communities in three states for approximately $110
million in cash and 555,555 shares of CCI Class A voting common stock. The
purchase was financed from proceeds of the Company's $225 million private debt
offering of 10.5% senior subordinated notes and available cash. In addition, the
Company utilized proceeds to pay down the 1999 credit facility by $100 million
and to redeem $33 million of its 9.875% senior subordinated notes. The 1999
credit facility was further amended to (a) allow for the Star acquisition, (b)
modify some of the covenants in the credit facility, (c) restructure the term
loan A to allow the Company to reborrow against it through February 2001,
subject to certain conditions, and (d) increase the term loan A facility $25
million. The extraordinary loss from these transactions was $8.5 million.
F-17
<PAGE> 161
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Buford Group, Inc.:
We have audited the accompanying consolidated balance sheets of Buford
Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Buford
Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998 in conformity with generally accepted accounting
principles.
KPMG LLP
Dallas, Texas
March 5, 1999
F-18
<PAGE> 162
BUFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash and cash equivalents................................... $ 7,903 $ 7,890
Accounts receivable, net.................................... 2,878 2,514
Prepaid expenses............................................ 166 342
Property, plant and equipment............................... 200,727 166,886
Less accumulated depreciation and amortization.............. (87,483) (71,198)
-------- --------
113,244 95,688
Intangible assets:
Franchise rights.......................................... 54,417 35,767
Noncompetition agreements................................. 7,434 7,434
Excess cost over net assets of acquired companies......... 2,114 2,114
Other..................................................... 2,116 2,031
-------- --------
66,081 47,346
Less accumulated amortization............................. (16,705) (12,001)
-------- --------
49,376 35,345
Other assets................................................ 2,386 2,153
-------- --------
$175,953 $143,932
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 1,033 $ 1,209
Deposits and unearned revenues.............................. 2,234 1,984
Accrued expenses............................................ 8,642 7,052
Long-term obligations....................................... 118,000 85,000
Deferred federal income taxes............................... 1,238 1,763
-------- --------
Total liabilities...................................... 131,147 97,008
-------- --------
Stockholders' equity:
Common stock, $1 par value. Authorized 2,000 shares;
issued and outstanding 1,000 shares.................... 1 1
Additional capital........................................ 14,833 6,945
Retained earnings......................................... 29,972 39,978
-------- --------
Total stockholders' equity............................. 44,806 46,924
Commitments and contingencies...............................
-------- --------
$175,953 $143,932
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE> 163
BUFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cable television revenues.................................. $ 70,475 $58,136 $49,561
Operating expenses:
Programming.............................................. 18,339 14,349 11,596
Plant and operating...................................... 6,937 6,567 5,705
General and administrative............................... 16,183 14,910 12,557
Marketing and advertising................................ 345 174 176
Corporate overhead....................................... 9,364 4,858 2,898
Depreciation and amortization............................ 21,399 17,753 17,175
-------- ------- -------
72,567 58,611 50,107
-------- ------- -------
Operating loss........................................ (2,092) (475) (546)
-------- ------- -------
Other income (expense):
Interest expense......................................... (7,919) (5,787) (5,345)
Interest income.......................................... 307 324 521
Gain (loss) on sales of assets........................... (165) 829 5,655
Other, net............................................... (363) (294) (414)
-------- ------- -------
(8,140) (4,928) 417
-------- ------- -------
Loss before income taxes.............................. (10,232) (5,403) (129)
Income tax benefit (expense)............................... 226 315 (94)
-------- ------- -------
Net loss.............................................. $(10,006) $(5,088) $ (223)
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE> 164
BUFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
COMMON ADDITIONAL RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995.......... $1 $ 1,968 $45,289 $ 47,258
Employee stock appreciation........... -- 1,458 -- 1,458
Net loss.............................. -- -- (223) (223)
-- ------- -------- --------
Balance at December 31, 1996.......... 1 3,426 45,066 48,493
Employee stock appreciation........... -- 3,519 -- 3,519
Net loss.............................. -- -- (5,088) (5,088)
-- ------- -------- --------
Balance at December 31, 1997.......... 1 6,945 39,978 46,924
Employee stock appreciation........... -- 7,888 -- 7,888
Net loss.............................. -- -- (10,006) (10,006)
-- ------- -------- --------
Balance at December 31, 1998.......... $1 $14,833 $29,972 $ 44,806
== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE> 165
BUFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $(10,006) $ (5,088) $ (223)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization...................... 21,399 17,753 17,175
Non-cash interest expense.......................... 171 168 --
(Gain) loss on sales of assets..................... 165 (829) (5,655)
Employee stock appreciation expense................ 7,888 3,519 1,458
Deferred federal income tax expense (benefit)...... (525) (449) 94
Changes in assets and liabilities, excluding
acquisitions and dispositions:
Accounts receivable........................... (364) (1,031) 484
Prepaid expenses.............................. 176 (30) (47)
Federal income taxes receivable............... -- -- 1,040
Accounts payable and accrued expenses......... 1,414 1,908 (522)
Deposits and unearned revenue................. 250 1,418 79
Other......................................... (234) (467) (255)
-------- -------- --------
Net cash provided by operating activities..... 20,334 16,872 13,628
-------- -------- --------
Cash flows from investing activities:
Acquisitions of cable systems........................... (29,900) (17,771) (18,350)
Additions to property, plant and equipment.............. (20,469) (22,042) (15,593)
Additions to intangible assets.......................... (3,139) (1,098) --
Net proceeds from sale of assets........................ 357 -- --
Net proceeds from disposition of cable systems.......... -- 1,228 13,654
-------- -------- --------
Net cash used in investing activities......... (53,151) (39,683) (20,289)
-------- -------- --------
Cash flows from financing activities:
Proceeds from long-term obligations..................... 33,000 25,000 4,260
Payments of long-term obligations....................... -- (53) (14,850)
Payment of debt issuance costs.......................... (170) -- (337)
-------- -------- --------
Net cash provided by (used in) financing
activities................................. 32,830 24,947 (10,927)
Net increase (decrease) in cash and cash equivalents...... 13 2,136 (17,588)
Cash and cash equivalents at beginning of year............ 7,890 5,754 23,342
-------- -------- --------
Cash and cash equivalents at end of year.................. $ 7,903 $ 7,890 $ 5,754
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE> 166
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION
Buford Group, Inc. and subsidiaries (the "Company") are engaged in cable
television operations within the United States. The Company owns and operates
cable television systems primarily in Texas, Louisiana, Arkansas, and Missouri.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Buford Group,
Inc. and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
During 1998, the Company purchased the remaining 76.8% of Friendship Cable,
Ltd. ("FCL"), a Texas limited partnership in which the Company had held a 1%
general partner interest and limited partner interests aggregating 22.2%. The
accounts of FCL for 1998 and 1997 are consolidated because the Company, as
general partner, is required to fund deficits incurred during the period from
inception to January 1, 2000, and certain shareholders of the Company controlled
the limited partner interests of FCL through the date of the Company's
acquisition of the remaining interests. In prior years, allocated net losses to
the limited partners had reduced their capital accounts to zero.
(c) REVENUE RECOGNITION
Revenues from basic and premium services are recognized when the related
services are provided.
Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
estimated average period that customers are expected to remain connected to the
cable television system.
(d) STATEMENTS OF CASH FLOWS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
The Company uses the indirect method to present cash flows from operating
activities. Supplemental disclosures of cash flow information follow:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Interest paid............................................. $7,593,000 $4,588,000
========== ==========
Income taxes paid......................................... $ 250,000 $ 59,000
========== ==========
</TABLE>
(e) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost, including all direct
cost and certain indirect costs of construction of cable television transmission
and distribution systems, and the cost of new customer installations.
Maintenance and repairs are charged to expense as incurred and equipment
replacements and betterments are capitalized. The Company charges
F-23
<PAGE> 167
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
depreciation to operations on a straight-line basis over the estimated useful
lives of the related property and equipment as follows:
<TABLE>
<S> <C>
Cable distribution equipment......................... 3 - 12 years
Furniture, fixtures, automobiles and other........... 3 - 12 years
Buildings and improvements........................... 5 - 20 years
</TABLE>
(f) INTANGIBLE ASSETS
The excess cost over net identifiable tangible and intangible assets of
acquired companies is being amortized on a straight-line basis over the
estimated economic lives of 40 years. Franchise rights purchased in connection
with cable television operations are being amortized on a straight-line basis
over 5 to 15 years. The costs of noncompetition agreements are being amortized
on a straight-line basis over the terms of the respective agreements.
The Company assesses the recoverability of intangible assets as well as the
related amortization lives by determining whether the carrying value of the
intangible assets can be recovered over the remaining lives through projected
undiscounted future cash flows. To the extent that such projections indicate
that undiscounted future cash flows are not expected to be adequate to recover
the carrying amounts of the related intangible assets, such carrying amounts are
adjusted for impairment to a level commensurate with the estimated fair value of
the underlying assets.
(g) FEDERAL INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount more likely than not to be realized.
Income tax expense is the total of tax payable for the period and the change
during the period in deferred tax assets and liabilities.
(h) DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Any derivative financial
instruments are used to manage well-defined interest rate risks related to the
Company's outstanding debt.
Any costs of interest rate agreements are initially recognized as assets
and amortized to interest expense over the lives of the agreements using the
interest method. Under all interest rate agreements, the differential to be paid
or received is recognized as an adjustment to interest expense. During the years
ended December 31, 1998, 1997 and 1996, the Company recognized net expenses of
$39,000, $38,000 and $59,000, respectively, under its interest rate agreements
(see note 6).
The carrying amounts of cash equivalents, accounts receivable and accounts
payable reported in the accompanying consolidated financial statements
approximate fair value due to their short maturities. The outstanding borrowings
under the Company's credit agreement (note 6) bear interest at current market
rates, and thus, the carrying amount of debt approximates estimated fair value.
The fair value of the interest rate agreements (note 6) was
F-24
<PAGE> 168
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $(449,000) at December 31, 1998, which represents the estimated
amount, based on dealer quotations, that the Company would pay, excluding
accrued interest, to terminate the contracts at December 31, 1998, taking into
account the current unrealized loss on open contracts.
(i) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(j) COMPREHENSIVE INCOME
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income," in the first
quarter of 1998, which required companies to disclose comprehensive income
separately from net income. Comprehensive income is defined as the change in
equity during a period from transactions and other events and circumstances from
non-ownership sources. It includes all changes in equity during a period, except
those resulting from investments by owners and distributions to owners. The
adoption of this statement had no effect on the Company at December 31, 1998,
because the Company has no elements of other comprehensive income. Accordingly,
comprehensive income and net income are the same amount for each period
presented.
(2) ACQUISITIONS AND DISPOSITIONS
In April 1998, the Company acquired cable systems from three unaffiliated
parties for $29.9 million. In April and May 1997, the Company acquired cable
systems from unaffiliated parties for $17.8 million. During 1996, the Company
acquired cable systems from unaffiliated parties for $18.4 million.
The acquisitions were accounted for as purchases and, accordingly, the
purchase prices were allocated to tangible and intangible assets based on
estimated fair values at the dates of the acquisitions. Operating results of the
acquired systems are included in the accompanying financial statements from the
dates of acquisition. Net assets acquired as a result of these acquisitions
included $15.6 million, $7.4 million and $7.0 million in franchise rights and
$14.3 million, $10.4 million and $11.4 million in property, plant and equipment
during 1998, 1997 and 1996, respectively.
On October 1, 1996, the Company sold all of its cable television systems
operating in North Carolina for a cash purchase price of $11.8 million,
resulting in a gain of $4.7 million. Additionally, on October 1, 1996, the
Company sold cable television system assets of a consolidated partnership
(70%-owned) for a total cash price of $2.1 million, resulting in a gain of
$717,000.
In September 1998, the Company acquired the remaining 76.8% of FCL for $2.8
million. The Company accounted for this transaction as a purchase business
combination, and accordingly, allocated the purchase price to FCL's assets
(primarily intangible assets) based on their estimated fair values.
Unaudited pro forma operating results as though the 1998 and 1997
acquisitions discussed above had occurred on January 1, 1997, with adjustments
to give effect to amortization of
F-25
<PAGE> 169
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
franchises, depreciation of property, plant and equipment, interest expense and
certain other adjustments is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1998 1997
---- ----
(UNAUDITED)
<S> <C> <C>
Revenues.................................................... $ 73,531 $67,354
Operating income (loss)..................................... (1,630) 1,801
Net loss.................................................... (10,177) (4,831)
</TABLE>
(3) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
---- ----
<S> <C> <C>
Accounts receivable, trade.................................. $2,665 $2,417
Accounts receivable, other.................................. 627 554
------ ------
3,292 2,971
Less allowance for doubtful accounts........................ (414) (457)
------ ------
$2,878 $2,514
====== ======
</TABLE>
(4) OTHER ASSETS
The Company is the named beneficiary on life insurance policies for key
management members. The cash surrender value of the policies is recorded net of
policy loans of $5,977,000 and $5,553,000 at December 31, 1998 and 1997,
respectively. The net amounts of $2,153,000 and $1,837,000 at December 31, 1998
and 1997, respectively, are included in other assets in the accompanying
consolidated balance sheets.
(5) PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment and accumulated depreciation and
amortization follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
---- ----
<S> <C> <C>
Cable distribution equipment................................ $188,264 $155,119
Furniture, fixtures, automobiles and other.................. 8,572 7,520
Buildings, land and improvements............................ 3,891 4,247
-------- --------
200,727 166,886
Less accumulated depreciation and amortization.............. (87,483) (71,198)
-------- --------
Property, plant and equipment, net..................... $113,244 $ 95,688
======== ========
</TABLE>
(6) LONG-TERM OBLIGATIONS
The Company had outstanding borrowings of $118,000,000 and $85,000,000 at
December 31, 1998 and 1997, respectively, under a credit agreement with banks
providing for up to $140,000,000 of borrowings. Borrowings bear interest at the
bank's floating rate, the London
F-26
<PAGE> 170
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interbank Offered Rate ("LIBOR"), or a combination thereof as selected by the
Company, plus a margin dependent on the Company's leverage ratio (as defined in
the credit agreement). The weighted average effective interest rate at December
31, 1998 and 1997 was 6.75%. The Company must pay an annual commitment fee
ranging from .25% to .375% of the unfunded portion of the commitment. Borrowings
under the credit agreement are secured by the common stock of the Company and
its subsidiaries. The credit agreement contains certain provisions which limit
the Company as to additional indebtedness, sales of assets, liens, guarantees,
investments and acquisitions. Additionally, the Company must maintain certain
specified financial ratios.
On April 30, 1998, the bank amended the credit agreement to extend the
final maturity date to June 30, 2005. Beginning September 30, 1999, and
quarterly thereafter through June 30, 2005, the commitment amount is to be
reduced by quarterly amounts ranging from $2,655,000 to $12,685,000.
Additionally, on or before April 30 of each year, commencing April 30, 2000, the
Company is required to make mandatory payments equal to 50% of the excess cash
flow for the previous fiscal year, if any, as defined in the credit agreement.
In accordance with the credit agreement, the Company has interest rate
agreements with various banks to reduce the impact of changes in interest rates.
At December 31, 1998, the Company had three interest rate collar agreements
expiring in May 1999, October 1999 and June 2000 with a bank covering notional
principal amounts of $10,000,000, $10,000,000 and $15,000,000, respectively.
These agreements have maximum cap rates of 8.20%, 7.50% and 6.55%, respectively,
and each has a minimum floor rate of 5.65%. The Company also had an interest
rate swap agreement with a bank covering a notional amount of $25,000,000, with
a fixed rate of 5.73%, which expires in January 2000.
The Company is exposed to credit loss in the event of nonperformance of the
other parties to the above agreements; however, the Company does not anticipate
nonperformance by such counterparties.
As of December 31, 1998, principal payments due on indebtedness in future
years was as follows (in thousands):
<TABLE>
<S> <C>
1999..................................................... $ 5,310
2000..................................................... 10,620
2001..................................................... 15,340
2002..................................................... 18,880
Thereafter............................................... 67,850
</TABLE>
(7) ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
---- ----
<S> <C> <C>
Accrued programming......................................... $2,970 $1,312
Accrued property taxes...................................... 1,704 1,389
Accrued payroll and benefits................................ 1,279 1,764
Accrued interest............................................ 514 938
Accrued other............................................... 2,175 1,649
------ ------
$8,642 $7,052
====== ======
</TABLE>
F-27
<PAGE> 171
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1998, 1997
and 1996 includes the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current -- State.......................................... $ 250 $ 134 $--
Current -- Federal........................................ 49 -- --
Deferred -- Federal....................................... (525) (449) 94
----- ----- ---
$(226) $(315) $94
===== ===== ===
</TABLE>
Actual income tax expense (benefit) differs from the "expected" income tax
expense (benefit) (computed by applying the U.S. federal corporate tax rate of
35% to the loss before income taxes) as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Computed expected tax benefit......................... $(3,581) $(1,891) $ (45)
Change in the valuation allowance..................... 394 328 1
Revision of prior year estimate....................... 299 -- (252)
Employee stock appreciation........................... 2,760 1,231 509
Other................................................. (98) 17 (119)
------- ------- -----
$ (226) $ (315) $ 94
======= ======= =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1997 are presented as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 8,616 $ 5,992
Alternative minimum tax credit carryforwards.............. 5,692 5,692
Investment in partnerships................................ -- 1,593
Deferred compensation..................................... -- 116
Other..................................................... 968 670
------- -------
Total gross deferred tax assets...................... 15,276 14,063
Less valuation allowance.................................. (4,764) (4,370)
------- -------
Net deferred tax assets.............................. 10,512 9,693
------- -------
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation........................................... $11,118 $10,898
Other..................................................... 632 558
------- -------
Total gross deferred tax liabilities................. 11,750 11,456
------- -------
Net deferred tax liability........................... $(1,238) $(1,763)
======= =======
</TABLE>
The net changes in the valuation allowance for 1998, 1997 and 1996 were
increases of $394,000, $328,000, and $1,000, respectively. The Company has
recognized deferred tax assets
F-28
<PAGE> 172
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to the extent such assets can be realized through future reversals of existing
temporary differences.
At December 31, 1998, the Company had approximately $24,596,000 of tax net
operating loss carryforwards which expire in years 2007 through 2012. In
addition, the Company had approximately $5,700,000 of alternative minimum tax
credit carryforwards available to reduce future regular federal income taxes
over an indefinite period.
(9) LEASE OBLIGATIONS
Total rental expense for operating leases was $1,427,000, $1,433,000 and
$1,264,000 in 1998, 1997 and 1996, respectively. Included in these amounts are
payments for pole rental agreements amounting to $1,313,000, $1,306,000 and
$1,102,000 in 1998, 1997 and 1996, respectively. Pole rental agreements may be
terminated by either party by written notice ranging up to ninety days. The
remaining operating lease agreements are primarily for office space and annual
minimum aggregate rentals under such leases are not considered material.
(10) EMPLOYEE BENEFIT PLANS
In January 1992, the Company established a savings plan to provide elective
employee and employer contributions under Section 401(k) of the Internal Revenue
Code. Under the terms of the plan, the Company may make voluntary contributions
to the plan matching employee contributions in percentages and discretionary
amounts as determined by the Board of Directors. The Company made matching and
discretionary contributions to the plan of $423,000, $459,000 and $397,000 in
1998, 1997 and 1996, respectively.
Under the terms of the Buford Television Partnership Agreement (the
"Agreement") effective January 1, 1994, a new partnership, Buford Television
Partnership ("BTP"), was formed to hold the outstanding shares of the Company.
Under the terms of this Agreement, the stockholders on January 1, 1994
contributed 100% of their shares to the Partnership. Key employees were granted
12% ownership of future appreciation in the market value of the Company's common
stock, as defined in the Agreement, through appreciation percentages. These
appreciation percentages have none of the rights associated with ownership of
the common stock of the Company, such as voting or dividend rights, and will
have no value outside the context of the Agreement. However, the partners of
BTP, which include the key employees, have voting rights in the management of
BTP, the purpose of which is to acquire, manage, vote, pledge, hold and dispose
of the Company's stock and to perform all duties necessary to accomplish the
purposes of BTP. On December 1, 1997, the Agreement was amended whereby 620
shares of the Company's common stock were withdrawn from BTP by the principal
stockholders, leaving BTP with 380 shares of the Company's common stock, or 38%
ownership. However, the aforementioned key employees still retain 12% ownership
of the future appreciation in the market value of 100% of the Company's common
stock. Participants have vested 20% each year in the accumulated value of their
appreciation percentages, and became fully vested as of December 31, 1998. The
Company records expense for the accumulated value of the common stock
appreciation based on vesting criteria over the five year vesting period, and
subsequently, will continue to record expense based on the fully vested status
of the key employees and changes in fair value of the Company's common stock.
For the years ended December 31, 1998, 1997 and 1996, the Company recognized
$7,888,000, $3,519,000 and $1,458,000, respectively, in expense related to the
Agreement. The cumulative amount recorded pursuant to this agreement was
$14,833,000 as of December 31, 1998.
F-29
<PAGE> 173
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has agreements with several employees that provide for amounts
to be paid to such employees in the event of a sale of certain cable systems'
assets. The amounts to be paid are based on several factors, including
historical cash flow. No amounts have been recorded related to these agreements
as the Company has not consummated a sale of any of the cable systems' assets
covered by these agreements.
(11) CONTINGENCIES
In October 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act"). During May 1993, pursuant to
authority granted to it under the 1992 Cable Act, the Federal Communications
Commission ("FCC") issued its rate regulation rules which became effective
September 1, 1993. These rate regulation rules required cable systems in
franchised areas serving at least 1,000 customers, which receive certification
and are not subject to effective competition, as defined, to set rates for basic
and cable programming services, as well as related equipment and installations,
pursuant to general cost-of-service standards or FCC prescribed benchmarks. The
Act also entailed quality service criteria and must carry/retransmission
requirements.
On February 1, 1996, Congress passed The Telecommunications Act of 1996
(the "1996 Act") which was signed into law on February 6, 1996. This new law
altered federal, state and local laws and regulations for telecommunications
providers and services, including the Company. Several aspects of the 1996 Act
impact cable television, including the elimination of regulation of the cable
programming service tier for certain smaller cable providers, including the
Company.
The Company believes that it has complied with all provisions of the 1992
Cable Act and the 1996 Act including the rate setting provisions promulgated by
the FCC.
(12) SUBSEQUENT EVENT (UNAUDITED)
In May 1999, the Company and its stockholders entered into an agreement to
sell all of the common stock of the Company to Classic Cable, Inc. for
approximately $302.3 million.
F-30
<PAGE> 174
BUFORD GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 2,890
Accounts receivable, net of allowance for doubtful accounts
of $398................................................... 2,846
Prepaid expenses............................................ 484
Property, plant and equipment............................... 208,268
Less accumulated depreciation and amortization.............. (96,913)
--------
111,355
Intangible assets:
Franchise rights....................................... 54,417
Noncompetition agreements.............................. 7,434
Excess cost over net assets of acquired companies...... 2,114
Other.................................................. 1,089
--------
65,054
Less accumulated amortization.......................... (18,613)
--------
46,441
Other assets................................................ 2,586
--------
$166,602
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 491
Deposits and unearned revenues.............................. 2,341
Accrued expenses............................................ 7,073
Long-term obligations....................................... 112,000
Deferred federal income taxes............................... 976
--------
Total liabilities................................. 122,881
--------
Stockholders' equity:
Common stock, $1 par value. Authorized 2,000 shares;
issued and outstanding 1,000 shares................... 1
Additional capital..................................... 14,058
Retained earnings...................................... 29,662
--------
Total stockholders' equity........................ 43,721
Commitments and contingencies...............................
--------
$166,602
========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-31
<PAGE> 175
BUFORD GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
----------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cable television revenues........................... $19,537 $17,680 $38,398 $32,943
------- ------- ------- -------
Operating expenses:
Programming....................................... 5,213 4,657 10,430 8,762
Plant and operating............................... 1,683 1,688 3,377 3,345
General and administrative........................ 4,301 4,239 8,461 7,936
Marketing and advertising......................... 128 57 237 150
Corporate overhead................................ (430) 2,250 (72) 4,354
Depreciation and amortization..................... 6,378 5,267 12,105 10,137
------- ------- ------- -------
17,273 18,158 34,538 34,684
------- ------- ------- -------
Operating income (loss)........................ 2,264 (478) 3,860 (1,741)
------- ------- ------- -------
Other income (expense):
Interest expense.................................. (2,001) (2,089) (4,095) (3,681)
Interest income................................... 74 90 166 172
Other, net........................................ (175) (77) (244) (99)
------- ------- ------- -------
(2,102) (2,076) (4,173) (3,608)
------- ------- ------- -------
Loss before income taxes and cumulative effect
of change in accounting principle............ 162 (2,554) (313) (5,349)
Income tax benefit (expense)........................ 123 131 210 (25)
------- ------- ------- -------
Loss before cumulative effect of change in
accounting principle......................... 285 (2,423) (103) (5,374)
Cumulative effect of change in accounting principle,
net of income tax benefit of $52.................. -- -- 207 --
------- ------- ------- -------
Net loss....................................... 285 $(2,423) $ (310) $(5,374)
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-32
<PAGE> 176
BUFORD GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (310) $ (5,374)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................ 12,105 10,137
Non-cash interest expense............................ 12 42
Employee stock appreciation expense.................. (775) 3,550
Deferred federal income tax benefit.................. (210) (274)
Cumulative effect of change in accounting
principle........................................... 207 --
Changes in assets and liabilities:
Accounts receivable............................... 32 (718)
Prepaid expenses.................................. (318) (188)
Accounts payable and accrued expenses............. (2,111) 1,272
Deposits and unearned revenues.................... 107 201
Other............................................. (212) (178)
------- --------
Net cash provided by operating activities......... 8,527 8,470
------- --------
Cash flows from investing activities:
Additions to property, plant and equipment................ (7,540) (10,980)
Acquisition of cable systems.............................. -- (29,900)
Other..................................................... -- (89)
------- --------
Net cash used in investing activities............. (7,540) (40,969)
------- --------
Cash flows from financing activities:
Proceeds from long-term obligations....................... -- 30,000
Payments of long-term obligations......................... (6,000) --
------- --------
Net cash provided by (used in) financing
activities...................................... (6,000) 30,000
------- --------
Net decrease in cash and cash equivalents................... (5,013) (2,499)
Cash and cash equivalents at beginning of period............ 7,903 7,890
------- --------
Cash and cash equivalents at end of period.................. $ 2,890 $ 5,391
======= ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-33
<PAGE> 177
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(1) GENERAL AND BASIS OF PRESENTATION
(a) ORGANIZATION
Buford Group, Inc. and subsidiaries are engaged in cable television
operations within the United States. The Company owns and operates cable
television systems primarily in Texas, Louisiana, Arkansas, and Missouri.
(b) PRINCIPLES OF CONSOLIDATION
The unaudited condensed consolidated financial statements include the
accounts of Buford Group, Inc. and its subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
(c) INTERIM FINANCIAL INFORMATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of the Company contain all adjustments,
consisting only of those of a normal recurring nature, necessary to present
fairly the Company's financial position as of June 30, 1999, and the results of
operations and cash flows for the three and six months ended June 30, 1999 and
1998. These results are not necessarily indicative of the results to be expected
for the full fiscal year.
(d) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(e) COMPREHENSIVE INCOME
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income," in the first
quarter of 1998, which required companies to disclose comprehensive income
separately from net income. Comprehensive income is defined as the change in
equity during a period from transactions and other events and circumstances from
non-ownership sources. It includes all changes in equity during a period, except
those resulting from investments by owners and distributions to owners. The
adoption of this statement had no effect on the Company at December 31, 1998,
because the Company has no elements of other comprehensive income. Accordingly,
comprehensive income and net income are the same amount for each period
presented.
(2) RECENT ACCOUNTING PRONOUNCEMENT
The Company adopted the provisions of Statement of Position 98-5 ("SOP
98-5"), "Reporting on the Costs of Start-up Activities," effective as of January
1, 1999. This pronouncement requires that costs of start-up activities,
including organizational costs, should be expensed as incurred. As a result of
adopting SOP 98-5, the Company recorded a charge of $259,000, less tax benefit
of $52,000, as the cumulative effect of recording the change in accounting
principle as of January 1, 1999.
F-34
<PAGE> 178
BUFORD GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
(3) CONTINGENCIES
In October 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act"). During May 1993, pursuant to
authority granted to it under the 1992 Cable Act, the Federal Communications
Commission ("FCC") issued its rate regulation rules which became effective
September 1, 1993. These rate regulation rules required cable systems in
franchised areas serving at least 1,000 customers, which receive certification
and are not subject to effective competition, as defined, to set rates for basic
and cable programming services, as well as related equipment and installations,
pursuant to general cost-of-service standards or FCC prescribed benchmarks. The
Act also entailed quality service criteria and must carry/retransmission
requirements.
On February 1, 1996, Congress passed The Telecommunications Act of 1996
(the "1996 Act") which was signed into law on February 6, 1996. This new law
altered federal, state and local laws and regulations for telecommunications
providers and services, including the Company. Several aspects of the 1996 Act
impact cable television, including the elimination of regulation of the cable
programming service tier for certain smaller cable providers, including the
Company.
The Company believes that it has complied with all provisions of the 1992
Cable Act and the 1996 Act including the rate setting provisions promulgated by
the FCC.
(4) SUBSEQUENT EVENTS
In May 1999, the Company and its shareholders entered into an agreement to
sell the common stock of the Company to Classic Cable, Inc. On July 29, 1999,
the sale was consummated for a total selling price of approximately $297.8
million. In connection with the Buford Television Partnership Agreement (the
"Agreement"), the Buford Television Partnership granted ownership in 12% of
future appreciation in the market value of the Company's common stock, to
certain key employees. At December 31, 1998, the Company had accrued an
estimated liability under this agreement of approximately $14.8 million. The key
employees covered by the Agreement received approximately $14.1 million in
satisfaction of their rights under the agreement at the time of sale.
Accordingly, the Company recorded a credit of approximately $.7 million to
corporate overhead expense during the three months ended June 30, 1999.
Additionally, the Company paid out approximately $2.6 million to certain
employees under separate agreements that provided for payments in the event of
the sale of certain cable systems' assets. The Company has not recognized
expense at June 30, 1999 related to these agreements as such amounts are payable
only upon consummation of a sale of cable system assets and were recognized when
the sale closed.
F-35
<PAGE> 179
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Star Cable Associates
In our opinion, the accompanying balance sheets and the related statements
of operations and changes in partners' capital (deficiency) and of cash flows
present fairly, in all material respects, the financial position of Star Cable
Associates at December 31, 1999 and 1998, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 14 to the financial statements, on February 15, 2000,
Classic Communications Inc. completed its purchase of substantially all assets
of the Partnership for approximately $110 million in cash and 555,555 shares of
its Class A common stock.
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 29, 2000
F-36
<PAGE> 180
STAR CABLE ASSOCIATES
(A PENNSYLVANIA GENERAL PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,873 $ 3,013
Accounts receivable, net (Note 5)......................... 956 871
Construction materials.................................... 349 348
Prepaid expenses and other current assets................. 188 194
-------- --------
Total current assets.............................. 6,366 4,426
Property, plant and equipment, net (Note 6)................. 52,936 50,478
Deferred financing costs, net............................... 390 451
Intangible assets:
Subscriber lists.......................................... 538 538
Franchise rights.......................................... 16,128 8,687
Noncompete agreements..................................... 1,416 1,157
Goodwill.................................................. 9,064 6,585
Other..................................................... 12 41
-------- --------
27,158 17,008
Less accumulated amortization............................. (9,042) (6,818)
-------- --------
18,116 10,190
-------- --------
Total assets...................................... $ 77,808 $ 65,545
======== ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 1,350 $ 1,250
Subscriber deposits and unearned income................... 1,026 1,012
Other accrued liabilities................................. 214 157
Accrued interest payable.................................. 277 228
Deferred compensation..................................... 425 --
Management fees payable (Note 12)......................... 4 120
-------- --------
Total current liabilities......................... 3,296 2,767
Deferred installation revenue............................... 280 235
Accrued interest payable -- subordinated debt............... 143 250
Senior debt (Note 7)........................................ 51,700 39,000
Subordinated debt -- related party (Note 8)................. 38,534 35,245
-------- --------
Total liabilities................................. 93,953 77,497
-------- --------
Commitments and contingencies (Notes 3, 11 and 13)
Partners' capital (deficiency).............................. (16,145) (11,952)
-------- --------
Total liabilities and partners' capital
(deficiency).................................... $ 77,808 $ 65,545
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE> 181
STAR CABLE ASSOCIATES
(A PENNSYLVANIA GENERAL PARTNERSHIP)
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' CAPITAL (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Revenues.................................................... $ 24,981 $ 18,447 $16,950
-------- -------- -------
Operating expenses:
Programming............................................... 7,407 5,435 5,016
CATV system operating costs............................... 3,707 2,588 2,536
General and administrative................................ 2,444 1,691 1,603
Marketing and advertising................................. 251 230 207
Management fees........................................... 876 644 589
Depreciation and amortization............................. 7,415 5,393 5,122
-------- -------- -------
Total operating expenses.......................... 22,100 15,981 15,073
-------- -------- -------
Income from operations...................................... 2,881 2,466 1,877
-------- -------- -------
Other income (expense):
Interest income........................................... 151 167 192
Interest expense.......................................... (7,183) (5,652) (5,575)
Loss on sale of assets.................................... (42) (1) (5)
-------- -------- -------
(7,074) (5,486) (5,388)
-------- -------- -------
Loss before extraordinary item.............................. (4,193) (3,020) (3,511)
Extraordinary item:
Loss on early extinguishment of debt...................... -- -- (249)
-------- -------- -------
Net loss.......................................... (4,193) (3,020) (3,760)
Partners' capital (deficiency), beginning of year........... (11,952) (8,932) (5,172)
-------- -------- -------
Partners' capital (deficiency), end of year................. $(16,145) $(11,952) $(8,932)
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE> 182
STAR CABLE ASSOCIATES
(A PENNSYLVANIA GENERAL PARTNERSHIP)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (4,193) $ (3,020) $ (3,760)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation......................................... 5,191 4,854 4,706
Amortization of intangible assets.................... 2,224 539 416
Amortization of deferred financing costs............. 61 37 49
Accrued interest on subordinated debt -- related
party.............................................. 3,182 3,036 3,552
Extraordinary item -- loss on early extinguishment of
debt............................................... -- -- 249
Loss on sale of assets............................... 42 1 5
Changes in working capital:
Accounts receivable, net............................. (85) (222) 203
Construction materials............................... (1) 52 24
Prepaid expenses and other current assets............ 6 25 36
Accounts payable..................................... 100 136 263
Subscriber deposits and unearned income.............. 14 207 (26)
Other accrued liabilities............................ 57 (120) (47)
Accrued interest payable............................. 49 43 (28)
Management fees payable.............................. (116) 70 4
Deferred installation revenue........................ 45 (43) (111)
Deferred compensation................................ 425 -- --
-------- -------- --------
Net cash provided by operating activities....... 7,001 5,595 5,535
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of CATV systems................................ (14,500) (9,586) --
Capital expenditures.................................... (3,356) (3,612) (2,460)
Proceeds from sale of assets............................ 15 11 10
-------- -------- --------
Net cash used in investing activities........... (17,841) (13,187) (2,450)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility.............. 12,700 39,000 31,200
Repayments of revolving credit facility................. -- (31,200) (24,250)
Repayments of subordinated debt -- Related party........ -- -- (10,650)
Expenditures for deferred financing costs............... -- (239) (257)
-------- -------- --------
Net cash provided by (used in) financing
activities.................................... 12,700 7,561 (3,957)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents...... 1,860 (31) (872)
Cash and cash equivalents, beginning of year.............. 3,013 3,044 3,916
-------- -------- --------
Cash and cash equivalents, end of year.................... $ 4,873 $ 3,013 $ 3,044
======== ======== ========
Supplemental schedule of cash flow information:
Cash interest paid...................................... $ 4,031 $ 2,536 $ 1,928
======== ======== ========
Accrued interest on subordinated debt-related party..... $ 3,182 $ 3,036 $ 3,552
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE> 183
STAR CABLE ASSOCIATES
(A PENNSYLVANIA GENERAL PARTNERSHIP)
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION
Star Cable Associates (the Partnership) is a general partnership formed
under the laws of the Commonwealth of Pennsylvania on August 6, 1986 to acquire,
develop and operate community antenna television systems (CATV systems). The
Partnership is governed by the Partnership Agreement and the Pennsylvania
Uniform Partnership Act. The Partnership operates CATV systems in Texas,
Louisiana and Ohio.
Distributions, additional capital contributions and allocations of profits
and losses among the partners are determined in accordance with the provisions
of the Partnership Agreement. The Partnership Agreement also provides the
general partners with the right to acquire each other's respective Partnership
interests under certain conditions.
2. ACQUISITIONS
In November 1998, the Partnership acquired additional CATV systems in
Louisiana from Galaxy Telecom L.P. (the Galaxy acquisition) for approximately
$9,586 in cash, including transaction costs. Based on appraised values,
approximately $2,022 of the purchase price was allocated to tangible assets
(primarily distribution systems) and $7,564 was allocated to intangible assets.
The purchase price was financed from borrowings under the Partnership's senior
revolving credit facility.
In February 1999, the Partnership acquired certain operating assets of a
CATV system from Illini Cablevision of Sabine, Inc., Illini Cablevision of Fort
Polk, Inc. and Cable West of Louisiana, Inc. (the Illini acquisition) for
approximately $15,000 in cash, including transaction costs. Based on appraised
values, approximately $4,952 of the purchase price has been allocated to
tangible assets (primarily distribution systems) and $10,048 has been allocated
to intangible assets. These acquisitions were financed primarily from additional
borrowings of approximately $12,700 under the Partnership's revolving credit
facility.
The above acquisitions were accounted for using the purchase method and,
accordingly, the operating results of the systems acquired have been included in
the Partnership's financial statements since the date of acquisition.
The following summarized unaudited pro forma financial information assumes
the Illini acquisition had occurred on January 1, 1998. The following pro forma
information is not necessarily indicative of the results that would have
occurred had the transaction been completed at the beginning of the period
indicated, nor is it indicative of future operating results:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
-----------------
1999 1998
------- -------
<S> <C> <C>
Revenues................................................ $25,342 $22,749
Net loss................................................ $(4,086) $(1,815)
</TABLE>
3. CABLE RATE REGULATION
In recent years, the cable television industry has been subject to Federal
Communications Commission (FCC) regulation under the Telecommunications Act of
1996 and, previously, the Cable Television Consumer Protection and Competition
Act of 1992 and related FCC regulations. On April 1, 1999, programming tier
cable television rates were deregulated. Basic rates remain
F-40
<PAGE> 184
STAR CABLE ASSOCIATES
(A PENNSYLVANIA GENERAL PARTNERSHIP)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
subject to local rate regulations if the community becomes certified to regulate
through the FCC. The Partnership currently has no communities actively
regulating basic rates.
During the periods the Partnership's cable rates were subject to regulation
under the 1996 Act, the Partnership believes it met the FCC definition for small
system relief from certain of the regulations. During the period its rates were
subject to the 1992 Act, the Partnership generally justified its rates on the
"cost-of-service" basis. In each case, management believes it fairly interpreted
and applied the applicable laws and regulations.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS SEGMENT
The Partnership is primarily engaged in one line of business and has one
industry segment, which is to acquire, develop and operate CATV systems.
REVENUE RECOGNITION
Revenue from cable services includes earned subscriber service revenue and
fees for installations and connections. Subscriber service revenue is recognized
in the period in which the services are provided to the customers. Subscriber
services paid for in advance are recorded as income when earned.
Initial installation revenue is recognized when the service is performed,
to the extent of direct selling costs, with any balance deferred and taken into
income over the estimated average period that subscribers are expected to remain
connected to the system.
INCOME TAXES
The partners are required to report their respective share of the
Partnership's taxable income or loss in their individual income tax returns and
are personally liable for any related taxes thereon. Accordingly, no provision
for income taxes has been made in the accompanying financial statements of the
Partnership.
The Partnership has not provided unaudited pro forma information as if the
Partnership was a taxable entity, since the Partnership would have no income tax
benefit under the provisions of Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," due to the recognition of a full valuation allowance against the
Partnership's net deferred tax assets.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and highly liquid
investments with original maturities of 3 months or less.
CONSTRUCTION MATERIALS
Construction materials are carried at cost and represent electronic
components and other materials purchased to maintain or to construct cable
television systems.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost.
F-41
<PAGE> 185
STAR CABLE ASSOCIATES
(A PENNSYLVANIA GENERAL PARTNERSHIP)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation is computed using the straight-line method over the following
estimated useful lives of the assets:
<TABLE>
<S> <C>
Buildings and improvements.............................. 25 years
Cable television distribution systems and plant......... 7-12 years
Equipment............................................... 3-7 years
Transportation vehicles................................. 5 years
Furniture and fixtures.................................. 7 years
</TABLE>
Leasehold improvements are amortized over the shorter of their estimated
life or the period of the related leases.
Initial subscriber costs are capitalized as part of cable television
distribution systems pursuant to industry practice. Costs related to disconnects
and reconnects of customers are expensed as incurred. Maintenance and repair
costs are charged to expense as incurred.
DEFERRED FINANCING COSTS
Deferred financing costs are capitalized and amortized using the interest
method over the term of the related debt.
INTANGIBLE ASSETS
Amounts allocated to specific identifiable intangible assets in connection
with CATV system acquisitions are capitalized and amortized using the
straight-line method over periods ranging as follows:
<TABLE>
<S> <C>
Noncompete agreements................................... 5-15 years
Subscriber lists........................................ 10 years
Franchise rights........................................ 7 years
Goodwill................................................ 20 years
</TABLE>
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically reviews the carrying amounts of property, plant
and equipment, identifiable intangible assets and goodwill both purchased in the
normal course of business and acquired through acquisition to determine whether
current events or circumstances, as defined in SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
warrant adjustments to such carrying amounts by considering, among other things,
the future cash inflows expected to result from the use of the asset and its
eventual disposition less the future cash outflows expected to be necessary to
obtain those inflows. At this time, future cash inflows exceed future cash
outflows; thus, no impairment loss has been recognized. Management reviews the
valuation and amortization periods of goodwill on a periodic basis, taking into
consideration any events or circumstances which might result in diminished fair
value or revised useful life. No events or circumstances have occurred to
warrant a diminished fair value or reduction in the useful life of goodwill.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Partnership to
concentrations of credit risk are primarily cash, cash equivalents and accounts
receivable. Excess cash is invested in high quality short-term liquid money
instruments issued by highly-rated financial institutions.
F-42
<PAGE> 186
STAR CABLE ASSOCIATES
(A PENNSYLVANIA GENERAL PARTNERSHIP)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Concentrations of credit risk with respect to the Partnership receivables are
limited due to the geographic dispersion and large number of customers,
individually small balances, short payment terms and required deposits.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of certain financial instruments, including cash and
cash equivalents, accounts receivable, accounts payable and other accrued
liabilities approximate fair value because of their short maturities. The fair
value of the Partnership's debt (Notes 7 and 8) approximates the book value due
to the variable interest rates of the debt.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted in years
beginning after June 15, 1999. Recently, the FASB delayed the effective date of
this statement for one year through the issuance of SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities -- Deferral of the Effective
Date of SFAS No. 133 and an Amendment of SFAS No. 133." Because of the
Partnership's minimal use of derivatives, management does not anticipate that
the adoption of the new Statement will have a significant effect on earnings or
the financial position of the Partnership.
5. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------
1999 1998
---- ----
<S> <C> <C>
Accounts receivable, subscriber............................. $921 $915
Accounts receivable, related party.......................... 116 10
Less allowance for doubtful accounts........................ (81) (54)
---- ----
Accounts receivable, net.................................... $956 $871
==== ====
</TABLE>
F-43
<PAGE> 187
STAR CABLE ASSOCIATES
(A PENNSYLVANIA GENERAL PARTNERSHIP)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Land.................................................. $ 54 $ 54
Buildings and improvements............................ 293 232
Cable television distribution systems................. 57,528 55,269
Towers, head-ends and transmission equipment.......... 11,163 6,648
Transportation vehicles............................... 1,449 1,355
Furniture and fixtures................................ 2,327 1,822
-------- --------
72,814 65,380
Less accumulated depreciation......................... (19,878) (14,902)
-------- --------
$ 52,936 $ 50,478
======== ========
</TABLE>
7. SENIOR DEBT
The Partnership has a revolving credit facility with certain lenders. In
November 1998, in connection with the acquisition of the CATV systems in
Louisiana, the loan agreement was amended to increase the maximum borrowings
under the revolving credit facility from $35 million to $55 million. The
borrowings outstanding under the revolving credit facility totaled $51.7 million
and $39 million at December 31, 1999 and 1998, respectively.
Under the Amended and Restated Loan Agreement, interest accrues at the
option of the Partnership at (1) 0.375% to 1.5% over the bank's prime rate or
(2) 1.375% to 2.5% over the LIBOR rate based on the Partnership's leverage
ratio, as defined in the loan agreement. Based on the option selected, interest
is payable on a quarterly basis for option (1) or at the end of the selected
term (which can range between 1 and 6 months) for option (2). The interest rate
in effect under the revolving credit facility was 8.25% at December 31, 1999 and
ranged from 7.50% to 7.66% as of December 31, 1998. Terms of the loan agreement
provides for fees of .25 percent per annum on the average daily unused balance
of the revolving credit facility.
The loan agreement includes various covenants and restrictions relating to
additional indebtedness, disposition of major assets, capital expenditures,
management fees, and certain operating and financial covenants. The loan
agreement limits Partnership distributions and provides reimbursement to the
bank, under certain circumstances, for any potential reduction in the rate of
return on the bank's capital as a consequence of its obligations under the
agreement. The loan is collateralized by substantially all of the Partnership's
assets.
On February 16, 2000, the outstanding borrowings under the revolving credit
facility totaling approximately $51.7 million were paid off from the proceeds
from the sale of the Company (refer to Note 14).
F-44
<PAGE> 188
STAR CABLE ASSOCIATES
(A PENNSYLVANIA GENERAL PARTNERSHIP)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
8. SUBORDINATED DEBT-RELATED PARTY
Subordinated debt-related party consist of:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1999 1998
------- -------
<S> <C> <C>
Subordinated notes -- principal............................. $27,040 $27,040
Subordinated notes -- accrued interest...................... 11,494 8,205
------- -------
Total............................................. $38,534 $35,245
======= =======
</TABLE>
The Partnership entered into a series of loan agreements with Star Cable
Management, Inc. (SCM), the managing general partner of the Partnership. At
December 31, 1999 and 1998, $27,040 of principal remained outstanding under the
loan agreements. The loans mature on December 31, 2003 and accrue interest at
prime plus 1/2% due monthly. The interest rate in effect at December 31, 1999
and 1998 was 9.00% and 8.25%, respectively.
On February 16, 2000, the outstanding principal and interest balances
totaling approximately $39,132 under the subordinate notes were paid off from
the proceeds from the sale of the Company (refer to Note 14).
9. SELF-INSURED MEDICAL PLAN
The Partnership participates in a self-insured medical plan with certain
related entities. Medical claims are paid by the Partnership for all related
entities that share in the proportional risk of the plan. Claims paid by the
Partnership on behalf of these entities are subsequently reimbursed. Claims paid
relating to the Partnership's employees amounted to approximately $246,000,
$227,000 and $129,000 in 1999, 1998 and 1997, respectively. The Partnership is
liable for each employee's medical expenses up to $32 per year with claims in
excess of $32 reinsured with a third party.
10. DEFINED CONTRIBUTION SAVINGS PLAN
The Partnership has a defined contribution 401(k) plan available to
substantially all employees. Under the plan, the Partnership matches 50% of
eligible employees' annual contributions up to $250 per employee. Partnership
matching contributions to the plan were approximately $9 in 1999, 1998 and 1997,
respectively.
11. DEFERRED COMPENSATION
The Partnership has a Deferred Equity Bonus Plan (the Plan) for certain key
employees providing for the earning of bonuses based on the appreciation in the
market value of the Partnership's various CATV systems from the base year as
defined in the Plan document. The bonus earned vests over a ten-year period from
the date an employee becomes operating manager at a CATV system and is payable
at the time such CATV system is sold. For the year ended December 31, 1999, the
Partnership recognized approximately $425 of expense related to the Plan. No
expense related to the Plan was recognized in 1998 or 1997.
F-45
<PAGE> 189
STAR CABLE ASSOCIATES
(A PENNSYLVANIA GENERAL PARTNERSHIP)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
12. RELATED-PARTY TRANSACTIONS
SCM supervises and manages the operations of the Partnership's CATV systems
and performs certain other duties with respect to the Partnership's operations.
Management fees, as prescribed by the management agreement, are not to exceed
3.5% of the quarterly gross revenues of the Partnership, plus additional amounts
as defined under the terms of the management agreement. SCM is also entitled to
be reimbursed for certain direct costs incurred on behalf of the Partnership.
The management agreement expires on the earlier of January 31, 2001, the date
SCM is no longer a general partner, or (as to any individual CATV system) on the
closing date of the sale of the respective system. Management fees earned by SCM
in 1999, 1998 and 1997 approximated $876, $644 and $589, respectively.
The Partnership pays certain employee wages and benefits, lease and general
and administrative costs on behalf of certain related entities. These costs are
included in other receivables and are subsequently reimbursed by the related
entities. At December 31, 1999 and 1998, such related-party receivables were
approximately $116 and $10, respectively.
13. LEASE COMMITMENTS
The Partnership leases office space and land used in the conduct of its
business under long-term noncancelable operating leases expiring at various
times. In May 1997, the Partnership entered into a 3-year operating lease
renewal with a related entity for its office space. The rental obligation
provides for monthly rentals of approximately $3 over the term of the lease.
Total rent expense for all leases, including cancelable pole use leases, for the
years ended December 31, 1999, 1998 and 1997 was approximately $133, $81 and
$84, respectively.
The following is a schedule of minimum lease payments required under
noncancelable operating leases as of December 31, 1999:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
2000........................................................ $ 92
2001........................................................ 45
2002........................................................ 25
2003........................................................ 20
Thereafter.................................................. 16
----
$198
====
</TABLE>
14. SUBSEQUENT EVENT
In February 2000, the management of the Partnership approved the payment of
approximately $255 in bonuses to certain employees.
On February 15, 2000, Classic Communications, Inc. completed its purchase
of substantially all assets of the Partnership for an aggregate purchase price
of approximately $110 million in cash and 555,555 shares of its Class A common
stock.
F-46
<PAGE> 190
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CLASSIC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CLASSIC SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
UNTIL , 2000, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THE UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................ 1
Risk Factors........................... 15
Forward-Looking Statements............. 22
Use of Proceeds........................ 23
Capitalization......................... 24
Unaudited Pro Forma Consolidated
Financial Information................ 25
Selected Historical Consolidated
Financial Data -- Classic Cable,
Inc.................................. 33
Selected Historical Consolidated
Financial Data -- Buford Group,
Inc.................................. 34
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 35
Business............................... 43
Legislation and Regulation............. 57
Management............................. 68
Certain Relationships and Related
Transactions......................... 80
Principal Stockholders................. 82
Description of Other Indebtedness...... 83
The Exchange Offer..................... 88
Description of Notes................... 96
Certain United States Federal Income
Tax Considerations................... 138
Plan of Distribution................... 138
Legal Matters.......................... 139
Experts................................ 139
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
OFFER TO EXCHANGE
ALL OUTSTANDING
10 1/2% SENIOR SUBORDINATED
NOTES DUE 2010
FOR
10 1/2% SENIOR SUBORDINATED
NOTES DUE 2010 OF
[CLASSIC CABLE LOGO]
CLASSIC CABLE, INC.
------------------------
PROSPECTUS
------------------------
, 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 191
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") grants each corporation organized thereunder, such as the Registrant,
the power to indemnify its directors and officers against liabilities for
certain of their acts. Section 102(b)(7) of the DGCL permits a provision in the
certificate of incorporation of each corporation organized thereunder, such as
the Registrant, eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for certain breaches of
fiduciary duty as a director except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit. Article Eighth of the Registrant's Certificate of
Incorporation has eliminated the personal liability of directors to the fullest
extent permitted by Section 102(b)(7) of the DGCL.
Article 11 of the Registrant's Certificate of Incorporation provides as
follows: The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(whether or not by or in the right of the Corporation) by reason of the fact
that he is or was a director, officer, employee, or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), liability, loss,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding to the fullest extent
permitted by either (i) any applicable law in effect on the date of
incorporation of the Corporation, or (ii) any law which becomes effective during
the existence of the Corporation and which is applicable to it.
Article 8 of the Registrant's By-Laws provides as follows: To the extent
permitted by law, the Corporation shall indemnify any person against any and all
judgments, fines, amounts paid in settling or otherwise disposing of actions or
threatened actions, and expenses in connection therewith, incurred by reason of
the fact that he, his testator or intestate is or was a director or officer of
the Corporation or of any other corporation of any type or kind, domestic or
foreign, which he served in any capacity at the request of the Corporation. To
the extent permitted by law, expenses so incurred by any such person in
defending a civil or criminal action or proceeding shall at his request be paid
by the Corporation in advance of the final disposition of such action or
proceeding.
The foregoing statements are subject to the detailed provisions of Section
102(b)(7) of the DGCL, Article 11 of the Certificate of Incorporation of the
Registrant and Article 8 of the By-Laws of the Registrant, as applicable.
The foregoing discussion is qualified in its entirety by reference to the
DGCL and the Registrant's Certificate of Incorporation and By-Laws.
II-1
<PAGE> 192
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
1.1 -- Purchase Agreement, dated February 11, 2000, by and among
Classic Cable, Inc. and Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation and Merrill
Lynch, Pierce, Fenner & Smith Incorporated
2.1 (1) -- Securities Purchase Agreement among Classic Cable, Inc.
and Buford Group, Inc. dated as of May 11, 1999
2.2 (2) -- Asset Purchase Agreement, dated as of October 14, 1999,
by and between Star Cable Associates and Universal Cable
Holdings, Inc., and Amendment No. 1 thereto, dated
February 16, 2000
3.1 (3) -- Classic Cable, Inc. Certificate of Incorporation dated
April 29, 1995.
3.2 (4) -- Classic Cable, Inc. Bylaws
3.3 (5) -- Classic Cable Holding, Inc. Certificate of Incorporation
dated December 1, 1996
3.4 (6) -- Classic Cable Holding, Inc. Bylaws
3.5 (7) -- Classic Telephone, Inc. Certificate of Incorporation
dated November 22, 1994
3.6 (8) -- Classic Telephone, Inc. Bylaws
3.7 (9) -- Universal Cable Holdings, Inc. Certificate of
Incorporation dated October 17, 1985, as amended
3.8 (10) -- Universal Cable Holdings, Inc. Bylaws
3.9 (11) -- Universal Cable Communications, Inc. Certificate of
Incorporation dated June 7, 1983, as amended
3.10(12) -- Universal Cable Communications, Inc. Bylaws
3.11(13) -- Universal Cable of Beaver Oklahoma, Inc. Certificate of
Incorporation dated June 4, 1987, as amended
3.12(14) -- Universal Cable of Beaver Oklahoma, Inc. Bylaws
3.13(15) -- Universal Cable Midwest, Inc. Certificate of
Incorporation dated February 22, 1989, as amended
3.14(16) -- Universal Cable Midwest, Inc. Bylaws
3.15(17) -- WT Acquisition Corporation Articles of Incorporation
dated August 14, 1992, as amended
3.16(18) -- WT Acquisition Corporation Bylaws
3.17(19) -- W.K. Communications, Inc. Certificate of Incorporation
dated June 11, 1987, as amended
3.18(20) -- W.K. Communications, Inc. Bylaws
3.19(21) -- Television Enterprises, Inc. Certificate of Incorporation
dated August 12, 1965, as amended
3.20(22) -- Television Enterprises, Inc. Bylaws
3.21(23) -- Black Creek Communications, L.P. Certificate of Limited
Partnership dated May 19, 1998
3.22(24) -- Black Creek Communications, L.P. Limited Partnership
Agreement
3.23(25) -- Black Creek Management, L.L.C. Articles of Organization
dated May 19, 1998
3.24(26) -- Black Creek Management, L.L.C. Regulations
</TABLE>
II-2
<PAGE> 193
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
3.25(27) -- Friendship Cable of Texas, Inc. Articles of Incorporation
dated July 12, 1988, as amended
3.26(28) -- Friendship Cable of Texas, Inc. Bylaws
3.27(29) -- CallCom 24, Inc. Articles of Incorporation dated June 9,
1998, as amended
3.28(30) -- CallCom 24, Inc. Bylaws
3.29(31) -- Correctional Cable TV, Inc. Articles of Incorporation
dated October 9, 1992.
3.30(32) -- Correctional Cable TV, Inc. Bylaws
3.31(33) -- Friendship Cable of Arkansas, Inc. Articles of
Incorporation dated July 11, 1986, as amended
3.32(34) -- Friendship Cable of Arkansas, Inc. Bylaws
3.33 -- Classic Network Transmission, L.L.C. Certificate of
Formation dated July 21, 1999
3.34 -- Classic Network Transmission, L.L.C. Limited Liability
Company Agreement, dated as of July 21, 1999
4.1 (35) -- Indenture for $125,000,000 9 7/8% Senior Subordinated
Notes due 2008, dated as of July 29, 1998, among Classic
Cable, Inc., as Issuer, and the Subsidiary Guarantors
listed on the Appendix thereto, and Chase Bank of Texas,
National Association, as Trustee
4.2 (36) -- Form of Global 9 7/8% Senior Subordinated Note due 2008
4.3 (37) -- Registration Rights Agreement, dated as of July 29, 1998,
by and among Classic Cable, Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, and Goldman, Sachs & Co.
4.4 (38) -- First Supplemental Indenture, dated as of July 28, 1999,
between Classic Cable, Inc., as Issuer, the Subsidiary
Guarantors named thereon, as Guarantors, and Chase Bank
of Texas, National Association, as Trustee
4.5 (39) -- Exchange and Registration Rights Agreement, dated July
28, 1999, by and between Classic Cable, Inc. and Goldman,
Sachs & Co., Donaldson, Lufkin & Jenrette Securities
Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated
4.6 (40) -- Indenture for $150,000,000 9.375% Senior Subordinated
Notes due 2009, dated as of July 28, 1999 between Classic
Cable, Inc., as Issuer, the Guarantors listed on Schedule
1 thereto, and Chase Bank of Texas, National Association,
as Trustee
4.7 (41) -- Form of Global 9.375% Senior Subordinated Note due 2009
4.8 (42) -- Purchase Agreement, dated July 21, 1999, by and among
Classic Cable, Inc. and Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation and Merrill
Lynch, Pierce, Fenner & Smith Incorporated
4.9 -- Indenture for $225,000,000 10 1/2% Senior Subordinated
Notes due 2010, dated as of February 16, 2000, among
Classic Cable, Inc., as Issuer, and the Subsidiary
Guarantors listed on Schedule 1 thereto, and Chase Bank
of Texas, National Association, as Trustee
4.10 -- Form of Global 10 1/2% Senior Subordinated Note due 2010
4.11 -- Exchange and Registration Rights Agreement, dated as of
February 16, 2000, by and among Classic Cable, Inc.,
Goldman Sachs & Co., Merrill Lynch & Co., Chase
Securities Inc. and Donaldson, Lufkin & Jenrette
4.12(43) -- Registration Rights Agreement dated as July 29, 1998, by
and between Classic Communications, Inc., and Merrill
Lynch, Pierce, Fenner & Smith Incorporated
</TABLE>
II-3
<PAGE> 194
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
4.13(44) -- Shareholder and Registration Rights Agreement, dated as
of July 29, 1998, by and among Classic Communications,
Inc., and Certain Stockholders and Merrill Lynch, Pierce,
Fenner & Smith Incorporated
4.14(45) -- Amended and Restated Registration Rights Agreement dated
as of October 31, 1995, modified by Amendment No. 1
(dated as of October 31, 1995) and Amendment No. 2 (dated
as of December 27, 1995)
4.15(46) -- Amended and Restated Shareholders Agreement dated as of
October 31, 1995, modified by Amendment No. 1 (dated as
of October 31, 1995), Amendment No. 2 (dated as of
December 27, 1995) and Amendment No. 3 (dated as of
December 19, 1997)
4.16(47) -- Amended and Restated Stockholders' Agreement, dated as of
December 13, 1999, by and among Classic Communications,
Inc., Brera Classic, LLC and the additional parties named
therein
4.17(48) -- Amended and Restated Registration Rights Agreement, dated
as of December 13, 1999, by and among Classic
Communications, Inc., Brera Classic, LLC and the
additional parties named therein
5.1* -- Form of opinion of Skadden, Arps, Slate, Meagher & Flom
(Illinois) regarding enforceability and issuance of the
securities, including consent
10.1 (49) -- Employment Agreement dated as of July 29, 1999 by and
between Classic Cable, Inc. and Ronald W. Martin
10.2 (50) -- Employment Agreement dated as of July 29, 1999 by and
between Classic Cable, Inc. and Elizabeth Kay Manigold
10.3 (51) -- Employment Agreement, dated as of July 28, 1999, by and
between Classic Communications, Inc., Classic Cable, Inc.
and J. Merritt Belisle
10.4 (52) -- Employment Agreement, dated as of July 28, 1999, by and
between Classic Communications, Inc., Classic Cable, Inc.
and Steven E. Seach
10.5 (53) -- Amended and Restated Credit Agreement, dated July 28,
1999, among Classic Cable, Inc., as Borrower, the Lenders
Parties thereto, Goldman Sachs Credit Partners L.P., as
Lead Arranger and Syndication Agent, The Chase Manhattan
Bank, as Documentation Agent and Union Bank of
California, N.A., as Administrative Agent
10.6 (54) -- Facilities Commitment Letter, dated June 24, 1999,
between Classic Cable, Inc. and Goldman Sachs Credit
Partners L.P.
10.7 (55) -- Amendment and Waiver No. 1 to the Amended and Restated
Credit Agreement dated November 15, 1999 among Classic
Cable, Inc., as Borrower, the Lenders Parties thereto,
Goldman Sachs Credit Partners, L.P., as Lead Arranger and
Syndication Agent, and The Chase Manhattan Bank, as
Documentation Agent, and Union Bank of California, N.A.,
as Administrative Agent
10.8 (56) -- Amended and Restated Credit Agreement dated January 31,
2000 among Classic Cable, Inc., as Borrower, the Lenders
Parties thereto, Goldman Sachs Credit Partners, L.P., as
Lead Arranger and Syndication Agent, and The Chase
Manhattan Bank, as Documentation Agent, and Union Bank of
California, N.A., Administrative Agent
10.9 (57) -- Management and Advisory Fee Agreement dated May 24, 1999
10.10(58) -- Asset Purchase Agreement dated May 14, 1998 by and
between Cable One, Inc. and Black Creek Communications,
Inc.
10.10(b)(58) -- Assignment of Asset Purchase Agreement dated June 19,
1998
10.10(c)(58) -- Amendment No. 1. to Asset Purchase Agreement dated July
15, 1998
</TABLE>
II-4
<PAGE> 195
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
10.11(59) -- Investment Agreement dated as of May 24, 1999 between
Brera Classic, LLC and Classic Communications, Inc.
10.12(60) -- Classic Communications, Inc. 1999 Omnibus Stock Incentive
Plan
10.13(61) -- 1996 Restricted Stock Award Plan of Classic
Communications, Inc.
10.14(62) -- 1998 Restricted Stock Award Plan of Classic
Communications, Inc.
10.15(63) -- Restricted Stock Award Agreement dated July 29, 1998 by
and between J. Merritt Belisle and Classic
Communications, Inc.
10.16(64) -- Restricted Stock Award Agreement dated July 29, 1998 by
and between Steven E. Seach and Classic Communications,
Inc.
10.17(65) -- Form of Stock Option Agreement relating to August 25,
1999 and December 7, 1999 grants
12.1 -- Statement of Earnings to Fixed Charges
21.1 -- Subsidiaries of Classic Cable, Inc.
23.1 -- Consent of PricewaterhouseCoopers LLP
23.2 -- Consent of PricewaterhouseCoopers LLP
23.3 -- Consent of KPMG LLP
24.1 -- Powers of Attorney (included as part of signature page of
this Registration Statement)
25.1 -- Statement of Eligibility on Form T-1 of Chase Bank of
Texas, National Association, as Trustee, including
consent
99.1 -- Form of Transmittal Letter with respect to the Exchange
Offer
99.2 -- Form of Notice of Guaranteed Delivery with respect to the
Exchange Offer
</TABLE>
- ---------------
* To be filed by amendment
(1) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(2) Incorporated herein by reference to Exhibit 2 to registrant's Form 8-K
filed on February 29, 2000
(3) Incorporated herein by reference to Exhibit 3.1 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(4) Incorporated herein by reference to Exhibit 3.2 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(5) Incorporated herein by reference to Exhibit 3.3 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(6) Incorporated herein by reference to Exhibit 3.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(7) Incorporated herein by reference to Exhibit 3.7 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(8) Incorporated herein by reference to Exhibit 3.8 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(9) Incorporated herein by reference to Exhibit 3.9 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(10) Incorporated herein by reference to Exhibit 3.10 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(11) Incorporated herein by reference to Exhibit 3.11 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
II-5
<PAGE> 196
(12) Incorporated herein by reference to Exhibit 3.12 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(13) Incorporated herein by reference to Exhibit 3.13 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(14) Incorporated herein by reference to Exhibit 3.14 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(15) Incorporated herein by reference to Exhibit 3.15 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(16) Incorporated herein by reference to Exhibit 3.16 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(17) Incorporated herein by reference to Exhibit 3.17 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(18) Incorporated herein by reference to Exhibit 3.18 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(19) Incorporated herein by reference to Exhibit 3.19 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(20) Incorporated herein by reference to Exhibit 3.20 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(21) Incorporated herein by reference to Exhibit 3.21 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(22) Incorporated herein by reference to Exhibit 3.22 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(23) Incorporated herein by reference to Exhibit 3.23 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(24) Incorporated herein by reference to Exhibit 3.24 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(25) Incorporated herein by reference to Exhibit 3.25 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(26) Incorporated herein by reference to Exhibit 3.26 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(27) Incorporated herein by reference to Exhibit 3.29 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(28) Incorporated herein by reference to Exhibit 3.30 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(29) Incorporated herein by reference to Exhibit 3.33 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(30) Incorporated herein by reference to Exhibit 3.34 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(31) Incorporated herein by reference to Exhibit 3.35 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(32) Incorporated herein by reference to Exhibit 3.36 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(33) Incorporated herein by reference to Exhibit 3.37 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(34) Incorporated herein by reference to Exhibit 3.38 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
II-6
<PAGE> 197
(35) Incorporated herein by reference to Exhibit 4.1 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(36) Incorporated herein by reference to Exhibit 4.2 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(37) Incorporated herein by reference to Exhibit 4.3 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(38) Incorporated herein by reference to Exhibit 4.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(39) Incorporated herein by reference to Exhibit 10.15 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(40) Incorporated herein by reference to Exhibit 10.16 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(41) Incorporated herein by reference to Exhibit 10.17 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(42) Incorporated herein by reference to Exhibit 10.14 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(43) Incorporated herein by reference to Exhibit 4.3A to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(44) Incorporated herein by reference to Exhibit 4.3B to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(45) Incorporated herein by reference to Exhibit 4.3C to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(46) Incorporated herein by reference to Exhibit 4.3D to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(47) Incorporated herein by reference to Exhibit 4.52 to the registrant's Annual
Report on Form 10-K filed on March 30, 2000
(48) Incorporated herein by reference to Exhibit 4.53 to the registrant's Annual
Report on Form 10-K filed on March 30, 2000
(49) Incorporated herein by reference to Exhibit 10.1 to Classic Communications,
Inc.'s Registration Statement on Form S-1 (Registration No. 333-89295)
(50) Incorporated herein by reference to Exhibit 10.2 to Classic Communications,
Inc.'s Registration Statement on Form S-1 (Registration No. 333-89295)
(51) Incorporated herein by reference to Exhibit 10.3 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(52) Incorporated herein by reference to Exhibit 10.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(53) Incorporated herein by reference to Exhibit 10.6 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(54) Incorporated herein by reference to Exhibit 10.7 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(55) Incorporated herein by reference to Exhibit 10.5 to the registrant's Annual
Report on Form 10-K filed on March 30, 2000
(56) Incorporated herein by reference to Exhibit 10.6 to the registrant's Annual
Report on Form 10-K filed on March 30, 2000
(57) Incorporated herein by reference to Exhibit 10.10 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
II-7
<PAGE> 198
(58) Incorporated by reference to Exhibit 10.8 to registrant's Registration
Statement on Form S-4 (Registration No. 333-63643)
(59) Incorporated herein by reference to Exhibit 10.9 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(60) Incorporated by reference to Exhibit 10.5 to Classic Communications, Inc.'s
Annual Report on Form 10-K filed on March 30, 2000
(61) Incorporated by reference to Exhibit 10.9 to Classic Communications, Inc.'s
Registration Statement on Form S-4 (Registration No. 333-63641)
(62) Incorporated by reference to Exhibit 10.10 to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(63) Incorporated by reference to Exhibit 10.10(a) to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(64) Incorporated by reference to Exhibit 10.10(b) to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(65) Incorporated by reference to Exhibit 10.13 to Classic Communications,
Inc.'s Annual Report on Form 10-K filed on March 30, 2000
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to this request.
(b) The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-8
<PAGE> 199
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
CLASSIC CABLE, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Classic Cable, Inc., do hereby
constitute and appoint Steven E. Seach our true and lawful attorney-in-fact and
agent, to do any and all acts and things in our names and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our name in the capacities indicated below, which said attorney and
agent may deem necessary or advisable to enable said Corporation to comply with
the Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this registration
statement, or any registration statement for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
including specifically, but without limitation, power and authority to sign for
us or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto; and we do hereby ratify
and confirm all that said attorney and agent shall do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Principal
Accounting Officer)
</TABLE>
II-9
<PAGE> 200
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
CLASSIC CABLE HOLDING, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Classic Cable Holding, Inc.,
do hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Principal
Accounting Officer)
</TABLE>
II-10
<PAGE> 201
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
CLASSIC TELEPHONE, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Classic Telephone, Inc., do
hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Principal
Accounting Officer)
</TABLE>
II-11
<PAGE> 202
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
UNIVERSAL CABLE HOLDINGS, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Universal Cable Holdings,
Inc., do hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Principal
Accounting Officer)
</TABLE>
II-12
<PAGE> 203
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
UNIVERSAL CABLE COMMUNICATIONS, INC.
By: /s/ STEVEN E. SEACH
-------------------------------------
Steven E. Seach
President and
Chief Executive Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Universal Cable
Communications, Inc., do hereby constitute and appoint Steven E. Seach our true
and lawful attorney-in-fact and agent, to do any and all acts and things in our
names and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our name in the capacities
indicated below, which said attorney and agent may deem necessary or advisable
to enable said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this registration statement, or any registration statement
for this offering that is to be effective upon filing pursuant to Rule 462(b)
under the Securities Act of 1933, including specifically, but without
limitation, power and authority to sign for us or any of us in our names in the
capacities indicated below, any and all amendments (including post-effective
amendments) hereto; and we do hereby ratify and confirm all that said attorney
and agent shall do or cause to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Principal
Accounting Officer)
</TABLE>
II-13
<PAGE> 204
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
UNIVERSAL CABLE
OF BEAVER OKLAHOMA, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Universal Cable of Beaver
Oklahoma, Inc., do hereby constitute and appoint Steven E. Seach our true and
lawful attorney-in-fact and agent, to do any and all acts and things in our
names and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our name in the capacities
indicated below, which said attorney and agent may deem necessary or advisable
to enable said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this registration statement, or any registration statement
for this offering that is to be effective upon filing pursuant to Rule 462(b)
under the Securities Act of 1933, including specifically, but without
limitation, power and authority to sign for us or any of us in our names in the
capacities indicated below, any and all amendments (including post-effective
amendments) hereto; and we do hereby ratify and confirm all that said attorney
and agent shall do or cause to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Principal
Accounting Officer)
</TABLE>
II-14
<PAGE> 205
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
UNIVERSAL CABLE MIDWEST, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Universal Cable Midwest, Inc.,
do hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Principal
Accounting Officer)
</TABLE>
II-15
<PAGE> 206
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
WT ACQUISITION CORPORATION
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of WT Acquisition Corporation, do
hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Principal
Accounting Officer)
</TABLE>
II-16
<PAGE> 207
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
W.K. COMMUNICATIONS, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of W.K. Communications, Inc., do
hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer April 14, 2000
- ----------------------------------------------------- and Director (Principal
J. Merritt Belisle Executive Officer)
/s/ STEVEN E. SEACH President and Chief April 14, 2000
- ----------------------------------------------------- Financial Officer
Steven E. Seach (Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
II-17
<PAGE> 208
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
TELEVISION ENTERPRISES, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Television Enterprises, Inc.,
do hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer April 14, 2000
- ----------------------------------------------------- and Director (Principal
J. Merritt Belisle Executive Officer)
/s/ STEVEN E. SEACH President and Chief April 14, 2000
- ----------------------------------------------------- Financial Officer
Steven E. Seach (Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
II-18
<PAGE> 209
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
BLACK CREEK COMMUNICATIONS, L.P.
BY: BLACK CREEK MANAGEMENT, L.L.C.
Its General Partner
By: /s/ STEVEN E. SEACH
------------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Black Creek Communications,
L.P., do hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer April 14, 2000
- ----------------------------------------------------- and Director (Principal
J. Merritt Belisle Executive Officer)
/s/ STEVEN E. SEACH President and Chief April 14, 2000
- ----------------------------------------------------- Financial Officer
Steven E. Seach (Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
II-19
<PAGE> 210
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
BLACK CREEK MANAGEMENT, L.L.C.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Black Creek Management,
L.L.C., do hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Principal
Accounting Officer)
</TABLE>
II-20
<PAGE> 211
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
FRIENDSHIP CABLE OF TEXAS, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Friendship Cable of Texas,
Inc., do hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Accounting
Officer)
</TABLE>
II-21
<PAGE> 212
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
CALLCOM 24, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Callcom 24, Inc., do hereby
constitute and appoint Steven E. Seach our true and lawful attorney-in-fact and
agent, to do any and all acts and things in our names and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our name in the capacities indicated below, which said attorney and
agent may deem necessary or advisable to enable said Corporation to comply with
the Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this registration
statement, or any registration statement for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
including specifically, but without limitation, power and authority to sign for
us or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto; and we do hereby ratify
and confirm all that said attorney and agent shall do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Accounting
Officer)
</TABLE>
II-22
<PAGE> 213
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
CORRECTIONAL CABLE TV, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Correctional Cable TV, Inc.,
do hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Accounting
Officer)
</TABLE>
II-23
<PAGE> 214
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
FRIENDSHIP CABLE OF ARKANSAS, INC.
By: /s/ STEVEN E. SEACH
----------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Friendship Cable of Arkansas,
Inc., do hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer and April 14, 2000
- ----------------------------------------------------- Director (Principal Executive
J. Merritt Belisle Officer)
/s/ STEVEN E. SEACH President and Chief Financial April 14, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven E. Seach Officer and Accounting
Officer)
</TABLE>
II-24
<PAGE> 215
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF AUSTIN, STATE OF TEXAS, ON
THE 14TH DAY OF APRIL, 2000.
CLASSIC NETWORK TRANSMISSION, L.L.C.
By: /s/ STEVEN E. SEACH
------------------------------------
Steven E. Seach,
President and Chief Financial
Officer
POWER OF ATTORNEY
We the undersigned directors and officers of Classic Network Transmission,
L.L.C., do hereby constitute and appoint Steven E. Seach our true and lawful
attorney-in-fact and agent, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney and agent shall do or cause to
be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. MERRITT BELISLE Chief Executive Officer April 14, 2000
- ----------------------------------------------------- and Director (Principal
J. Merritt Belisle Executive Officer)
/s/ STEVEN E. SEACH President and Chief April 14, 2000
- ----------------------------------------------------- Financial Officer
Steven E. Seach (Principal Financial
Officer and Accounting
Officer)
</TABLE>
II-25
<PAGE> 216
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
1.1 -- Purchase Agreement, dated February 11, 2000, by and among
Classic Cable, Inc. and Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation and Merrill
Lynch, Pierce, Fenner & Smith Incorporated
2.1 (1) -- Securities Purchase Agreement among Classic Cable, Inc.
and Buford Group, Inc. dated as of May 11, 1999
2.2 (2) -- Asset Purchase Agreement, dated as of October 14, 1999,
by and between Star Cable Associates and Universal Cable
Holdings, Inc., and Amendment No. 1 thereto, dated
February 16, 2000
3.1 (3) -- Classic Cable, Inc. Certificate of Incorporation dated
April 29, 1995.
3.2 (4) -- Classic Cable, Inc. Bylaws
3.3 (5) -- Classic Cable Holding, Inc. Certificate of Incorporation
dated December 1, 1996
3.4 (6) -- Classic Cable Holding, Inc. Bylaws
3.5 (7) -- Classic Telephone, Inc. Certificate of Incorporation
dated November 22, 1994
3.6 (8) -- Classic Telephone, Inc. Bylaws
3.7 (9) -- Universal Cable Holdings, Inc. Certificate of
Incorporation dated October 17, 1985, as amended
3.8 (10) -- Universal Cable Holdings, Inc. Bylaws
3.9 (11) -- Universal Cable Communications, Inc. Certificate of
Incorporation dated June 7, 1983, as amended
3.10(12) -- Universal Cable Communications, Inc. Bylaws
3.11(13) -- Universal Cable of Beaver Oklahoma, Inc. Certificate of
Incorporation dated June 4, 1987, as amended
3.12(14) -- Universal Cable of Beaver Oklahoma, Inc. Bylaws
3.13(15) -- Universal Cable Midwest, Inc. Certificate of
Incorporation dated February 22, 1989, as amended
3.14(16) -- Universal Cable Midwest, Inc. Bylaws
3.15(17) -- WT Acquisition Corporation Articles of Incorporation
dated August 14, 1992, as amended
3.16(18) -- WT Acquisition Corporation Bylaws
3.17(19) -- W.K. Communications, Inc. Certificate of Incorporation
dated June 11, 1987, as amended
3.18(20) -- W.K. Communications, Inc. Bylaws
3.19(21) -- Television Enterprises, Inc. Certificate of Incorporation
dated August 12, 1965, as amended
3.20(22) -- Television Enterprises, Inc. Bylaws
3.21(23) -- Black Creek Communications, L.P. Certificate of Limited
Partnership dated May 19, 1998
3.22(24) -- Black Creek Communications, L.P. Limited Partnership
Agreement
3.23(25) -- Black Creek Management, L.L.C. Articles of Organization
dated May 19, 1998
3.24(26) -- Black Creek Management, L.L.C. Regulations
3.25(27) -- Friendship Cable of Texas, Inc. Articles of Incorporation
dated July 12, 1988, as amended
3.26(28) -- Friendship Cable of Texas, Inc. Bylaws
</TABLE>
<PAGE> 217
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
3.27(29) -- CallCom 24, Inc. Articles of Incorporation dated June 9,
1998, as amended
3.28(30) -- CallCom 24, Inc. Bylaws
3.29(31) -- Correctional Cable TV, Inc. Articles of Incorporation
dated October 9, 1992.
3.30(32) -- Correctional Cable TV, Inc. Bylaws
3.31(33) -- Friendship Cable of Arkansas, Inc. Articles of
Incorporation dated July 11, 1986, as amended
3.32(34) -- Friendship Cable of Arkansas, Inc. Bylaws
3.33 -- Classic Network Transmission, L.L.C. Certificate of
Formation dated July 21, 1999
3.34 -- Classic Network Transmission, L.L.C. Limited Liability
Company Agreement, dated as of July 21, 1999
4.1 (35) -- Indenture for $125,000,000 9 7/8% Senior Subordinated
Notes due 2008, dated as of July 29, 1998, among Classic
Cable, Inc., as Issuer, and the Subsidiary Guarantors
listed on the Appendix thereto, and Chase Bank of Texas,
National Association, as Trustee
4.2 (36) -- Form of Global 9 7/8% Senior Subordinated Note due 2008
4.3 (37) -- Registration Rights Agreement, dated as of July 29, 1998,
by and among Classic Cable, Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, and Goldman, Sachs & Co.
4.4 (38) -- First Supplemental Indenture, dated as of July 28, 1999,
between Classic Cable, Inc., as Issuer, the Subsidiary
Guarantors named thereon, as Guarantors, and Chase Bank
of Texas, National Association, as Trustee
4.5 (39) -- Exchange and Registration Rights Agreement, dated July
28, 1999, by and between Classic Cable, Inc. and Goldman,
Sachs & Co., Donaldson, Lufkin & Jenrette Securities
Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated
4.6 (40) -- Indenture for $150,000,000 9.375% Senior Subordinated
Notes due 2009, dated as of July 28, 1999 between Classic
Cable, Inc., as Issuer, the Guarantors listed on Schedule
1 thereto, and Chase Bank of Texas, National Association,
as Trustee
4.7 (41) -- Form of Global 9.375% Senior Subordinated Note due 2009
4.8 (42) -- Purchase Agreement, dated July 21, 1999, by and among
Classic Cable, Inc. and Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation and Merrill
Lynch, Pierce, Fenner & Smith Incorporated
4.9 -- Indenture for $225,000,000 10 1/2% Senior Subordinated
Notes due 2010, dated as of February 16, 2000, among
Classic Cable, Inc., as Issuer, and the Subsidiary
Guarantors listed on Schedule 1 thereto, and Chase Bank
of Texas, National Association, as Trustee
4.10 -- Form of Global 10 1/2% Senior Subordinated Note due 2010
4.11 -- Exchange and Registration Rights Agreement, dated as of
February 16, 2000, by and among Classic Cable, Inc.,
Goldman Sachs & Co., Merrill Lynch & Co., Chase
Securities Inc. and Donaldson, Lufkin & Jenrette
4.12(43) -- Registration Rights Agreement dated as July 29, 1998, by
and between Classic Communications, Inc., and Merrill
Lynch, Pierce, Fenner & Smith Incorporated
4.13(44) -- Shareholder and Registration Rights Agreement, dated as
of July 29, 1998, by and among Classic Communications,
Inc., and Certain Stockholders and Merrill Lynch, Pierce,
Fenner & Smith Incorporated
</TABLE>
<PAGE> 218
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
4.14(45) -- Amended and Restated Registration Rights Agreement dated
as of October 31, 1995, modified by Amendment No. 1
(dated as of October 31, 1995) and Amendment No. 2 (dated
as of December 27, 1995)
4.15(46) -- Amended and Restated Shareholders Agreement dated as of
October 31, 1995, modified by Amendment No. 1 (dated as
of October 31, 1995), Amendment No. 2 (dated as of
December 27, 1995) and Amendment No. 3 (dated as of
December 19, 1997)
4.16(47) -- Amended and Restated Stockholders' Agreement, dated as of
December 13, 1999, by and among Classic Communications,
Inc., Brera Classic, LLC and the additional parties named
therein
4.17(48) -- Amended and Restated Registration Rights Agreement, dated
as of December 13, 1999, by and among Classic
Communications, Inc., Brera Classic, LLC and the
additional parties named therein
5.1* -- Form of opinion of Skadden, Arps, Slate, Meagher & Flom
(Illinois) regarding enforceability and issuance of the
securities, including consent
10.1 (49) -- Employment Agreement dated as of July 29, 1999 by and
between Classic Cable, Inc. and Ronald W. Martin
10.2 (50) -- Employment Agreement dated as of July 29, 1999 by and
between Classic Cable, Inc. and Elizabeth Kay Manigold
10.3 (51) -- Employment Agreement, dated as of July 28, 1999, by and
between Classic Communications, Inc., Classic Cable, Inc.
and J. Merritt Belisle
10.4 (52) -- Employment Agreement, dated as of July 28, 1999, by and
between Classic Communications, Inc., Classic Cable, Inc.
and Steven E. Seach
10.5 (53) -- Amended and Restated Credit Agreement, dated July 28,
1999, among Classic Cable, Inc., as Borrower, the Lenders
Parties thereto, Goldman Sachs Credit Partners L.P., as
Lead Arranger and Syndication Agent, The Chase Manhattan
Bank, as Documentation Agent and Union Bank of
California, N.A., as Administrative Agent
10.6 (54) -- Facilities Commitment Letter, dated June 24, 1999,
between Classic Cable, Inc. and Goldman Sachs Credit
Partners L.P.
10.7 (55) -- Amendment and Waiver No. 1 to the Amended and Restated
Credit Agreement dated November 15, 1999 among Classic
Cable, Inc., as Borrower, the Lenders Parties thereto,
Goldman Sachs Credit Partners, L.P., as Lead Arranger and
Syndication Agent, and The Chase Manhattan Bank, as
Documentation Agent, and Union Bank of California, N.A.,
as Administrative Agent
10.8 (56) -- Amended and Restated Credit Agreement dated January 31,
2000 among Classic Cable, Inc., as Borrower, the Lenders
Parties thereto, Goldman Sachs Credit Partners, L.P., as
Lead Arranger and Syndication Agent, and The Chase
Manhattan Bank, as Documentation Agent, and Union Bank of
California, N.A., Administrative Agent
10.9 (57) -- Management and Advisory Fee Agreement dated May 24, 1999
10.10(58) -- Asset Purchase Agreement dated May 14, 1998 by and
between Cable One, Inc. and Black Creek Communications,
Inc
10.10(b)(58) -- Assignment of Asset Purchase Agreement dated June 19,
1998
10.10(c)(58) -- Amendment No. 1. to Asset Purchase Agreement dated July
15, 1998
10.11(59) -- Investment Agreement dated as of May 24, 1999 between
Brera Classic, LLC and Classic Communications, Inc.
10.12(60) -- Classic Communications, Inc. 1999 Omnibus Stock Incentive
Plan
10.13(61) -- 1996 Restricted Stock Award Plan of Classic
Communications, Inc.
10.14(62) -- 1998 Restricted Stock Award Plan of Classic
Communications, Inc.
</TABLE>
<PAGE> 219
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
10.15(63) -- Restricted Stock Award Agreement dated July 29, 1998 by
and between J. Merritt Belisle and Classic
Communications, Inc.
10.16(64) -- Restricted Stock Award Agreement dated July 29, 1998 by
and between Steven E. Seach and Classic Communications,
Inc.
10.17(65) -- Form of Stock Option Agreement relating to August 25,
1999 and December 7, 1999 grants
12.1 -- Statement of Earnings to Fixed Charges
21.1 -- Subsidiaries of Classic Cable, Inc.
23.1 -- Consent of PricewaterhouseCoopers LLP
23.2 -- Consent of PricewaterhouseCoopers LLP
23.3 -- Consent of KPMG LLP
24.1 -- Powers of Attorney (included as part of signature page of
this Registration Statement)
25.1 -- Statement of Eligibility on Form T-1 of Chase Bank of
Texas, National Association, as Trustee, including
consent
99.1 -- Form of Transmittal Letter with respect to the Exchange
Offer
99.2 -- Form of Notice of Guaranteed Delivery with respect to the
Exchange Offer
</TABLE>
- ---------------
* To be filed by amendment
(1) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(2) Incorporated herein by reference to Exhibit 2 to registrant's Form 8-K
filed on February 29, 2000
(3) Incorporated herein by reference to Exhibit 3.1 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(4) Incorporated herein by reference to Exhibit 3.2 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(5) Incorporated herein by reference to Exhibit 3.3 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(6) Incorporated herein by reference to Exhibit 3.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(7) Incorporated herein by reference to Exhibit 3.7 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(8) Incorporated herein by reference to Exhibit 3.8 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(9) Incorporated herein by reference to Exhibit 3.9 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(10) Incorporated herein by reference to Exhibit 3.10 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(11) Incorporated herein by reference to Exhibit 3.11 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(12) Incorporated herein by reference to Exhibit 3.12 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(13) Incorporated herein by reference to Exhibit 3.13 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(14) Incorporated herein by reference to Exhibit 3.14 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
<PAGE> 220
(15) Incorporated herein by reference to Exhibit 3.15 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(16) Incorporated herein by reference to Exhibit 3.16 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(17) Incorporated herein by reference to Exhibit 3.17 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(18) Incorporated herein by reference to Exhibit 3.18 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(19) Incorporated herein by reference to Exhibit 3.19 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(20) Incorporated herein by reference to Exhibit 3.20 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(21) Incorporated herein by reference to Exhibit 3.21 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(22) Incorporated herein by reference to Exhibit 3.22 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(23) Incorporated herein by reference to Exhibit 3.23 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(24) Incorporated herein by reference to Exhibit 3.24 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(25) Incorporated herein by reference to Exhibit 3.25 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(26) Incorporated herein by reference to Exhibit 3.26 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(27) Incorporated herein by reference to Exhibit 3.29 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(28) Incorporated herein by reference to Exhibit 3.30 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(29) Incorporated herein by reference to Exhibit 3.33 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(30) Incorporated herein by reference to Exhibit 3.34 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(31) Incorporated herein by reference to Exhibit 3.35 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(32) Incorporated herein by reference to Exhibit 3.36 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(33) Incorporated herein by reference to Exhibit 3.37 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(34) Incorporated herein by reference to Exhibit 3.38 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(35) Incorporated herein by reference to Exhibit 4.1 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(36) Incorporated herein by reference to Exhibit 4.2 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(37) Incorporated herein by reference to Exhibit 4.3 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(38) Incorporated herein by reference to Exhibit 4.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
<PAGE> 221
(39) Incorporated herein by reference to Exhibit 10.15 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(40) Incorporated herein by reference to Exhibit 10.16 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(41) Incorporated herein by reference to Exhibit 10.17 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(42) Incorporated herein by reference to Exhibit 10.14 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(43) Incorporated herein by reference to Exhibit 4.3A to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(44) Incorporated herein by reference to Exhibit 4.3B to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(45) Incorporated herein by reference to Exhibit 4.3C to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(46) Incorporated herein by reference to Exhibit 4.3D to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(47) Incorporated herein by reference to Exhibit 4.52 to the registrant's Annual
Report on Form 10-K filed on March 30, 2000
(48) Incorporated herein by reference to Exhibit 4.53 to the registrant's Annual
Report on Form 10-K filed on March 30, 2000
(49) Incorporated herein by reference to Exhibit 10.1 to Classic Communications,
Inc.'s Registration Statement on Form S-1 (Registration No. 333-89295)
(50) Incorporated herein by reference to Exhibit 10.2 to Classic Communications,
Inc.'s Registration Statement on Form S-1 (Registration No. 333-89295)
(51) Incorporated herein by reference to Exhibit 10.3 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(52) Incorporated herein by reference to Exhibit 10.4 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(53) Incorporated herein by reference to Exhibit 10.6 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(54) Incorporated herein by reference to Exhibit 10.7 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(55) Incorporated herein by reference to Exhibit 10.5 to the registrant's Annual
Report on Form 10-K filed on March 30, 2000
(56) Incorporated herein by reference to Exhibit 10.6 to the registrant's Annual
Report on Form 10-K filed on March 30, 2000
(57) Incorporated herein by reference to Exhibit 10.10 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(58) Incorporated by reference to Exhibit 10.8 to registrant's Registration
Statement on Form S-4 (Registration No. 333-63643)
(59) Incorporated herein by reference to Exhibit 10.9 to the registrant's
Registration Statement on Form S-4 (File No. 333-63643)
(60) Incorporated by reference to Exhibit 10.5 to Classic Communications, Inc.'s
Annual Report on Form 10-K filed on March 30, 2000
(61) Incorporated by reference to Exhibit 10.9 to Classic Communications, Inc.'s
Registration Statement on Form S-4 (Registration No. 333-63641)
(62) Incorporated by reference to Exhibit 10.10 to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
<PAGE> 222
(63) Incorporated by reference to Exhibit 10.10(a) to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(64) Incorporated by reference to Exhibit 10.10(b) to Classic Communications,
Inc.'s Registration Statement on Form S-4 (Registration No. 333-63641)
(65) Incorporated by reference to Exhibit 10.13 to Classic Communications,
Inc.'s Annual Report on Form 10-K filed on March 30, 2000
<PAGE> 1
EXHIBIT 1.1
EXECUTION COPY
CLASSIC CABLE, INC.
10 1/2% SENIOR SUBORDINATED NOTES DUE 2010
----------------------
PURCHASE AGREEMENT
February 11, 2000
Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
As representatives of the several Purchasers
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Classic Cable, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of $225.0
million principal amount of the 10 1/2% Senior Subordinated Notes due 2010 (the
"Securities") of the Company. The Securities will be unconditionally guaranteed
as to the payment of principal, premium, if any, and interest (the "Guarantees")
by each of the entities named in Schedule II hereto (each a "Guarantor" and,
collectively, the "Guarantors").
The Notes are being issued and sold in connection with an Asset
Purchase Agreement (the "Asset Purchase Agreement") dated as of October 14,
1999, as amended, by and among Universal Cable Holdings, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company ("Universal") and Star
Cable Associates, a Pennsylvania general partnership ("Star"). The Asset
Purchase Agreement provides that, subject to certain conditions as described
therein, Universal will, directly or indirectly, acquire substantially all of
the assets of Star (the "Acquisition") for a purchase price of approximately
$110.0 million in cash and 555,555 shares of Class A Common Stock, par
<PAGE> 2
value $0.01 per share, of Classic Communications, Inc., the direct parent of the
Company, (the "Asset Purchase Consideration").
The proceeds to the Company from the sale to the Purchasers of the
Notes (the "Proceeds") will be used to repay a portion of the outstanding
indebtedness under the Company's credit facility (the "Credit Facility") and to
finance a portion of the Asset Purchase Consideration. In addition to the
Proceeds, the Company will fund the Acquisition and repay a portion of the
Credit Facility with available cash. Simultaneously with the closing of the sale
of the Securities, the Company will enter into an amendment to the Credit
Facility (the "Credit Facility Amendment"), which will (1) allow for the
offering of the Securities, (2) modify some of the covenants in the Credit
Facility and (3) restructure the Term A loan to allow the Company to reborrow
under that tranche under certain circumstances for a period of time.
1. Each of the Company and the Guarantors, jointly and severally,
represents and warrants to, and agrees with, each of the Purchasers that:
(a) A preliminary offering circular, dated February 2, 2000 (the
"Preliminary Offering Circular") and an offering circular, dated
February 11, 2000 (the "Offering Circular"), in each case including
the international supplement thereto, have been prepared in connection
with the offering of the Securities. Any reference to the Preliminary
Offering Circular or the Offering Circular shall be deemed to refer to
and include any Additional Issuer Information (as defined in Section
5(f)) furnished by the Company prior to the completion of the
distribution of the Securities. The Preliminary Offering Circular or
the Offering Circular and any amendments or supplements thereto did
not and will not, as of their respective dates, contain an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a Purchaser through
Goldman, Sachs & Co. expressly for use therein;
(b) Neither the Company nor any of its subsidiaries has, and
after giving effect to the Acquisition pursuant to the terms of the
Asset Purchase Agreement will have, sustained since the date of the
latest audited financial statements included in the Offering Circular
any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Offering Circular; and, since the respective dates as of which
information is given in the Offering Circular, there has not been, and
after giving effect to the Acquisition pursuant to the terms of the
Asset Purchase Agreement will not be, any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any
material adverse change in or affecting the general affairs,
management, the current or future financial position, business,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect") (provided
that "Material Adverse Effect," when used with respect to the Company
after giving effect to the Acquisition pursuant to the terms of the
Asset Purchase Agreement, will be measured with respect to the Company
and its subsidiaries, including Star, taken as a whole), otherwise
than as set forth or contemplated in the Offering Circular;
2
<PAGE> 3
(c) The Company and its subsidiaries have, and after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement will have, good and marketable title in fee simple to all
real property and good and marketable title to all personal property
owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Offering Circular or
such as do not, in the aggregate, materially affect the value of such
property and do not, in the aggregate, materially interfere with the
use made and proposed to be made of such property by the Company and
its subsidiaries; and any real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and
proposed to be made of such property and buildings by the Company and
its subsidiaries;
(d) The Company has been, and after giving effect to the
Acquisition pursuant to the terms of the Asset Purchase Agreement will
be, duly incorporated and is validly existing as a corporation in good
standing under the laws of the state of Delaware, with power and
authority (corporate and other) to own its properties and conduct its
business as described in the Offering Circular, and has been, and
after giving effect to the Acquisition pursuant to the terms of the
Asset Purchase Agreement will be, duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, except where the failure to be so qualified or in good
standing in any such jurisdiction would not have a Material Adverse
Effect; and each subsidiary of the Company has been, and after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement will be, duly organized and is validly existing in good
standing under the laws of its jurisdiction of organization;
(e) The Company has an authorized capitalization as set forth in
the Offering Circular, and all of the issued shares of capital stock
of the Company are, and after giving effect to the Acquisition
pursuant to the terms of the Asset Purchase Agreement will be, duly
and validly authorized and issued, fully paid and non-assessable; and
all of the issued shares of capital stock of each subsidiary of the
Company are, and after giving effect to the Acquisition pursuant to
the terms of the Asset Purchase Agreement will be, duly and validly
authorized and issued, fully paid and non-assessable and (except for
directors' qualifying shares and except as otherwise set forth in the
Offering Circular) are and will be owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims, except where there is not a Material Adverse Effect;
(f) The Securities have been duly authorized by the Company and,
when issued and delivered pursuant to this Agreement, will have been
duly executed, authenticated, issued and delivered and will constitute
valid and legally binding obligations of the Company entitled to the
benefits provided by the Indenture to be dated as of February 16, 2000
(the "Indenture") between the Company and Chase Bank of Texas,
National Association, as Trustee (the "Trustee"), under which they are
to be issued, which will be substantially in the form previously
delivered to you; the Indenture has been duly authorized and, when
executed and delivered by the Company and the Trustee, the Indenture
will constitute a valid and legally binding instrument of the Company,
enforceable against the Company in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
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<PAGE> 4
laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and the Securities and the
Indenture will conform in all material respects to the descriptions
thereof in the Offering Circular and will be in substantially the form
previously delivered to you;
(g) The Guarantees have been duly authorized and, upon the due
authorization, issuance and delivery of the related Securities and the
due endorsement of the Guarantees thereon, will have been duly
executed, authenticated, issued and delivered and will constitute
valid and legally binding obligations of such Guarantor entitled to
the benefits provided by the Indenture under which they are to be
issued, and the Guarantees will conform in all material respects to
the description thereof in the Offering Circular and will be in
substantially the form previously delivered to you;
(h) The exchange and registration rights agreement, to be dated
as of February 16, 2000 (the "Registration Rights Agreement"), between
the Company, the Guarantors and the Purchasers has been duly
authorized by the Company and each of the Guarantors and, when
executed and delivered by the Company and each Guarantor, the
Registration Rights Agreement will constitute a valid and legally
binding instrument of the Company and each Guarantor, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles. Pursuant to the Registration Rights Agreement, the Company
and the Guarantors will agree to file with the Commission, under the
circumstances set forth therein, (i) a registration statement under
the United States Securities Act of 1933, as amended (the "Act"),
relating to another series of debt securities of the Company with
terms substantially identical to the Securities (the "Exchange
Securities") to be offered in exchange for the Securities (the
"Exchange Offer"), (ii) to the extent required by the Registration
Rights Agreement, a shelf registration statement pursuant to Rule 415
of the Act relating to the resale by certain holders of the Securities
and (iii) to the extent required by the Registration Rights Agreement,
a market making registration statement, and in each case, to use its
reasonable best efforts to cause such registration statements to be
declared effective. The Exchange Securities have been duly authorized
for issuance by the Company, and when issued and authenticated in
accordance with the terms of the Indenture will be the valid and
legally binding obligations of the Company, entitled to the benefits
provided by the Indenture, enforceable against the Company in
accordance with their terms. The Guarantees with respect to the
Exchange Securities have been duly authorized for issuance by each
Guarantor, and when issued in accordance with the terms of the
Indenture will be the valid and legally binding obligations of such
Guarantor, entitled to the benefits provided by the Indenture,
enforceable in accordance with their terms. The Registration Rights
Agreement, the Exchange Securities and the Guarantees with respect to
the Exchange Securities will conform, in all material respects, to the
descriptions thereof in the Offering Circular and will be in
substantially the form previously delivered to you;
(i) The Credit Facility Amendment has been duly authorized by the
Company and, when executed and delivered by the Company and the
subsidiaries of the Company that are obligors thereunder, the Credit
Facility Amendment will constitute a valid and legally binding
instrument of the Company, enforceable against the Company in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of
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<PAGE> 5
general applicability relating to or affecting creditors' rights and
to general equity principles; and the Credit Facility Amendment will
conform in all material respects to the descriptions thereof in the
Offering Circular;
(j) The Asset Purchase Agreement has been duly authorized,
executed and delivered by Universal, constitutes a valid and legally
binding instrument of Universal, enforceable against Universal in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Asset Purchase Agreement conforms to the
descriptions thereof in the Offering Circular;
(k) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale
of the Securities) will violate or result in a violation of Section 7
of the Exchange Act, or any regulation promulgated thereunder,
including, without limitation, Regulations T, U, and X of the Board of
Governors of the Federal Reserve System;
(l) Prior to the date hereof, none of the Company, the Guarantors
nor any of their respective affiliates have taken any action which is
designed to or which has constituted or which might have been expected
to cause or result in stabilization or manipulation of the price of
any security of the Company or any Guarantor in connection with the
offering of the Securities and the Guarantees;
(m) The issue and sale of the Securities and the Guarantees and
the compliance by the Company and the Guarantors with all of the
provisions of the Securities, the Guarantees, the Indenture, the
Registration Rights Agreement and this Agreement and the consummation
of the transactions herein and therein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is, or after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement will be, a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is, or after giving effect to the
Acquisition pursuant to the terms of the Asset Purchase Agreement will
be, subject (except such as will not individually or in the aggregate
have a Material Adverse Effect), nor will such action result in any
violation of the provisions of the Certificate of Incorporation or
By-laws of the Company or any Guarantor or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties (other than immaterial Federal Communications
Commission ("FCC") and local franchise authority requirements); and no
consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required
for the issue and sale of the Securities and the Guarantees or the
consummation by the Company and the Guarantors of the transactions
contemplated by this Agreement, the Registration Rights Agreement or
the Indenture, except for the filing of a registration statement by
the Company with the Commission pursuant to the Act pursuant to
Section 5(k) hereof and qualification of the Indenture under the Trust
Indenture Act of 1939 (the "TIA") and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or
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<PAGE> 6
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Purchasers;
(n) Neither the Company nor any of its subsidiaries is, and after
giving effect to the Acquisition pursuant to the terms of the Asset
Purchase Agreement will be, in violation of its Certificate of
Incorporation or By-laws or in default in the performance or
observance of any obligation, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any
of its properties may be bound, except for such default that would not
have a Material Adverse Effect;
(o) The statements set forth in the Offering Circular under the
caption "Description of Notes", insofar as they purport to constitute
a summary of the terms of the Securities and under the captions
"Legislation and Regulation", "Certain Relationships and Related
Transactions", "Description of Other Indebtedness", "Certain Federal
Income Tax Considerations" and "Underwriting", insofar as they purport
to describe the provisions of the laws and documents referred to
therein, are accurate and complete in all material respects;
(p) Other than as set forth in the Offering Circular, there are
no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is, and after giving effect to the Acquisition
pursuant to the terms of the Asset Purchase Agreement will be, a party
or to which any property of the Company or any of its subsidiaries is,
and after giving effect to the Acquisition pursuant to the terms of
the Asset Purchase Agreement will be, the subject which, if determined
adversely to the Company or any of its subsidiaries, could reasonably
be expected to individually or in the aggregate have a Material
Adverse Effect; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(q) When the Securities and the Guarantees are issued and
delivered pursuant to this Agreement, neither the Securities nor the
Guarantees will be of the same class (within the meaning of Rule 144A
under the Act) as securities of the Company or the Guarantors which
are listed on a national securities exchange registered under Section
6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system;
(r) Each of the Company and the Guarantors is not, and after
giving effect to the offering and sale of the Securities and after
giving effect to the Acquisition pursuant to the terms of the Asset
Purchase Agreement, will not be an "investment company", as such term
is defined in the United States Investment Company Act of 1940, as
amended (the "Investment Company Act");
(s) None of the Company, the Guarantors or any person acting on
its or their behalf (other than the Purchasers and their affiliates as
to whom the Company and the Guarantors make no representation) has
offered or sold the Securities by means of any general solicitation or
general advertising within the meaning of Rule 502(c) under the Act
or, with respect to Securities and Guarantees sold outside the United
States to non-U.S. persons (as defined in Rule 902 under the Act), by
means of any directed selling efforts within the meaning of Rule 902
under the Act and the Company, the Guarantors, any affiliate of the
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<PAGE> 7
Company or the Guarantors and any person acting on its or their behalf
(other than the Purchasers and their affiliates as to whom the Company
and the Guarantors make no representation) has complied with and will
implement the "offering restriction" within the meaning of such Rule
902;
(t) Within the preceding six months none of the Company, the
Guarantors or any other person acting on behalf of the Company or any
Guarantor (other than the Purchasers and their affiliates as to whom
the Company and the Guarantors make no representation) has offered or
sold to any person any Securities or Guarantees, or any securities of
the same or a similar class as the Securities or Guarantees, other
than Securities and Guarantees offered or sold to the Purchasers
hereunder. The Company and the Guarantors will take reasonable
precautions designed to insure that any offer or sale, direct or
indirect, in the United States or to any U.S. person (as defined in
Rule 902 under the Act) of any Securities, any Guarantee or any
substantially similar security issued by the Company or any Guarantor,
within six months subsequent to the date on which the distribution of
the Securities and the Guarantees has been completed (as notified to
the Company by Goldman, Sachs & Co.), is made under restrictions and
other circumstances reasonably designed not to affect the status of
the offer and sale of the Securities and the Guarantees in the United
States and to U.S. persons contemplated by this Agreement as
transactions exempt from the registration provisions of the Act;
(u) Pricewaterhouse Coopers, LLP, who has certified certain
financial statements of the Company and its subsidiaries and Star and
its subsidiaries, Ernst & Young, LLP, who has certified certain
financial statements of the Company its subsidiaries, and KPMG LLP,
who has certified certain financial statements of Buford Group, Inc.,
a Delaware corporation, and its subsidiaries, are each independent
public accountants as required by the Act and the rules and
regulations of the Commission thereunder;
(v) The Company has reviewed its operations and those of its
subsidiaries and any third parties with which the Company or any of
its subsidiaries has a material relationship to evaluate the extent to
which the business or operations of the Company or any of its
subsidiaries has been or will be affected by the Year 2000 Problem. As
a result of such review, the Company has no reason to believe, and
does not believe, that the Year 2000 Problem has had or will have a
Material Adverse Effect or has resulted or will result in any material
loss or interference with the Company's business or operations. The
"Year 2000 Problem" as used herein means any significant risk that
computer hardware or software used in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data or in the operation of mechanical or electrical
systems of any kind is not functioning or will not function, in the
case of dates or time periods occurring after December 31, 1999, at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000;
(w) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, and after giving effect to the
Acquisition pursuant to the terms of the Asset Purchase Agreement will
own or possess, or be able to acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or
7
<PAGE> 8
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them, or operated
by them after giving effect to the Acquisition, except as would not
result in a Material Adverse Effect, and neither the Company nor any
of its subsidiaries has received, and after giving effect to the
Acquisition pursuant to the terms of the Asset Purchase Agreement will
have received, any notice or is otherwise aware of any infringement of
or conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of its subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would result in a Material Adverse Effect;
(x) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of (collectively,
"authorizations"), any court or governmental authority or agency
(including the FCC) is necessary or required for the performance by
the Company of its obligations hereunder, in connection with the
offering, issuance or sale of the Securities hereunder or the
consummation of the transactions contemplated by this Agreement or the
Asset Purchase Agreement (other than filings which have been made and
authorizations which have been obtained in the case of the Asset
Purchase Agreement and other than immaterial FCC and local franchise
authority requirements); except for the filing of a registration
statement by the Company with the Commission pursuant to the Act
pursuant to Section 5(k) hereof and qualification of the Indenture
under the TIA and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Purchasers or the failure of
which to obtain would not have a Material Adverse Effect;
(y) The Company and its subsidiaries possess, and after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement will possess, such permits, franchises, licenses (including
licenses of the FCC), approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them, except where
the failure to possess such Governmental Licenses would not have a
Material Adverse Effect; the Company and its subsidiaries are, and
after giving effect to the Acquisition pursuant to the terms of the
Asset Purchase Agreement will be, in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in
a Material Adverse Effect;
(z) The Company and its subsidiaries have filed, and after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement will have filed, all federal, state, local and foreign tax
returns that are required to be filed or have duly requested
extensions thereof and have paid all material taxes required to be
paid by any of them and
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<PAGE> 9
any related assessments, fines or penalties, except where failure to
so file would not have a Material Adverse Effect, and except for any
such tax, assessment, fine or penalty that is being contested in good
faith and by appropriate proceedings; and adequate charges, accruals
and reserves have been provided for in the financial statements,
together with the related schedules and notes, included in the
Offering Circular in respect of all material federal, state, local and
foreign taxes for all periods as to which the tax liability of the
Company or any of its subsidiaries has not been fully determined or
remains open to examination by applicable taxing authorities;
(aa) Except as described in the Offering Circular and except as
such matters as would not, singly or in the aggregate, result in a
Material Adverse Effect, (i) neither the Company nor any of its
subsidiaries is, and after giving effect to the Acquisition pursuant
to the terms of the Asset Purchase Agreement will be, in violation of
any federal, state, local or foreign statute, law, rule, regulation,
ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "Environmental
Laws"), (ii) the Company and its subsidiaries have, and after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement will have, all permits, authorizations and approvals
required under any applicable Environmental Laws and are each, and
after giving effect to the Acquisition pursuant to the terms of the
Asset Purchase Agreement will each be, in compliance with their
requirements, (iii) there are, and after giving effect to the
Acquisition pursuant to the terms of the Asset Purchase Agreement
there will be, no pending or to the Company's knowledge threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Laws
against the Company or any of its subsidiaries and (iv) there are, and
after giving effect to the Acquisition pursuant to the terms of the
Asset Purchase Agreement there will be, no events or circumstances
that might reasonably be expected to form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or
Environmental Laws;
(bb) The Company and its subsidiaries carry or are entitled to
the benefits of, and after giving effect to the Acquisition pursuant
to the terms of the Asset Purchase Agreement will carry or be entitled
to the benefits of, insurance, with financially sound and reputable
insurers, in such amounts and covering such risks as is generally
maintained by companies of established repute engaged in the same or
similar business, and all such insurance is in full force and effect
in all material respects;
(cc) The Company is, and after giving effect to the Acquisition
pursuant to the terms of the Asset Purchase Agreement will be,
Solvent. As used herein, the term "Solvent" means,
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<PAGE> 10
with respect to the Company on a particular date, that on such date
(i) the fair market value of the assets of the Company is greater than
the total amount of liabilities (including contingent liabilities) of
the Company, (ii) the present fair salable value of the assets of the
Company is greater than the amount that will be required to pay the
probable liabilities of the Company on its debts as they become
absolute and matured, (iii) the Company is able to realize upon its
assets and pay its debts and other liabilities, including contingent
obligations, as they mature, and (iv) the Company does not have
unreasonably small capital; and
(dd) The Company is not in default under any contract, indenture,
mortgage, loan agreement, note, lease or other agreement or instrument
constituting Senior Debt (as defined in the Indenture) or under the
Asset Purchase Agreement, except for defaults of the Company or any of
its subsidiaries that would not have a Material Adverse Effect.
2. Subject to the terms and conditions herein set forth, the Company
and the Guarantors agree to issue and sell to each of the Purchasers, and each
of the Purchasers agrees, severally and not jointly, to purchase from the
Company and the Guarantors, at a purchase price of 97.375% of the principal
amount thereof, plus accrued interest, if any, from February 16, 2000 to the
Time of Delivery hereunder, the principal amount of Securities (including the
Guarantees thereof) set forth opposite the name of such Purchaser in Schedule I
hereto.
3. Upon the authorization by you of the release of the Securities and
the Guarantees, the several Purchasers propose to offer the Securities for sale
upon the terms and conditions set forth in this Agreement and the Offering
Circular, and each Purchaser hereby represents and warrants to, and agrees with
the Company and the Guarantors that:
(a) It will offer and sell the Securities only to: (i) persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within the
meaning of Rule 144A under the Act in transactions meeting the requirements of
Rule 144A or (ii) upon the terms and conditions set forth in Annex I to this
Agreement;
(b) It is an Institutional Accredited Investor; and
(c) It will not offer or sell the Securities and Guarantees by any form
of general solicitation or general advertising, including but not limited to the
methods described in Rule 502(c) under the Act.
4. (a) The Securities to be purchased by each Purchaser hereunder will
be represented by one or more definitive global Securities in book-entry form,
which will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company and the Guarantors will
deliver the Securities and the Guarantees to Goldman, Sachs & Co., for the
account of each Purchaser, against payment by or on behalf of such Purchaser of
the purchase price therefor by wire transfer of Federal (same day) funds to an
account designated by the Company, by causing DTC to credit the Securities to
the account of Goldman, Sachs & Co. at DTC. The Company and the Guarantors will
cause the certificates representing the Securities to be made available to
Goldman, Sachs & Co. for checking at least twenty-four hours prior to the Time
of Delivery (as defined below) at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and payment shall
be 9:30 a.m., New York City time, on February
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16, 2000 or such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing. Such time and date are herein called the "Time of
Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Purchasers pursuant to Section 7(i) hereof, will be delivered at such time and
date at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000, New York,
New York 10022 (the "Closing Location"), and the Securities and Guarantees will
be delivered at the Designated Office, all at the Time of Delivery. A meeting
will be held at the Closing Location at 3:00 p.m., New York City time, on the
New York Business Day next preceding the Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding sentence
will be available for review by the parties hereto. For the purposes of this
Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to close.
5. Each of the Company and the Guarantors, jointly and severally,
agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to make
no amendment or any supplement to the Offering Circular which shall be
disapproved by you promptly after reasonable notice thereof; and to furnish you
with copies thereof;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith neither the Company nor
any Guarantor shall be required to qualify as a foreign corporation or subject
itself to taxation in respect of doing business or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Purchasers with five copies of the Offering Circular
and each amendment or supplement thereto signed by an authorized officer of the
Company with the independent accountants' report(s) in the Offering Circular,
and any amendment or supplement containing amendments to the financial
statements covered by such report(s), signed by the accountants, and additional
copies thereof in such quantities as you may from time to time reasonably
request, and if, at any time prior to the expiration of nine months after the
date of the Offering Circular, any event shall have occurred as a result of
which the Offering Circular as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made when such Offering Circular is delivered, not misleading,
or, if for any other reason it shall be necessary during such period to amend or
supplement the Offering Circular, to notify you and upon your request to prepare
and furnish without charge to each Purchaser and to any dealer in securities as
many copies as you may from time to time reasonably request of an amended
Offering Circular or a supplement to the Offering Circular which will correct
such statement or omission or effect such compliance;
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<PAGE> 12
(d) During the period beginning from the date hereof and continuing
until the date six months after the Time of Delivery, not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder any
securities of the Company or any Guarantor that are substantially similar to the
Securities or the Guarantees; except to the extent required by existing
registration rights agreements;
(e) Not to be or become, at any time prior to the expiration of three
years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act;
(f) At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, for the benefit of holders from time to time of Securities,
to furnish at its expense, upon request, to holders of Securities and
prospective purchasers of securities information (the "Additional Issuer
Information") satisfying the requirements of subsection (d)(4)(i) of Rule 144A
under the Act;
(g) If requested by you, to use its best efforts to cause such
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealers, Inc.;
(h) To furnish to the holders of the Securities as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of the
Offering Circular), to make available to holders of the Securities consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
(i) During a period of five years from the date of the Offering
Circular, to furnish to you copies of all reports or other communications
(financial or other) furnished to holders of Securities of the Company or any of
the Guarantors, and to deliver to you (i) as soon as they are available, copies
of any reports and financial statements furnished to or filed with the
Commission or any securities exchange on which the Securities or any class of
securities of the Company or the Guarantors is listed; and (ii) such additional
information concerning the business and financial condition of the Company or
the Guarantors as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(j) During a period of two years after the Time of Delivery, the
Company will not, and will not permit any of its "affiliates" (as defined in
Rule 144 under the Act) to, resell any of the Securities which constitute
"restricted securities" under Rule 144 that have been reacquired by them;
(k) The Company and the Guarantors shall file and use their best
efforts to cause to be declared or become effective under the Act, on or prior
to 210 days after the Time of Delivery, a registration statement on Form S-4
providing for the registration of the Exchange Securities and the Guarantees
thereon, and the exchange of the Securities for the Exchange Securities, all in
a manner
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<PAGE> 13
which will permit persons who acquire the Exchange Securities to resell the
Exchange Securities pursuant to Section 4(1) of the Act; and
(l) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the Offering
Circular under the caption "Use of Proceeds".
6. Each of the Company and the Guarantors, jointly and severally,
covenants and agrees with the several Purchasers that the Company and the
Guarantors will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's and the Guarantors' counsel and
accountants in connection with the issue of the Securities and all other
expenses in connection with the preparation, printing and filing of the
Preliminary Offering Circular and the Offering Circular and any amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Purchasers and dealers; (ii) the cost of printing or producing any Agreement
among Purchasers, this Agreement, the Indenture, the Registration Rights
Agreement, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities and Guarantees;
(iii) all expenses in connection with the qualification of the Securities and
the Exchange Securities for offering and sale under state securities laws as
provided in Section 5(b) hereof, including the fees and disbursements of counsel
for the Purchasers in connection with such qualification and in connection with
the Blue Sky and legal investment surveys; (iv) any fees charged by securities
rating services for rating the Securities and the Exchange Securities; (v) the
cost of preparing the Securities, the Exchange Securities and the Guarantees
with respect thereto; (vi) the fees and expenses of the Trustee and any agent of
the Trustee and the fees and disbursements of counsel for the Trustee in
connection with the Indenture, the Securities and the Exchange Securities; (vii)
any cost incurred in connection with the designation of the Securities for
trading in PORTAL; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 11 hereof, the Purchasers will pay
all of their own costs and expenses, including the fees of their counsel,
transfer taxes on resale of any of the Securities by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Purchasers hereunder shall be subject, in
their discretion, to the condition that all representations and warranties and
other statements of the Company and the Guarantors herein are, at and as of the
Time of Delivery, true and correct, the condition that the Company and the
Guarantors shall have performed all of its obligations hereunder theretofore to
be performed, and the following additional conditions:
(a) Latham & Watkins, counsel for the Purchasers, shall have furnished
to you such opinion or opinions, dated the Time of Delivery, with respect to the
matters covered in paragraphs (i), (vii), (viii), (ix), (x), (xi), (xii), (xiv)
and (xv) of subsection (b) below as well as such other related matters as you
may reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(b) Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel for the
Company, shall have furnished to you their written opinion, dated the Time of
Delivery, in form and substance satisfactory to you, to the effect that:
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<PAGE> 14
(i) The Company has been duly incorporated and is validly
existing and in good standing under the Delaware General Corporation
Law (the "DGCL"), with the corporate power and corporate authority to
own or lease its properties and conduct its business as described in
the Offering Circular;
(ii) The execution and delivery by Universal of the Asset
Purchase Agreement and the consummation by Universal of the
transactions contemplated thereby have been duly authorized by all
requisite corporate action on the part of Universal under the DGCL.
The Asset Purchase Agreement has been duly executed and delivered by
Universal. The Asset Purchase Agreement constitutes the valid and
binding obligation of Universal enforceable against Universal in
accordance with its terms under the DGCL;
(iii) The authorized capital stock of the Company consists of
1,000 shares of Common Stock, par value $0.01 per share;
(iv) The outstanding shares of capital stock of the Company have
been duly authorized and validly issued and, to such counsel's
knowledge, are fully paid and nonassessable;
(v) To such counsel's knowledge and other than as set forth in
the Offering Circular, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or
of which any property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate reasonably be
expected to have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and each of Classic Cable Holdings, Inc.,
Universal Cable Holdings, Inc., Universal Cable Communications Inc.,
Universal Cable of Beaver, Oklahoma, Inc., Universal Cable Midwest,
Inc., Classic Telephone, Inc., WT Acquisition Corporation, Black Creek
Management, L.L.C., Black Creek Communications, L.P., and Classic
Network Transmission, L.L.C. (collectively, the "Delaware
Guarantors");
(vii) The Securities have been duly authorized and executed by
the Company and, when duly authenticated in accordance with the terms
of the Indenture, and issued and delivered to and paid for by you
pursuant to this Agreement, will be valid and legally binding
obligations of the Company entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms, except
to the extent that enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity);
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<PAGE> 15
(viii) The Guarantees have been duly authorized and executed by
each Delaware Guarantor and, when duly authenticated in accordance
with the terms of the Indenture, and issued and delivered to and paid
for by you pursuant to this Agreement, will be valid and legally
binding obligations of the Delaware Guarantors entitled to the
benefits of the Indenture, enforceable against each Delaware Guarantor
in accordance with their terms, except to the extent that enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity);
(ix) The Exchange Securities have been duly authorized;
(x) The Guarantees with respect to the Exchange Securities have
been duly authorized by each Delaware Guarantor;
(xi) The Indenture has been duly authorized, executed and
delivered by the Company and the Delaware Guarantors and is a valid
and legally binding agreement of the Company and each Delaware
Guarantor, enforceable against the Company and each Delaware Guarantor
in accordance with its terms, except to the extent that enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity);
(xii) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and the Delaware Guarantors and
is a valid and legally binding agreement of the Company and each
Delaware Guarantor, enforceable against the Company and each Delaware
Guarantor in accordance with its terms, except to the extent that (a)
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally and (ii) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in
equity) and (b) the enforceability of indemnification and contribution
provisions may be limited by federal and state securities laws and the
policies underlying such laws;
(xiii) The Credit Facility Amendment has been duly authorized,
executed and delivered by the Company and the Delaware Guarantors and
is a valid and legally binding agreement of the Company and each
Delaware Guarantor, enforceable against the Company and each Delaware
Guarantor in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally and (ii) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in
equity);
(xiv) The statements set forth in the Offering Circular under the
caption "Description of Notes", insofar as they purport to summarize
certain terms of the Indenture, the Guarantees, the Securities and the
Registration Rights Agreement, and under the captions "Certain
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<PAGE> 16
Relationships and Related Transactions", "Description of Other
Indebtedness" and "Certain Federal Income Tax Considerations", insofar
as they purport to describe or summarize the provisions of specific
agreements, statutes and regulations referred to therein, are true and
correct in all material respects;
(xv) Assuming (a) the accuracy of the representations and
warranties of the Company and the Guarantors set forth in Section 1 of
this Agreement and of your representations, warranties and agreements
set forth in Section 3 of this Agreement, (b) the due performance by
the Company and the Guarantors of the covenants and agreements set
forth in Section 5 of this Agreement, and (c) the compliance by the
Company and the Guarantors and you with the offering and transfer
procedures and restrictions described in the Offering Circular, the
offer, sale and delivery of the Securities to you in the manner
contemplated by this Agreement and the Offering Circular, and the
initial resale of the Securities by you in the manner contemplated in
the Offering Circular and the Purchase Agreement, do not require
registration under the Securities Act, and the Indenture does not
require qualification under the Trust Indenture Act, it being
understood that we do not express any opinion as to any subsequent
resale of any Security;
(xvi) Each of the Company and the Delaware Guarantors is not an
"investment company", required to register as such under the
Investment Company Act; and
Such counsel's opinion shall also include the following statement:
In addition, we have participated in conferences with officers
and other representatives of the Company, representatives of the
independent public accountants of the Company, you and your counsel at
which the contents of the Offering Circular and related matters were
discussed and, although we are not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Offering Circular and have made no
independent check or verification thereof, on the basis of the
foregoing, no facts have come to our attention that have led us to
believe that the Offering Circular, at the Time of Delivery, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Offering Circular, as of its date
and the date hereof, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that we express no
opinion or belief with respect to the financial statements, schedules
and other financial information included therein or excluded
therefrom.
(c) Winstead Sechrest & Minick P.C., counsel for the Company, shall
have furnished to you their written opinion, dated the Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the
failure to be so qualified in any such
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<PAGE> 17
jurisdiction (such counsel being entitled to rely in respect of the
opinion in this clause upon opinions of local counsel and in respect
of matters of fact upon certificates of officers of the Company,
provided that such counsel shall state that they believe that both you
and they are justified in relying upon such opinions and
certificates);
(ii) Each subsidiary of the Company has been duly organized and
is validly existing as a corporation, limited liability company or
limited partnership, in good standing under the laws of its
jurisdiction of organization; and all of the issued shares of capital
stock of each such subsidiary have been duly and validly authorized
and issued, are fully paid and non-assessable, and (except for
directors' qualifying shares and except as otherwise set forth in the
Offering Circular) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims (such
counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect of matters of
fact upon certificates of officers of the Company or its subsidiaries,
provided that such counsel shall state that they believe that both you
and they are justified in relying upon such opinions and
certificates);
(iii) The issue and sale of the Securities and the Guarantees and
the compliance by the Company and the Guarantors with all of the
provisions of the Securities, the Guarantees, the Indenture, the
Registration Rights Agreement and this Agreement and the consummation
of the transactions herein and therein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other material agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such actions
result in any violation of the provisions of the Certificate of
Incorporation or By-laws, or Certificate of Limited Liability Company
or Limited Liability Company Agreement, or Certificate of Limited
Partnership or Limited Partnership Agreement, of the Company or any
Guarantor or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their properties;
(iv) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Securities and the
Guarantees or the consummation by the Company and the Guarantors of
the transactions contemplated by this Agreement, the Registration
Rights Agreement or the Indenture, except such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Purchasers; and
(v) Except as set forth in the Offering Circular, each of the
Company and its subsidiaries has all of the licenses, permits,
franchises and authorizations required by each state in which it
operates, or the political subdivisions thereof, for the provision of
cable television services (as such counsel understands service to be
provided which may be based on a certificate of an officer of the
Company, provided that such counsel shall state that they believe that
both the Purchasers and such counsel are justified in relying on such
certificate),
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<PAGE> 18
where the failure to obtain or hold such license, permit, franchise or
authorization would have a Material Adverse Effect;
(vi) This Agreement has been duly authorized, executed and
delivered by Friendship Cable of Texas, Inc. ("FCT"), Correctional
Cable TV, Inc. ("CCTV"), CallCom 24, Inc. ("CC24"), Friendship Cable
of Arkansas, Inc. ("FCA"), Television Enterprises, Inc. ("TE" and,
together with FCT, CCTV, CC24 and FCA, the "Texas Guarantors") and
W.K. Communications, Inc. (the "Kansas Guarantor");
(vii) The Guarantees have been duly authorized, executed, issued
and delivered and constitute valid and legally binding obligations of
the Texas Guarantors and the Kansas Guarantor entitled to the benefits
provided by the Indenture;
(viii) The Guarantees with respect to the Exchange Securities
have been duly authorized by the Texas Guarantors and the Kansas
Guarantor;
(ix) The Indenture has been duly authorized, executed and
delivered by the Texas Guarantors and the Kansas Guarantor and
constitutes a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(x) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Texas Guarantors and the Kansas
Guarantor and constitutes a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles;
(xii) The Credit Facility Amendment has been duly authorized,
executed and delivered by the Texas Guarantors and the Kansas
Guarantor and constitutes a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles;
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States.
(d) Cole Raywid & Braverman, regulatory counsel for the Company, shall
have furnished to you their written opinion, dated the Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The statements set forth in the Offering Circular under the
caption "Legislation and Regulation," insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are accurate and complete in all material respects;
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<PAGE> 19
(ii) The Company and its subsidiaries operate cable television
systems which serve the communities listed on Attachment 1 hereto.
Each such community has been registered with the FCC;
(iii) The Company and its subsidiaries hold the FCC licenses set
forth on Attachment 1 hereto, each of which is in full force and
effect, and each of the Company and its subsidiaries have fulfilled
and performed all material obligations with respect thereto. To the
best of our knowledge, these are the only FCC licenses which are
presently necessary to the business of the Company and its
subsidiaries as now conducted, except for those licenses that are not
material to the Company. To the best of our knowledge, no condition
exists or event has occurred which permits or which after lapse of
time or the giving of notice or both would permit the suspension,
revocation, impairment, forfeiture, nonrenewal or termination of any
FCC license set forth on Attachment 1. To the best of our knowledge,
neither the Company nor any of its subsidiaries has received written
notice of any violation or institution of any cease and desist
proceeding with respect thereto;
(iv) Except with respect to general rulemakings and similar
matters relating generally to the cable television industry, there is
no action, suit or proceeding pending at the FCC, or, to the best of
our knowledge after due investigation with respect thereto, any
inquiry or investigation by the FCC pending or proceeding threatened
by the FCC against or affecting the Company or any of its subsidiaries
which might have Material Adverse Effect upon the Company and its
subsidiaries or the operation of the cable systems of the Company and
its subsidiaries; and
(v) The execution, delivery and performance by the Company of the
Purchase Agreement, the Registration Rights Agreement, the Indenture,
the Notes and the Credit Facility Amendment and the consummation of
the Acquisition do not require the approval of the FCC and will not
result in any violation of the Communications Act of 1934, as amended,
or any rule or regulation of the FCC; provided however, that prior FCC
approval is required for the transfer of control of FCC licenses.
(e) Wiley, Rein & Fielding, regulatory counsel for Star, shall have
furnished to you their written opinion, dated the Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) Star and its subsidiaries operate cable television systems
which serve the communities listed on Attachment 1 hereto. Each such
community has been registered with the FCC;
(ii) Star and its subsidiaries hold the FCC licenses set forth on
Attachment 1 hereto, each of which is in full force and effect, and
each of Star and its subsidiaries have fulfilled and performed all
material obligations with respect thereto. To the best of our
knowledge, these are the only FCC licenses which are presently
necessary to the business of Star and its subsidiaries as now
conducted, except for those licenses that are not material to Star. To
the best of our knowledge, no condition exists or event has occurred
which permits or which after lapse of time or the giving of notice or
both would permit the suspension, revocation, impairment, forfeiture,
nonrenewal or termination of any FCC license set forth on Attachment
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<PAGE> 20
1. To the best of our knowledge, neither Star nor any of its
subsidiaries has received written notice of any violation or
institution of any cease and desist proceeding with respect thereto;
(iii) Except with respect to general rulemakings and similar
matters relating generally to the cable television industry, there is
no action, suit or proceeding pending at the FCC, or, to the best of
our knowledge after due investigation with respect thereto, any
inquiry or investigation by the FCC pending or proceeding threatened
by the FCC against or affecting Star or any of its subsidiaries which
might have Material Adverse Effect upon Star and its subsidiaries or
the operation of the cable systems of Star and its subsidiaries; and
(f) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Pricewaterhouse Coopers, LLP shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex II hereto;
(g) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Ernst & Young, LLP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth in
Annex II hereto;
(h) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, KPMG LLP shall have furnished to you
a letter or letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annex II hereto;
(i) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Gainer Donnelly & Desroches shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you;
(j) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Offering Circular any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Circular, and (ii) since the
respective dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Offering
Circular, the effect of which, in any such case described in Clause (i) or (ii),
is in the judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities on the terms and in the manner contemplated in this Agreement
and in the Offering Circular;
(k) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's and any Guarantors' debt securities by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under
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<PAGE> 21
surveillance or review, with possible negative implications, its rating of any
of the Company's and any Guarantors' debt securities;
(l) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a general moratorium on
commercial banking activities declared by either Federal or New York State
authorities; or (iii) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in this Clause (iii) in the
judgment of the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Securities on the terms and in
the manner contemplated in the Offering Circular; or (iv) the occurrence of any
material adverse change in the existing, financial, political or economic
conditions in the United States or elsewhere which, in the judgment of the
Representatives, would materially and adversely affect the financial markets or
the markets for the Securities and other debt securities;
(m) The Securities have been designated for trading on PORTAL;
(n) The Company shall have furnished or caused to be furnished to you
at the Time of Delivery certificates of officers of the Company and the
Guarantors satisfactory to you as to the accuracy of the representations and
warranties of the Company and the Guarantors herein at and as of such Time of
Delivery, as to the performance by the Company of all of its obligations
hereunder to be performed at or prior to such Time of Delivery, as to the
matters set forth in subsections (h) and (i) of this Section and as to such
other matters as you may reasonably request;
(o) The Company shall have entered into the Credit Facility Amendment
(the form and substance of which shall be acceptable to the Purchasers) and the
Purchasers shall have received copies of counterparts, conformed as executed
thereof and of all other documents and agreements entered into in connection
therewith; and
(p) The Company shall have entered into the Asset Purchase Agreement
and the Purchasers shall have received counterparts, conformed as executed
thereof and of all other documents and agreements entered into in connection
therewith. The Asset Purchase Agreement shall be in full force and effect, all
conditions thereto shall have been satisfied, and no condition shall have been
waived without the express consent of Goldman, Sachs & Co., which consent shall
not be unreasonably withheld.
8. (a) The Company and each Guarantor will, jointly and severally,
indemnify and hold harmless each Purchaser against any losses, claims, damages
or liabilities, joint or several, to which such Purchaser may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, and will reimburse each Purchaser for any legal or other
expenses reasonably incurred by such Purchaser in connection with investigating
or defending any such action or claim as such expenses are incurred; provided,
however, that neither the Company nor any Guarantor shall be liable in any such
case to the extent that any such loss, claim, damage or
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<PAGE> 22
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Offering
Circular or the Offering Circular or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Purchaser through Goldman, Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company and the
Guarantors against any losses, claims, damages or liabilities to which the
Company and any Guarantor may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Circular or
the Offering Circular, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact or necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary Offering
Circular or the Offering Circular or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Purchaser through Goldman, Sachs & Co. expressly for use
therein; and will reimburse the Company and the Guarantors for any legal or
other expenses reasonably incurred by the Company and the Guarantors in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability hereunder to the extent it is not materially
prejudiced as a result thereof and in any event shall not relieve it from any
liability which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (which shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of any
indemnified party. No indemnifying party shall be required to indemnify an
indemnified party for any amount paid or payable by such indemnified party in
the settlement of any action, proceeding or investigation without the written
consent of such indemnifying party, which consent shall not be unreasonably
withheld.
22
<PAGE> 23
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors on the one hand and
the Purchasers on the other from the offering of the Securities. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Guarantors on the one hand and the Purchasers on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Guarantors on the one hand and the Purchasers on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company and the
Guarantors bear to the total underwriting discounts and commissions received by
the Purchasers, in each case as set forth in the Offering Circular. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and the Guarantors on the one hand or the Purchasers on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Guarantors and
the Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to
investors were offered to investors exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. The Purchasers' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company and the Guarantors under this
Section 8 shall be in addition to any liability which the Company and the
Guarantors may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Purchaser within the
meaning of the Act; and the obligations of the Purchasers under this Section 8
shall be in addition to any liability which the respective Purchasers may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company or any Guarantor and to each person, if any,
who controls the Company or any Guarantor within the meaning of the Act.
23
<PAGE> 24
9. (a) If any Purchaser shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If within thirty-six hours after such default by any
Purchaser you do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to you to purchase such
Securities on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Securities, or the Company notifies you that it has so arranged for the
purchase of such Securities, you or the Company shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Offering Circular,
or in any other documents or arrangements, and the Company agrees to prepare
promptly any amendments to the Offering Circular which in your opinion may
thereby be made necessary. The term "Purchaser" as used in this Agreement shall
include any person substituted under this Section with like effect as if such
person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder and, in
addition, to require each non-defaulting Purchaser to purchase its pro rata
share (based on the principal amount of Securities which such Purchaser agreed
to purchase hereunder) of the Securities of such defaulting Purchaser or
Purchasers for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal amount
of all the Securities, or if the Company shall not exercise the right described
in subsection (b) above to require non-defaulting Purchasers to purchase
Securities of a defaulting Purchaser or Purchasers, then this Agreement shall
thereupon terminate, without liability on the part of any non-defaulting
Purchaser or the Company and the Guarantors, except for the expenses to be borne
by the Company, the Guarantors and the Purchasers as provided in Section 6
hereof and the indemnity and contribution agreements in Section 8 hereof; but
nothing herein shall relieve a defaulting Purchaser from liability for its
default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Guarantors and the several Purchasers,
as set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Purchaser or any controlling person of any Purchaser, or the
Company, the Guarantors or any officer or director or controlling person of the
Company or a Guarantor, and shall survive delivery of and payment for the
Securities.
24
<PAGE> 25
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Purchaser except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities (including the Guarantees with respect thereto) are not delivered by
or on behalf of the Company and the Guarantors as provided herein, the Company
and the Guarantors will reimburse the Purchasers through you for all
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Purchasers in making
preparations for the purchase, sale and delivery of the Securities, but the
Company shall then be under no further liability to any Purchaser except as
provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Purchaser made or given
by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the Offering
Circular, Attention: Secretary, with a copy to Brera Classic, L.L.C., 712 Fifth
Avenue, 34th Floor, New York, NY 10019; provided, however, that any notice to a
Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Purchaser at its address set forth in
its Purchasers' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchasers, the Company, the Guarantors and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and the Guarantors and each person who controls the Company, a Guarantor or any
Purchaser, and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. No purchaser of any of the Securities from any Purchaser
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and each of the Representatives plus one
for each counsel counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Purchasers, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Purchasers and the
25
<PAGE> 26
Company. It is understood that your acceptance of this letter on behalf of each
of the Purchasers is pursuant to the authority set forth in a form of Agreement
among Purchasers, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
26
<PAGE> 27
Very truly yours,
CLASSIC CABLE, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
CLASSIC CABLE HOLDING, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
CLASSIC TELEPHONE, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
UNIVERSAL CABLE HOLDINGS, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
UNIVERSAL CABLE COMMUNICATIONS INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
<PAGE> 28
UNIVERSAL CABLE OF BEAVER, OKLAHOMA,
INC.
By: /s/ STEVEN E. SEACH
-------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
<PAGE> 29
UNIVERSAL CABLE MIDWEST, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
WT ACQUISITION CORPORATION
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
W.K. COMMUNICATIONS, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
TELEVISION ENTERPRISES, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
BLACK CREEK MANAGEMENT, L.L.C.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
<PAGE> 30
BLACK CREEK COMMUNICATIONS, L.P.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
<PAGE> 31
FRIENDSHIP CABLE OF TEXAS, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
CALLCOMM 24, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
CORRECTIONAL CABLE TV, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
FRIENDSHIP CABLE OF ARKANSAS, INC.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
CLASSIC NETWORK TRANSMISSION, L.L.C.
By: /s/ STEVEN E. SEACH
--------------------------------
Name: Steven E. Seach
Title: President and Chief Financial Officer
<PAGE> 32
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BY: /s/ GOLDMAN, SACHS & CO.
------------------------------------
(GOLDMAN, SACHS & CO)
On behalf of each of the Purchasers
<PAGE> 33
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
PURCHASER PURCHASED
--------- ------------
<S> <C>
Goldman, Sachs & Co. ............................................ $101,250,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .................................. 78,750,000
Chase Securities Inc. ........................................... 22,500,000
Donaldson, Lufkin & Jenrette Securities Corporation ............. 22,500,000
------------
Total ......................................... $225,000,000
============
</TABLE>
<PAGE> 34
SCHEDULE II
GUARANTORS
Classic Cable Holding, Inc.
Classic Telephone, Inc.
Universal Cable Holdings, Inc.
Universal Cable Communications Inc.
Universal Cable of Beaver, Oklahoma, Inc.
Universal Cable Midwest, Inc.
WT Acquisition Corporation
W.K. Communications, Inc.
Television Enterprises, Inc.
Black Creek Management, L.L.C.
Black Creek Communications, L.P.
Friendship Cable of Texas, Inc.
CallComm 24, Inc.
Correctional Cable TV, Inc.
Friendship Cable of Arkansas, Inc.
Classic Network Transmission, L.L.C.
<PAGE> 35
ANNEX I
(1) The Securities have not been and will not be registered under the
Act and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with Regulation S under
the Act or pursuant to an exemption from the registration requirements of the
Act. Each Purchaser represents that it has offered and sold the Securities, and
will offer and sell the Securities (i) as part of its distribution at any time
and (ii) otherwise until 40 days after the later of the commencement of the
offering and the Time of Delivery, only in accordance with Rule 903 of
Regulation S or Rule 144A under the Act. Accordingly, each Purchaser agrees that
neither it, its affiliates nor any persons acting on its or their behalf has
engaged or will engage in any directed selling efforts with respect to the
Securities, and it and they have complied and will comply with the offering
restrictions requirement of Regulation S. Each Purchaser agrees that, at or
prior to confirmation of sale of Securities (other than a sale pursuant to Rule
144A), it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Securities from it
during the restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S (or Rule 144A if available) under the Act. Terms used
above have the meaning given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not
enter into any contractual arrangement with respect to the distribution or
delivery of the Securities, except with its affiliates or with the prior written
consent of the Company.
(2) Notwithstanding the foregoing, Securities in registered form may be
offered, sold and delivered by the Purchasers in the United States and to U.S.
persons pursuant to Section 3 of this Agreement without delivery of the written
statement required by paragraph (1) above.
(3) Each Purchaser further represents and agrees that (a) it has not
offered or sold and will not offer or sell any Securities to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply, with all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom,
and (c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
the Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
A-1
<PAGE> 36
(4) Each Purchaser agrees that it will not offer, sell or deliver any
of the Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Securities in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Securities
to be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except in any such case
with Goldman, Sachs & Co.'s express written consent and then only at its own
risk and expense.
A-2
<PAGE> 37
ANNEX II
Pursuant to Section 7(c) and 7(d) of the Purchase Agreement, the
accountants shall furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Securities Exchange Act of 1934 (the "Exchange Act") and the applicable
published rules and regulations thereunder;
(ii) In our opinion, the consolidated financial statements and
financial statement schedules audited by us and included in the
Offering Circular comply as to form in all material respects with the
applicable requirements of the Exchange Act and the related published
rules and regulations;
(iii) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Offering
Circular agrees with the corresponding amounts (after restatements
where applicable) in the audited consolidated financial statements for
such five fiscal years;
(iv) On the basis of limited procedures not constituting an
audit in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Offering Circular, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular are not in
conformity with generally accepted accounting principles
applied on the basis substantially consistent with the basis
for the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular;
(B) any other unaudited income statement data and balance
sheet items included in the Offering Circular do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included in the Offering Circular;
(C) the unaudited financial statements which were not
included in the Offering Circular but from which were derived
any unaudited condensed financial statements referred to in
Clause (A) and any unaudited income statement data and balance
sheet
AII-1
<PAGE> 38
items included in the Offering Circular and referred to in
Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated
financial statements included in the Offering Circular;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Offering Circular do not
comply as to form in all material respects with the applicable
accounting requirements or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Offering Circular or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or stockholders'
equity or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest balance
sheet included in the Offering Circular except in each case
for changes, increases or decreases which the Offering
Circular discloses have occurred or may occur or which are
described in such letter; or
(F) for the period from the date of the latest financial
statements included in the Offering Circular to the specified
date referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or
per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or
increases which the Offering Circular discloses have occurred
or may occur or which are described in such letter.
(v) In addition to the examination referred to in their
report(s) included in the Offering Circular and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (iv) above, they have carried out certain
specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives,
which are derived from the general accounting records of the Company
and its subsidiaries, which appear in the Offering Circular, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and
have found them to be in agreement.
AII-2
<PAGE> 1
EXHIBIT 3.33
State of Delaware
PAGE 1
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "CLASSIC NETWORK TRANSMISSION, L.L.C.", FILED IN THIS
OFFICE ON THE TWENTY-FIRST DAY OF JULY, A.D. 1999, AT 4 O'CLOCK P.M.
/s/ EDWARD J. FREEL
[SEAL] -----------------------------------
Edward J. Freel, Secretary of State
3072766 8100 AUTHENTICATION: 9878769
991300513 DATE: 07-21-99
<PAGE> 2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:00 PM 07/21/1999
991300513 - 3072766
STATE OF DELAWARE
CERTIFICATE OF FORMATION OF
CLASSIC NETWORK TRANSMISSION, L.L.C.
THE UNDERSIGNED, desiring to form a limited liability company pursuant to
the Delaware Limited Liability Company Act, 6 Delaware Code, Chapter 18, do
hereby certify as follows:
The name of the limited liability company is Classic Network Transmission,
L.L.C.
The address of its registered office in the State of Delaware is 1209
Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its
Registered Agent at such address if The Corporation Trust Company.
The period of its duration is perpetual.
The management of the Company is reserved to the Managers. The names and
addresses of the initial managers of the Company are:
J. Merritt Belisle
515 Congress Avenue, Suite 2626
Austin, Texas 78701
Steven E. Seach
515 Congress Avenue, Suite 2626
Austin, Texas 78701
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Formation of Classic Network Transmission, L.L.C. this 27th day of July, 1999.
/s/ GAYLE WINDLE
-------------------------------
Gayle Windle, Authorized Person
<PAGE> 1
Exhibit 3.34
================================================================================
CLASSIC NETWORK TRANSMISSION, LLC
------------------------------------
A Delaware Limited Liability Company
------------------------------------
LIMITED LIABILITY COMPANY AGREEMENT
Dated as of July 21, 1999
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS LIMITED LIABILITY COMPANY
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933 OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH INTERESTS MAY NOT BE
SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE
REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND COMPLIANCE WITH
THE OTHER RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS..........................................................1
1.1 DEFINITIONS............................................1
1.2 OTHER DEFINITIONS......................................9
1.3 CONSTRUCTION...........................................9
1.4 INCLUDING..............................................9
ARTICLE II
ORGANIZATION.........................................................9
2.1 FORMATION..............................................9
2.2 NAME..................................................10
2.3 REGISTERED OFFICE;
REGISTERED AGENT; PRINCIPAL OFFICE; OTHER OFFICES.....10
2.4 PURPOSES..............................................10
2.5 POWERS OF THE COMPANY.................................11
2.6 FOREIGN QUALIFICATION.................................13
2.7 TERM..................................................13
2.8 NO STATE-LAW PARTNERSHIP..............................13
ARTICLE III
MEMBERSHIP; CAPITAL CONTRIBUTIONS; ADDITIONAL IN-
TERESTS.............................................................13
3.1 MEMBERS...............................................13
(a) NAMES, ETC....................................13
(b) LOANS BY MEMBERS..............................14
(c) REPRESENTATIONS AND
WARRANTIES OF MEMBERS.........................14
3.2 NO LIABILITY OF MEMBERS...............................15
(a) NO LIABILITY..................................15
(b) DISTRIBUTION..................................16
3.3 INITIAL CAPITAL CONTRIBUTIONS.........................16
3.4 ISSUANCE OF ADDITIONAL INTERESTS;
ADDITIONAL MEMBERS....................................16
(a) ADDITIONAL INTERESTS..........................16
(b) ADDITIONAL MEMBERS AND INTERESTS..............17
3.5 CERTIFICATION OF UNITS................................17
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<PAGE> 3
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ARTICLE IV
CAPITAL ACCOUNTS....................................................17
4.1 CAPITAL ACCOUNTS......................................17
4.2 ALLOCATIONS OF INCOME AND LOSS........................18
(a) ALLOCATIONS TO CAPITAL ACCOUNTS...............18
(b) SPECIAL ALLOCATIONS...........................18
4.3 DISTRIBUTIONS.........................................20
(a) GENERAL.......................................20
(b) INTERIM DISTRIBUTIONS.........................20
(c) AMOUNTS WITHHELD..............................20
4.4 NO RIGHT OF WITHDRAWAL................................21
4.5 AMOUNTS HELD IN RESERVE...............................21
ARTICLE V
MANAGEMENT; MEMBERS.................................................21
5.1 MANAGEMENT BY THE BOARD OF MANAGERS...................21
5.2 ACTIONS BY THE BOARD; DELEGATION OF
AUTHORITY AND DUTIES..................................22
5.3 BOARD COMPOSITION.....................................22
5.4 MEETINGS OF AND VOTING BY THE BOARD...................22
5.5 ACTION BY WRITTEN CONSENT OR TELEPHONE
CONFERENCE............................................25
5.6 OFFICERS..............................................26
5.7 PURCHASE OF UNITS.....................................26
5.8 LIMITATION OF DUTIES..................................27
ARTICLE VI
EXCULPATION AND INDEMNIFICATION.....................................27
6.1 PERFORMANCE OF DUTIES; NO LIABILITY OF
MEMBERS, MANAGERS AND OFFICERS........................27
6.2 CONFIDENTIAL INFORMATION..............................28
6.3 RIGHT TO INDEMNIFICATION..............................28
6.4 ADVANCE PAYMENT.......................................29
6.5 INDEMNIFICATION OF EMPLOYEES AND AGENTS...............29
6.6 APPEARANCE AS A WITNESS...............................29
6.7 NONEXCLUSIVITY OF RIGHTS..............................29
6.8 INSURANCE.............................................30
6.9 SAVINGS CLAUSE........................................30
ii
<PAGE> 4
Page
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ARTICLE VII
TAXES...............................................................30
7.1 TAX RETURNS...........................................30
7.2 TAX MATTERS MEMBER....................................31
ARTICLE VIII
BOOKS, REPORTS AND COMPANY FUNDS....................................31
8.1 MAINTENANCE OF BOOKS..................................31
8.2 COMPANY FUNDS.........................................31
ARTICLE IX
TRANSFERS AND OTHER EVENTS..........................................31
9.1 RESTRICTION ON TRANSFERS..............................31
9.2 REDEMPTION BY THE COMPANY.............................32
9.3 LEGEND................................................32
9.4 EFFECTIVE DATE........................................32
9.5 EFFECT OF INCAPACITY..................................32
ARTICLE X
DISSOLUTION, LIQUIDATION AND TERMINATION............................33
10.1 DISSOLUTION...........................................33
10.2 LIQUIDATION AND TERMINATION...........................33
10.3 CANCELLATION OF CERTIFICATE...........................34
ARTICLE XI
GENERAL/MISCELLANEOUS PROVISIONS....................................34
11.1 OFFSET................................................34
11.2 NOTICES...............................................34
11.3 ENTIRE AGREEMENT......................................35
11.4 EFFECT OF WAIVER OR CONSENT...........................35
11.5 AMENDMENT OR MODIFICATION.............................35
11.6 BINDING EFFECT........................................35
11.7 GOVERNING LAW; SEVERABILITY...........................36
11.8 FURTHER ASSURANCES....................................36
11.9 WAIVER OF CERTAIN RIGHTS..............................36
11.10 INDEMNIFICATION AND REIMBURSEMENT FOR
PAYMENTS ON BEHALF OF A HOLDER........................36
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11.11 NOTICE TO HOLDERS OF PROVISIONS.......................37
11.12 COUNTERPARTS..........................................37
11.13 CONSENT TO JURISDICTION...............................37
11.14 HEADINGS..............................................38
11.15 REMEDIES..............................................38
11.16 SEVERABILITY..........................................38
11.17 SURVIVAL..............................................38
iv
<PAGE> 6
LIMITED LIABILITY COMPANY AGREEMENT
OF
CLASSIC NETWORK TRANSMISSION, LLC
A DELAWARE LIMITED LIABILITY COMPANY
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of
Classic Network Transmission, LLC, dated and effective as of July 21, 1999, is
adopted, executed and entered into by and among the Members.
WHEREAS, the Members have caused Classic Network Transmission, LLC to
be formed as a limited liability company under the Act and, as required
thereunder, do hereby adopt this Agreement as the Limited Liability Company
Agreement of the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein made and intending to be legally bound, the Members hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms have
the following meanings:
"Act" means the Delaware Limited Liability Company Act, Title 6,
Sections 18-101, et seq., and any successor statute, as amended from time to
time.
"Adjusted Capital Account" means, at any time, the then current
balance in the Capital Account of a Member, after giving effect to the following
adjustments:
(i) credit to such Capital Account any amounts that such
Member is deemed obligated to restore as described in the penultimate
sentences of Treasury Regulations Section 1.704-2(g)(1) and Treasury
Regulations Section 1.704-2(i)(5); and
<PAGE> 7
(ii) debit to such Capital Account the items described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Affiliate" of, or a Person "Affiliated" with, a specified Person
means a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified.
"Agreement" means this Limited Liability Company Agreement, as
executed and as it may be amended, modified, supplemented or restated from time
to time, as the context requires.
"Asset Contribution" shall mean any Capital Contribution of tangible
or intangible property other than cash made by a Member to the Company and
accepted by the Company upon consent of the Board.
"Capital Contribution" means, with respect to any Member, the amount
of money and Gross Asset Value of any property (other than money) contributed
to the Company in exchange for or with respect to the Membership Interest
acquired or held by such Member pursuant to this Agreement, as shown opposite
such Member's name on Schedule A , as the same may be amended from time to time.
"Cash Available for Distribution" means, with respect to any period,
Cash Flow less any amounts set aside from Cash Flow for the restoration or
creation of Reserves.
"Cash Flow" means, with respect to each Fiscal Year, the Company's
taxable income for such Fiscal Year, increased by (1) any Depreciation or
depletion deductions taken into account in computing taxable income and (2) any
nontaxable income or receipts (other than capital contributions and loans to the
Company) and proceeds of the Company, and reduced by (1) any principal payments
on any Company debts, (2) expenditures to acquire or improve Company assets and
(3) cash distributions to the Members prior to the end of such Fiscal Year.
"Certificate" means the Certificate of Formation of the Company as
filed with the Secretary of State of the State of Delaware.
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<PAGE> 8
"Class A Unit" means a Unit representing a fractional part of the
ownership of the Company and having the rights and obligations specified with
respect to Class A Units in this Agreement. Schedule A attached hereto sets
forth (i) the initial Holders of the Class A Units and (ii) the proportionate
amount of ownership of such Class A Units based on the initial cash or other
Capital Contributions made by such Holders, as the same may be amended from time
to time.
"Class B Unit" means a Unit representing a fractional part of the
ownership of the Company and having the rights and obligations specified with
respect to Class B Units in this Agreement. Schedule A attached hereto sets
forth (i) the initial Holders of the Class B Units and (ii) the proportionate
amount of ownership of such Class B Units based on the initial cash or other
Capital Contributions made by such Holders, as the same may be amended from time
to time. The Class B Units shall have no voting, approval or consent rights
attached to such Class B Units, unless otherwise required by applicable law. For
all other purposes, (i) the rights, privileges, benefits and liabilities
pertaining to the Class B Units shall be identical in all respects to the
rights, privileges, benefits and liabilities pertaining to the Class A Units as
provided under this Agreement and applicable law.
"Class B Unitholder" means a Holder of Class B Units.
"Code" means the Internal Revenue Code of 1986 and any successor
statute, as amended from time to time.
"Communications Act" means the Communications Act of 1934, as amended,
and any successor statute or statutes.
"Company" means the Delaware limited liability company formed pursuant
to the Certificate and this Agreement, as such limited liability company may be
constituted from time to time, and including its successors.
"Confidential Information" means information disclosed to the Holder
or known by the Holder as a consequence of or through his or its relationship
with the Company and its Subsidiaries, about the customers, employees, business
methods, public relations methods, organization, manufacturing procedures and
techniques or finances of the Company and its Subsidiaries, including, without
limitation, information of or relating to customer lists of the Company and its
Subsidiaries. Notwithstanding the foregoing, information will not constitute
Confidential Information for the purpose of this Agreement if such information
can be shown to have been (x) in the possession of the receiving party at the
time of its disclosure as provided in the
3
<PAGE> 9
preceding sentence, (y) in the public domain or otherwise generally known to the
industry (either prior to or after the furnishing of such information hereunder)
through no fault of such receiving party or (z) later acquired by the receiving
party from another source if such source is not under an obligation to another
party to keep such information confidential.
"Depreciation" means, for any Fiscal Year or portion thereof, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowed or allowable with respect to an asset for such period for Federal income
tax purposes, except that if the Gross Asset Value of an asset differs from its
adjusted basis for Federal income tax purposes at the beginning of such period,
Depreciation shall be an amount that bears the same relationship to such
beginning Gross Asset Value as the depreciation, amortization or cost recovery
deduction in such period for Federal income tax purposes bears to the beginning
adjusted tax basis; provided, however, that if the adjusted basis for Federal
income tax purposes of an asset at the beginning of such period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Tax Matters Member.
"Economic Interest" means a Holder's share of the Company's net
profits, net losses and distributions pursuant to this Agreement and the Act,
but shall not include any right to participate in the management or affairs of
the Company, including the right to vote on, consent to or otherwise participate
in any decision of the Members, or any right to receive information concerning
the business and affairs of the Company, in each case to the extent provided for
herein or otherwise required by the Act.
"FCC" means the Federal Communications Commission, and any successor
governmental agency or department.
"FCC Rules" means the rules, regulations, orders, decisions and
policies of the FCC, as they may be amended from time to time.
"Fiscal Year" of the Company means the calendar year.
"GAAP" means U.S. generally accepted accounting principles
consistently applied.
4
<PAGE> 10
"Gross Asset Value" means, with respect to any asset of the Company,
the asset's adjusted basis for Federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company as an Asset Contribution shall be the fair market value of
such asset on the date of contribution as reasonably determined by the Board;
(b) The Gross Asset Value of all assets of the Company shall be
adjusted to equal their respective fair market values as reasonably determined
by the Board, in accordance with Treasury Regulations Section 1.704-
1(b)(2)(iv)(f), upon the occurrence of one or more of the following events: (i)
the acquisition of an Additional Interest by any new or existing Member in
exchange for more than a de minimis Capital Contribution; (ii) the distribution
by the Company to a Member of more than a de minimis amount of property in
exchange for a Membership Interest; or (iii) the liquidation of the Company
within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clauses (i) and (ii) above shall
be made only if the Board reasonably determines that such adjustments are
necessary or appropriate to reflect the relative economic interests of the
Members of the Company;
(c) The Gross Asset Value of any asset of the Company distributed
to any Member shall be adjusted to equal the fair market value of such asset
(taking Code Section 7701(g) into account) on the date of distribution as
reasonably determined by the Board; and
(d) The Gross Asset Value of assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and paragraph (f)
of the definition of Profits and Losses; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this paragraph (d) to the extent that
the Board determines that an adjustment pursuant to paragraph (b) above is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this paragraph (d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
paragraphs (a), (b) or (d) above, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
5
<PAGE> 11
"Holder" means, as applicable, a holder of a Unit or one or more Unit
Equivalents and/or the Economic Interests represented thereby as reflected on
the Company's books and records.
"Incapacity" or "Incapacitated" means (a), with respect to a natural
person, the bankruptcy, death, incompetency or insanity of such individual and
(b), with respect to any other Person, the bankruptcy, liquidation, dissolution
or termination of such Person.
"Media Subsidiary" means any Person in which the Company has an
attributable interest under the FCC Rules and which directly or indirectly owns,
controls or operates (i) a U.S. cable television system or broadcast television
station, or (ii) any other communications facility or enterprise subject to
multiple ownership, alien ownership, cross-ownership or other ownership
restrictions set forth in the Communications Act or the FCC Rules.
"Member" means each Person identified on Schedule A hereto as of the
date hereof who has executed this Agreement or a counterpart hereof and each
Person who is hereafter admitted as a Member in accordance with the terms of
this Agreement and the Act, in each case so long as such Person is shown on the
Company's books and records as the owner of one or more Units. The Members
shall constitute the "members" (as that term is defined in the Act) of the
Company.
"Membership Interest" means a Member's interest in the Company,
including such Member's Economic Interest and the right, if any, to participate
in the management of the business and affairs of the Company, including the
right, if any, to vote on, consent to or otherwise participate in any decision
or action of or by the Members and the right to receive information concerning
the business and affairs of the Company, in each case to the extent expressly
provided in this Agreement or otherwise required by the Act.
"Officer" means each Person designated as an officer of the Company
pursuant to Section 5.8 for so long as such Person remains an officer pursuant
to the provisions of Section 5.8.
"Person" means a natural person, partnership (whether general or
limited), limited liability company, trust, estate, association, corporation,
custodian, nominee or any other individual or entity in its own or any
representative capacity.
6
<PAGE> 12
"Profits" and "Losses" shall mean an amount equal to the Company's
taxable income or loss with respect to any relevant period, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 702 shall be in cluded in taxable income or loss), with the following
adjustments:
(a) Any income of the Company that is exempt from Federal income tax
and not otherwise taken into account in computing Profits and Losses pursuant to
this definition of Profits and Losses shall be added to such taxable income or
loss;
(b) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition of Profits
and Losses, shall be subtracted from such taxable income or loss;
(c) Gain or loss resulting from any disposition of Company property
with respect to which gain or loss is recognized for Federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(d) In the event that the Gross Asset Value of any Company asset is
adjusted pursuant to paragraphs (b) or (c) of the definition of Gross Asset
Value hereunder, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing
Profits and Losses;
(e) In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year or other period,
computed in accordance with the definition of Depreciation;
(f) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution other
than in complete liquidation of a Membership Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of the asset)
from the disposition of the asset and shall be taken into account for purposes
of computing Profits or Losses; and
7
<PAGE> 13
(g) Notwithstanding any other provision of this definition of Profits
and Losses, any items which are specially allocated pursuant to Section 4.2(b)
shall not be taken into account in computing Profits or Losses allocable
pursuant to Section 4.2(a).
"Reserves" means amounts set aside by the Company for working capital,
operating expenses or other actual or contingent obligations or liabilities of
the Company.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Subsidiary" means any Person in which another Person, directly or
indirectly through Subsidiaries or otherwise, beneficially owns fifty percent
(50%) or more of either the equity interests in, or the voting control of, such
Person.
"Taxable Year" means the Company's taxable year ending December 31 (or
part thereof, in the case of the Company's last taxable year), or such other
year as is (i) required by Section 706 of the Code or (ii) determined by the
Board.
"Transfer" shall mean, with respect to any Membership Interest
(including any Unit, Unit Equivalents or other Economic Interest) or portion
thereof or right therein in the Company, to sell, assign, transfer, convey,
exchange, or other wise dispose of, including by dividend or distribution, such
Company Membership Interest (including any Unit, Unit Equivalents or other
Economic Interest) or portion thereof or right therein, in each case, whether
made directly or indirectly, voluntarily or involuntarily, absolutely or
conditionally, or by operation of law or otherwise.
"Treasury Regulations" means the Federal income tax regulations,
including any temporary regulations, promulgated under the Code, as such
regulations may be amended from time to time.
"Unit" means an Economic Interest in the Company representing a
fractional part of the entire Economic Interest in the Company; provided that
any class or group of Units issued shall have the relative rights, powers and
duties set forth in this Agreement and the Economic Interest represented by such
class or group of Units shall be determined in accordance with such relative
rights, powers and duties.
8
<PAGE> 14
"Unit Equivalents" means (without duplication of any Units or other
Unit Equivalents) rights, warrants, options, convertible securities,
exchangeable securities, indebtedness or other rights, in each case exercisable
for or convertible or exchangeable into, directly or indirectly, Units or
securities exercisable for or convertible or exchangeable into Units, whether at
the time of issuance or upon the passage of time or the occurrence of some
future event.
1.2 OTHER DEFINITIONS. The terms set forth below are defined in the
following Sections of this Agreement:
<TABLE>
<S> <C>
Additional Interests............ Section 3.4(a)
Board........................... Section 5.1
Brera Translator................ Section 9.1
Capital Account ................ Section 4.1
Certificated Interests.......... Section 9.3
Class A Majority................ Section 5.3(a)
Indemnifying Holder............. Section 11.10
Loss............................ Section 6.3
Managers........................ Section 5.3(a)
Pass-Thru Member ............... Section 7.2
Proceeding...................... Section 6.3
Tax Matters Member.............. Section 7.2
</TABLE>
1.3 CONSTRUCTION. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine and neuter and the
singular number includes the plural number and vice versa. Unless otherwise
indicated, all references to Articles and Sections refer to articles and
sections of this Agreement, and all references to Schedules are to Schedules
attached hereto, each of which is made a part hereof for all purposes.
1.4 INCLUDING. Reference in this Agreement to "including", "includes"
and "include" shall be deemed to be followed by "without limitation."
ARTICLE II
ORGANIZATION
2.1 FORMATION. The Company has been organized as a Delaware limited
liability company by the execution and filing of the Certificate by an
authorized person (within the meaning of the Act) under and pursuant to the
Act. The rights, powers, duties, obligations and liabilities of the Members
shall be determined pursuant to the Act and this Agreement. To the extent that
the rights, powers, duties, obligations and liabilities of any Member are
different by reason of any provision of this Agreement than they would be in
the absence of such provision, this Agreement shall, to the extent permitted by
the Act, control.
9
<PAGE> 15
2.2 NAME. The name of the Company shall be "Classic Network
Transmission, LLC." The Board in its sole discretion may change the name of the
Company at any time and from time to time. Written notification of any such
change shall be given to all Members. The Company's business may be conducted
under its name and/or any other name or names deemed advisable by the Board.
2.3 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE; OTHER
OFFICES. The registered office of the Company required by the Act to be
maintained in the State of Delaware shall be the office of the initial
registered agent named in the Certificate or such other office (which need not
be a place of business of the Company) as the Board may designate from time to
time in the manner provided by law. The registered agent of the Company in the
State of Delaware shall be the initial registered agent named in the Certificate
or such other Person or Persons as the Board may designate from time to time in
the manner provided by law. The principal office of the Company shall be at such
place as the Board may designate from time to time, which need not be in the
State of Delaware, and the Company shall maintain records there. The Company may
have such other offices as the Board may designate from time to time.
2.4 PURPOSES. The nature of the business or purposes to be conducted
or promoted by the Company is to operate the television translators licensed by
the FCC as currently operated by Classic Communications, Inc., a Delaware
corporation, and its subsidiaries and assigned to the Company pursuant to that
certain Assignment and Assumption Agreement, dated as of the date hereof, by and
among the Company, Television Enterprises, Inc., a Texas corporation, Universal
Cable Com, Inc. a/k/a Universal Cable Holdings, Inc., a Delaware corporation,
and WT Acquisition corporation, a Delaware corporation, as such Members' Capital
Contributions to the Company. The Company may engage in any and all activities
necessary, desirable or incidental to the accomplishment of the foregoing.
Notwithstanding anything herein to the contrary, nothing set forth herein shall
be construed as authorizing the Company to possess any purpose or power, or to
do any act or thing, forbidden by law to a limited liability company organized
under the laws of the State of Delaware.
2.5 POWERS OF THE COMPANY. Subject to the provisions of this Agreement
and the Act, the Company shall have the power and authority to take any and all
actions necessary, appropriate, proper, advisable, convenient or incidental to
or for the furtherance of the purposes set forth in Section 2.4, including,
without limitation, the power:
10
<PAGE> 16
(a) to conduct its business, carry on its operations and have and
exercise the powers granted to a limited liability company by the Act in any
state, territory, district or possession of the United States, or in any foreign
country that may be necessary, convenient or incidental to the accomplishment of
the purpose of the Company;
(b) to acquire by purchase, lease, contribution of property or
otherwise, own, hold, operate, maintain, finance, refinance, improve, lease,
sell, convey, mortgage, transfer, demolish or dispose of any real or personal
property that may be necessary, convenient or incidental to the accomplishment
of the purpose of the Company;
(c) to enter into, perform and carry out contracts of any kind,
including, subject to Section 6.3, contracts with any Member or any Affiliate
thereof, or any agent of the Company necessary to, in connection with,
convenient to or incidental to the accomplishment of the purpose of the Company;
(d) to purchase, take, receive, subscribe for or otherwise
acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or
otherwise dispose of, and otherwise use and deal in and with, shares or other
interests in or obligations of domestic or foreign corporations, associations,
general or limited partnerships (including the power to be admitted as a partner
thereof and to exercise the rights and perform the duties created thereby),
trusts, limited liability companies (including the power to be admitted as a
member or appointed as a manager thereof and to exercise the rights and perform
the duties created thereby) or individuals or direct or indirect obligations of
the United States or of any government, state, territory, governmental district
or municipality or of any instrumentality of any of them;
(e) to lend money for any proper purpose, to invest and reinvest
its funds and to take and hold real and personal property for the payment of
funds so loaned or invested;
(f) to sue and be sued, complain and defend, and participate in
administrative or other proceedings, in its name;
(g) to appoint employees and agents of the Company and define
their duties and fix their compensation;
11
<PAGE> 17
(h) to indemnify any Person in accordance with the Act and to
obtain any and all types of insurance;
(i) to cease its activities and cancel its Certificate;
(j) to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, execute, acknowledge or take any other action
with respect to any lease, contract or security agreement in respect of any
assets of the Company;
(k) to borrow money and issue evidences of indebtedness and
guaranty indebtedness (whether of the Company or any of its Subsidiaries), and
to secure the same by a mortgage, pledge or other lien on the assets of the
Company;
(l) to pay, collect, compromise, litigate, arbitrate or other
wise adjust or settle any and all other claims or demands of or against the
Company or to hold such proceeds against the payment of contingent liabilities;
(m) to make, execute, acknowledge and file any and all documents
or instruments necessary, convenient or incidental to the accomplishment of the
purpose of the Company; and
(n) to make such elections under the Code and other relevant tax
laws as to the treatment of items of Company income, gain, loss, deduction and
expense, and as to all other relevant matters, as the Company deems necessary or
appropriate, including, without limitation, elections referred to in Section 754
of the Code, determination of which items of cash outlay are to be capitalized
or treated as current expenses, and selection of the method of accounting and
bookkeeping procedures to be used by the Company.
2.6 FOREIGN QUALIFICATION. The Board shall cause the Company to comply
with all requirements necessary to qualify the Company as a foreign limited
liability company in any jurisdiction in which the Company owns property or
transacts business to the extent, in the reasonable judgment of the Board, such
qualification or registration is necessary or advisable for the protection of
the limited liability of the Members or to permit the Company lawfully to own
property or transact business. The Board may and, at the request of the Board or
any Officer, each Member shall, execute, acknowledge, swear to and deliver any
or all certificates and other instruments conforming with this Agreement that
are necessary or appro priate to qualify,
12
<PAGE> 18
continue or terminate the Company as a foreign limited liability company in all
such jurisdictions in which the Company may conduct business.
2.7 TERM. The term of the Company commenced on the date the
Certificate was filed with the office of the Secretary of State of Delaware and
shall continue in existence until dissolution as determined under Section 10.1.
2.8 NO STATE-LAW PARTNERSHIP. The Members intend that the Company
shall not be a partnership (including, without limitation, a limited
partnership) or joint venture, and that no Member or Officer shall be a partner
or joint venturer of any other Member or Officer, for any purposes, and this
Agreement shall not be construed to the contrary. The Members intend that the
Company shall be treated as a partnership for Federal and, if applicable, state
and local income tax purposes, and each Member and the Company shall file all
tax returns and shall otherwise take all tax and financial reporting positions
in a manner consistent with such treatment.
ARTICLE III
MEMBERSHIP; CAPITAL CONTRIBUTIONS; ADDITIONAL INTERESTS
3.1 MEMBERS.
(a) Names, etc. The names, residence, business or mailing
addresses, Capital Contributions and the type and number of Units of each Member
are set forth on Schedule A, as such Schedule shall be amended from time to time
in accordance with the terms of this Agreement. Any reference to this Agreement
shall be deemed to include a reference to Schedule A as amended and in effect
from time to time. Each Person listed on Schedule A, upon (i) his or its
execution of this Agreement or counterpart thereto and (ii) receipt (or deemed
receipt) by the Company of such Person's Capital Contribution as set forth on
Schedule A, is hereby admitted to the Company as a Member of the Company.
(b) Loans by Members. No Member, as such, shall be required to
lend any funds to the Company or to make any additional contribution of capital
to the Company, except as otherwise required by applicable law. Any Member may,
with the approval of the Board, make loans to the Company, and any loan by a
Member to the Company shall not be considered to be a Capital Contribution.
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(c) Representations and Warranties of Members. Each Member hereby
represents and warrants to the Company and acknowledges that:
(i) such Member has such knowledge and experience in
financial and business matters and is capable of evaluating the
merits and risks of an investment in the Company and making an
informed investment decision with respect thereto; (ii) such
Member has reviewed and evaluated all information necessary to
assess the merits and risks of its investment in the Company and
has had answered to its satisfaction any and all questions
regarding such information (subject to such Member's right to
rely upon the accuracy of any written representations and
warranties made by the Company to such Member in connection with
its investment); (iii) such Member is able to bear the economic
and financial risk of an investment in the Company for an
indefinite period of time; (iv) such Member is acquiring
interests in the Company for investment only and not with a view
to, or for resale in connection with, any distribution to the
public or public offering thereof; (v) the interests in the
Company have not been registered under the securities laws of any
jurisdiction and cannot be disposed of unless such disposition
would not violate applicable securities laws or such interests
are subsequently registered and/or qualified under applicable
securities laws and the provisions of this Agreement have been
complied with; (vi) the execution, delivery and performance of
this Agreement have been duly authorized by such Member and do
not require such Member to obtain any consent or approval that
has not been obtained and do not contravene or result in a
default under any provision of any law or regulation applicable
to such Member or other governing documents or any agreement or
instrument to which such Member is a party or by which such
Member is bound; (vii) the determination of such Member to
purchase interests in the Company has been made by such Member
independent of any other Member and independent of any statements
or opinions
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as to the advisability of such purchase or as to the properties,
business, prospects or condition (financial or otherwise) of the
Company and its Subsidiaries which may have been made or given by
any other Member or by any agent or employee of any other Member;
(viii) this Agreement is valid, binding and enforceable against
such Member in accordance with its terms; (ix) such Member is an
"accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act; and (x) if such Member is a
corporation, partnership, limited liability company or trust, it
has not been organized, reorganized or recapitalized specifically
for the purpose of investing in the Company, or if organized,
reorganized or recapitalized specifically for the purpose of
investing in the Company, each of the stockholders, partners,
members or other owners of such Member is an "accredited
investor" as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
3.2 NO LIABILITY OF MEMBERS.
(a) No Liability. Except as otherwise required by applicable law
and as expressly set forth in this Agreement, no Member shall have any personal
liability whatsoever in such Member's capacity as a Member, whether to the
Company, to any of the other Members, to the creditors of the Company or to any
other third party, for the debts, liabilities, commitments or any other
obligations of the Company or for any losses of the Company. Each Member shall
be liable only to make such Member's Capital Contribution to the Company and the
other payments provided expressly herein.
(b) Distribution. In accordance with the Act and the laws of the
State of Delaware, a member of a limited liability company may, under certain
circumstances, be required to return amounts previously distributed to such
member. It is the intent of the Members that no distribution to any Member
pursuant to Article IV hereof shall be deemed a return of money or other
property paid or distributed in violation of the Act. The payment of any such
money or distribution of any such property to a Member shall be deemed to be a
compromise within the meaning of the Act, and the Member receiving any such
money or property shall not be required to return to any Person any such money
or property. However, if any court of
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competent jurisdiction holds that, notwithstanding the provisions of this
Agreement, any Member is obligated to make any such payment, such obligation
shall be the obligation of such Member and not of any other Member.
3.3 INITIAL CAPITAL CONTRIBUTIONS. Each Member shall make a Capital
Contribution to the Company in cash in the amount set forth opposite such
Member's name on Schedule A hereto or an Asset Contribution, the Gross Asset
Value of which is the amount set forth opposite such Member's name on Schedule A
hereto. Upon receipt of the Capital Contribution set forth opposite such
Member's name on Schedule A, each Member shall be deemed to own the number of
Units set forth opposite such Member's name on Schedule A.
3.4 ISSUANCE OF ADDITIONAL INTERESTS; ADDITIONAL MEMBERS.
(a) Additional Interests. The Board shall have the right to cause
the Company to issue or sell to any Person (including Members and Affiliates of
Members) any of the following (which for purposes of this Agreement shall be
"Additional Interests") (i) additional Membership Interests or other interests
in the Company (including new classes or series thereof having different
rights); (ii) obligations, evidences of indebtedness or other securities or
interests convertible into or exchangeable for Membership Interests or other
interests in the Company; and (iii) warrants, options or other rights to
purchase or otherwise acquire Membership Interests or other interests in the
Company. The Board shall determine the terms and conditions governing the
issuance of such Additional Interests, including the number and designation of
such Additional Interests, the preference (with respect to distributions, in
liquidation or otherwise) over any other Membership Interests and any required
contributions in connection therewith.
(b) Additional Members and Interests. In order for a Person to be
admitted as a Member of the Company with respect to an Additional Interest (i)
such Person shall have delivered to the Company a written undertaking to be
bound by the terms and conditions of this Agreement and shall have delivered
such documents and instruments as the Board determines to be necessary or
appropriate in connection with the issuance of such Additional Interest to such
Person or to effect such Person's admission as a Member; and (ii) the Board
shall amend Schedule A without the further vote, act or consent of any other
Person to reflect such new Person as a Member. Upon the amendment of Schedule A,
such Person shall be deemed to have been admitted as a Member and shall be
listed as such on the books and records of the Company and thereupon shall be
issued his or its Membership Interest. If an Additional Interest is issued to an
existing Member, the Board or the
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Secretary of the Company shall amend Schedule A without the further vote, act or
consent or any other Person to reflect the issuance of such Additional Interest
and, upon the amendment of such Schedule A, such Member shall be issued his or
its Additional Interest, including any Economic Interest that corresponds to and
is part of such Additional Interest.
3.5 CERTIFICATION OF UNITS. The Company may in its discretion issue
certificates to the Holders representing the Economic Interest held by such
Holder.
ARTICLE IV
CAPITAL ACCOUNTS; DIVISION OF PROFITS AND LOSSES;
DISTRIBUTIONS
4.1 CAPITAL ACCOUNTS. Each Member shall have a capital account (a
"Capital Account") which account shall be (a) increased by the amount of (i)
cash and the Gross Asset Value of any Asset Contributions (net of liabilities
assumed by the Company and liabilities to which the property is subject), plus
(ii) such Member's distributive share of Profits allocated pursuant to Section
4.2(a) and any items of income and gain of the Company specially allocated to
such Member pursuant to Section 4.2(b), and (b) decreased by the amount of (i)
cash and the Gross Asset Value of other property (net of liabilities assumed by
the Member and liabilities to which the property is subject) distributed by the
Company to such Member, plus (ii) such Member's distributive share of Losses
allocated pursuant to Section 4.2(a) and any items of loss and deduction of the
Company specially allocated to such Member pursuant to Section 4.2(b). The
Capital Accounts shall be maintained in accordance with Treasury Regulations
Section 1.704-1(b). Accordingly, the provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Treasury
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Section of the Treasury Regulations.
4.2 ALLOCATIONS OF INCOME AND LOSS.
(a) Allocations to Capital Accounts.
(i) Profits. After giving effect to the special
allocations set forth in Section 4.2(b), Profits with
respect to each Fiscal Year shall be allocated in the
following order of priority:
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(1) first, to each Member in amounts
equal to the respective Losses, if any, allocated to each such Member
pursuant to Section 4.2(a)(ii) until the aggregate amount of Profits
allocated to such Members equals the amount of Losses allocated to
such Members pursuant to Section 4.2(a)(ii); and
(2) thereafter, to each of the Members,
in accordance with their respective Economic Interests.
(ii) Losses. After giving effect to the special
allocations set forth in Section 4.2(b), all Losses with
respect to each Fiscal Year shall be allocated to each of
the Members in accordance with their respective Economic
Interests.
(b) Special Allocations.
(i) Any allocation pursuant to Section 4.2(a)
will, however, be subject to any adjustment required to
comply with Treasury Regulations Sections 1.704-1 and
1.704-2, including, without limitation, any qualified income
offset within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and any non recourse deduction or
minimum gain chargeback within the meaning of Treasury
Regulations Section 1.704-2.
(ii) No allocation of Losses (or items thereof)
shall be made to any Member to the extent that such
allocation would create or increase a deficit in such
Member's Adjusted Capital Account.
(iii) In the event that any Member has a deficit
Adjusted Capital Account balance as of the close of any
Fiscal Year, such Member shall be specially allocated items
of Company income and gain in amounts sufficient to
eliminate such deficit as quickly as possible.
(c) Any special allocations (other than special allocations,
the effect of which are likely to be offset in the future by other special
allocations) of
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items pursuant to Section 4.2(b) shall be taken into account, to the extent
permitted by the Treasury Regulations, in computing subsequent allocations of
income, gain, loss or deductions pursuant to Section 4.2(a) so that the net
amount of any items so allocated and all other items allocated to each Member
shall, to the extent possible, be equal to the amount that would have been
allocated to each Member pursuant to Section 4.2(a) had such special allocations
under this Section 4.2(b) not occurred.
(d) The Board is authorized to adopt any convention or
combination of conventions likely to be upheld for Federal income tax purposes
regarding the allocation and/or special allocations of items of Company income,
gain, loss, deduction and expense with respect to a newly issued Membership
Interest, a Transferred Membership Interest and a redeemed Membership Interest.
A transferee of a Membership Interest shall succeed to the Capital Account of
the transferor Member to the extent it relates to the Transferred Membership
Interest.
(e) Subject to applicable Treasury Regulations and
notwithstanding anything expressed or implied to the contrary in this Agreement,
the Board may, in its sole and absolute discretion, determine allocations to
Capital Accounts based on an annual, quarterly or other period and/or on
realized and unrealized net increases or net decreases, as the case may be, in
the fair market value of Company property.
(f) Tax Allocations. Items of income, gain, loss, deduction
and expense realized by the Company shall, for each Fiscal Year, be allocated,
for Federal, state and local income tax purposes, among the Members in the same
manner as the items of income, gain, loss, deduction and expense were allocated
to Capital Accounts pursuant to Sections 4.2(a) and (b), except that solely for
Federal, state and local income tax purposes, allocations shall be made in
accordance with Section 704(c) of the Code and the Treasury Regulations
promulgated thereunder. The Company may, as determined by the Board, use any
permissible allocation method under Treasury Regulations Section 1.704-3. Any
tax credits generated by the Company shall be allocated among the Members in
accordance with their Economic Interests. The Members are aware of the income
tax consequences of the allocations made by this Section 4.2(f) and hereby agree
to be bound by the provisions of this Agreement in reporting their shares of
Company income, gain, loss, deduction, expense and credit for income tax
purposes.
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4.3 DISTRIBUTIONS.
(a) General. The Company shall not make any distributions
to its Members other than as determined by the Board in accordance with this
Agreement or as provided in this Article IV or Article X.
(b) Interim Distributions. All distributions of Company
assets to be made to the Members prior to and otherwise not in conjunction with
the final liquidation of the Company shall be made to the Members only at such
times as the Board, in its sole and absolute discretion, deems appropriate and
shall be made to the Members pro rata in accordance with their respective
Economic Interests; provided that to the extent that any such distribution would
result in the Capital Account of any Member being reduced below its initial
Capital Contribution set forth in Section 3.3, the portion of such distribution
causing such occurrence shall be distributed to the other Members pro rata based
on their respective Capital Accounts.
(c) Amounts Withheld. Notwithstanding any other provision
of this Agreement, the Board is authorized to take any action that it determines
to be necessary or appropriate to cause the Company to comply with any foreign
or United States Federal, state or local withholding requirement with respect to
any allocation, payment or distribution by the Company to any Member or other
Person. All amounts so withheld, and, in the manner determined by the Board,
amounts withheld with respect to any allocation, payment or distribution by any
Person to the Company, shall be treated as distributions to the applicable
Members under Section 4.3 or 10.2, as the case may be. If any such withholding
requirement with respect to any Member exceeds the amount distributable to such
Member under Section 4.3 or 10.2, as the case may be, or if any such withholding
requirement was not satisfied with respect to any amount previously allocated or
distributed to such Member, such Member and any successor or assignee with
respect to such Membership Interest hereby indemnifies and agrees to hold
harmless the Board, the Managers and the Company for such excess amount or such
withholding requirement, as the case may be.
4.4 NO RIGHT OF WITHDRAWAL. No Member shall have the right to withdraw
any portion of such Member's Capital Contributions or Capital Account in the
Company, except as expressly provided herein.
4.5 AMOUNTS HELD IN RESERVE. The Board shall have the power, based
upon the advice of the Company's auditors, financial consultants and attorneys,
to set aside an amount of Reserves to be held by the Company in order to
maintain
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the Company in a sound financial and cash position and to make such provision as
it in its reasonable judgment deems necessary or advisable for any and all
liabilities and obligations, contingent, unforeseen or otherwise, of the
Company.
ARTICLE V
MANAGEMENT; MEMBERS
5.1 MANAGEMENT BY THE BOARD OF MANAGERS. Except for cases in which the
approval of the Members is expressly required by this Agreement or by
non-waivable provisions of applicable law, and subject to the provisions of
Section 5.2, the powers of the Company shall be exercised by or under the
authority of, and the business and affairs of the Company shall be managed under
the direction of, a board of managers (the "Board"). Except with respect to the
execution and filing of the Certificate or as otherwise specifically provided by
this Agreement, no Member, acting solely in the capacity of a Member, shall be
an agent of the Company or have any authority to act for or bind the Company.
Except as expressly provided in this Agreement, Members, in their capacity as
such, shall have no voting, approval or consent rights.
5.2 ACTIONS BY THE BOARD; DELEGATION OF AUTHORITY AND DUTIES.
(a) In managing the business and affairs of the Company and
exercising its powers, the Board may act through meetings and written consents
pursuant to Sections 5.4 and 5.7 and through any Officer of the Company to whom
authority and duties have been delegated pursuant to Section 5.8.
(b) Any Person dealing with the Company, other than a
Member, may rely on the authority of any Officer in taking any action in the
name of the Company without inquiry into the provisions of this Agreement or
compliance herewith, regardless of whether that action actually is taken in
accordance with the provisions of this Agreement.
5.3 BOARD COMPOSITION.
(a) The Board shall consist of up to two (2) (the
"Managers") designated by the Member(s) holding a majority of the Class A Units
(the "Class A Majority"). Each Manager shall have one (1) vote for all matters
submitted for approval to the Board. The names of the initial members of the
Board are J. Merritt Belisle and Steven E. Seach.
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(b) Removal. The removal from the Board (with or without
cause) of any Manager shall be in the sole discretion and at the written
direction of the Class A Majority, but only upon such written direction and
under no other circumstances.
(c) Vacancy. In the event that any Manager ceases to serve
as a member of the Board during such representative's term of office, the
resulting vacancy on the Board shall be filled only by a representative
designated by the Class A Majority.
5.4 MEETINGS OF AND VOTING BY THE BOARD.
(a) J. Merritt Belisle will serve as Chairman of the Board;
provided that in the event J. Merritt Belisle shall not be a member of the
Board, the Class A Majority shall designate his successor.
(b) The presence of all of the members of the Board shall
constitute a quorum for the transaction of business of the Board, and, except as
otherwise provided elsewhere in this Agreement, the act of the unanimous vote of
the Managers present at a meeting of the Board at which a quorum is present
shall be the act of the Board. Any Manager who is present at a meeting of the
Board at which action on any matter is taken shall be presumed to have assented
to the action unless his dissent shall be entered in the minutes of the meeting
or unless such Manager shall file his written dissent to such action with the
person acting as secretary of the meeting before the adjournment thereof or
shall deliver such dissent to the Company immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a Manager who voted in
favor of such action.
(c) Special meetings of the Board may be called by any
Manager on at least 48 hours' written notice to each other Manager. Such notice
shall state the purpose or purposes of, or the business to be transacted at,
such meeting, except as may otherwise be required by law or provided for in this
Agreement.
(d) Attendance of a Manager at a meeting shall constitute a
waiver of notice of such meeting, except where a Manager attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that such meeting is not lawfully called or convened.
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(e) The Company shall promptly pay the reasonable
out-of-pocket expenses incurred by each Manager (including reasonable private
aircraft expenses) in connection with attending the meetings of the Board or any
committee thereof (unless such expenses shall have been paid or are required to
be paid by any other Person).
(f) Except as otherwise provided in Section 5.4(e) above,
none of the Managers shall be entitled to compensation from the Company by
virtue of such Person's activities as a Manager; provided that the foregoing
shall not prevent a Manager from receiving reimbursement for out-of-pocket
expenses incurred by such Person on behalf of the Company (including, without
limitation, legal fees), receiving distributions as a Member pursuant to this
Agreement or otherwise receiving compensation from the Company for actions
unrelated to such Person's activities as a Manager.
(g) Certain FCC-Related Restrictions. Without in any way
limiting the foregoing provisions of this Section 5.4, no Member who is a Class
B Unitholder, shall do any of the following:
(i) act as an employee of the Company if his or
her functions, directly or indirectly, relate to the media
business of the Company or any Media Subsidiary;
(ii) serve, in any material capacity, as an
independent contractor or agent with respect to the media
business of the Company or any Media Subsidiary;
(iii) communicate on matters pertaining to the
day-to-day operations of the Company or any Media Subsidiary
with the Board or any officer, director, equivalent
non-corporate official, partner, agent, representative or
employee of the Company or any Media Subsidiary, provided
that this clause (iii) shall not be deemed to prohibit
obtaining periodic financial reports or other financial
information;
(iv) perform any services for the Company
materially relating to the media activities of the Company
(except to make loans to, or act as a surety for the
Company);
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(v) become actively involved in the management or
operation of the media business of the Company;
(vi) vote on the appointment of any Manager,
unless such appointment can be vetoed by the Board; or
(vii) vote on the removal of any Manager, unless
the Manager is (A) subject to bankruptcy proceedings (as
described below), (B) removed for cause in a situation in
which it is determined by a court of competent jurisdiction
or other independent third party that any actions of the
Manager constitute either malfeasance, criminal conduct
constituting a felony, fraud, wanton or willful neglect,
gross negligence, reckless disregard of its duties with
respect to the management of the Company and its Media
Subsidiaries, or other such comparable extraordinary conduct
with respect to which a prudent investor would require the
right to remove such Person, or (C) in the case of any
Manager, adjudicated incompetent by a court of competent
jurisdiction. For purposes of this clause, a Manager shall
be deemed to be subject to "bankruptcy proceedings" upon the
occurrence of any of the following: (I) the filing of an
application by a Manager for, or a consent to, the
appointment of a trustee of its assets; (II) the filing by a
Manager of a voluntary petition in bankruptcy or the filing
of a pleading in any court of record admitting in writing
its inability to pay its debts as they come due; (III) the
making by a Manager of a general assignment for the benefit
of creditors; (IV) the filing by a Manager of an answer
admitting the material allegations of, or its consenting to,
or defaulting in answering, a bankruptcy petition filed
against it in any bankruptcy proceeding; or (V) the
expiration of 60 days following the entry or
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an order, judgment or decree by any court of competent
jurisdiction adjudicating a Manager bankrupt or appointing a
trustee of its assets.
The purpose of the restrictions set forth in this Section 5.4(g) is to conform
the rights and powers of Class B Unitholders to the criteria for non-attribution
of limited partnership interests and membership interests in limited liability
companies established by the FCC Rules.
5.5 ACTION BY WRITTEN CONSENT OR TELEPHONE CONFERENCE. Any action
permitted or required by the Act, the Certificate or this Agreement to be taken
at a meeting of the Board may be taken without a meeting if a consent in
writing, setting forth the action to be taken, is signed by all the Managers.
Such consent shall have the same force and effect as a unanimous vote at a
meeting and may be stated as such in any document or instrument filed with the
Secretary of State of Delaware, and the execution of such consent shall
constitute attendance or presence in person at a meeting of the Board. Subject
to the requirements of the Act, the Certificate or this Agreement for notice of
meetings, the Managers may participate in and hold a meeting of the Board by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and presence in person
at such meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
5.6 OFFICERS. Officers of the Company may be elected by the Board and
may consist of a chief executive officer, chief financial officer, a president,
one or more vice-presidents, a treasurer, a secretary, and such other officers
and assistant officers as may be deemed necessary or desirable by the Board. Any
number of offices may be held by the same person. In its discretion, the Board
may choose not to fill any office for any period as it may deem advisable. Each
Officer shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as hereinafter provided.
Any Officer or agent elected by the Board may be removed by the Board whenever
in its judgment the best interests of the Company would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Any vacancy occurring in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
for the unexpired portion of the term by the Board then in office. Compensation
of all Officers shall be fixed by the Board, and no Officer shall be prevented
from receiving such compensation by virtue of his or her also being a
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Manager. In the case of the absence or disability of any Officer of the Company
and of any person hereby authorized to act in such Officer's place during such
Officer's absence or disability, the Board may by resolution delegate the powers
and duties of such Officer to any other Officer or to any director, or to any
other person whom it may select. The Officers, in the performance of their
duties as such, shall owe to the Company duties of loyalty and due care of the
type owed by the officers of a corporation to such corporation and its
stockholders under the laws of the State of Delaware.
5.7 PURCHASE OF UNITS. The Board may cause the Company to purchase or
otherwise acquire Units, Unit Equivalents or other Economic Interests or may
purchase or otherwise acquire Units, Unit Equivalents or other Economic
Interests on behalf of the Company. As long as such Units, Unit Equivalents or
other Economic Interests are owned by or on behalf of the Company, such
securities will not be considered outstanding for any purpose.
5.8 LIMITATION OF DUTIES. No Manager (in his capacity as a Manager)
shall have any duties (including fiduciary duties) or liabilities relating
thereto, to the Company, the Holders or the other Managers, except as
specifically provided herein. Accordingly, each Manager shall be entitled to act
solely on behalf of the Members that have designated such Manager.
ARTICLE VI
EXCULPATION AND INDEMNIFICATION
6.1 PERFORMANCE OF DUTIES; NO LIABILITY OF MEMBERS, MANAGERS AND
OFFICERS. No Member or Manager shall have any duty to the Company or any Member
of the Company except as expressly set forth herein or in other written
agreements. No Member, Manager or Officer of the Company shall be liable to the
Company or to any Member for any loss or damage sustained by the Company or to
any Member, unless the loss or damage shall have been the result of gross
negligence, fraud or intentional misconduct by the Member, Manager or Officer in
question or, in the case of an Officer, breach of such Person's duties pursuant
to Section 5.6. In performing such Person's duties, each such Person shall be
entitled to rely in good faith on the provisions of this Agreement and on
information, opinions, reports or statements (including financial statements and
information, opinions, reports or statements as to the value or amount of the
assets, liabilities, profits or losses of the Company or any facts pertinent to
the existence and amount of assets from which distributions to Members might
properly be paid) of the following other
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Persons or groups: one or more Officers or employees of the Company, any
attorney, independent accountant, appraiser or other expert or professional
employed or engaged by or on behalf of the Company, the Board; or any other
Person who has been selected with reasonable care by or on behalf of the
Company, the Board in each case as to matters which such relying Person
reasonably believes to be within such other Person's competence. The preceding
sentence shall in no way limit any Person's right to rely on information to the
extent provided in Section 18-406 of the Act. No Member, Manager or Officer of
the Company shall be personally liable under any judgment of a court, or in any
other manner, for any debt, obligation or liability of the Company, whether that
liability or obligation arises in contract, tort or otherwise, solely by reason
of being a Member, Manager or Officer of the Company or any combination of the
foregoing.
6.2 CONFIDENTIAL INFORMATION. No Holder or Manager shall disclose or
use at any time, either during his or its association or employment with the
Company or thereafter, any Confidential Information of which the Holder or
Manager is or becomes aware. Each Holder and Manager in possession of
Confidential Information shall take all appropriate steps to safeguard such
information and to protect it against disclosure, misuse, espionage, loss and
theft. Notwithstanding the above, a Holder or Manager may disclose Confidential
Information to the extent (i) the disclosure is necessary for the Holder,
Manager and/or the Company's agents, representatives, and advisors to fulfill
their duties to the Company pursuant to this Agreement and/or other written
agreements, (ii) the disclosure is made in connection with the exercise of any
Holder's or Manager's rights pursuant to Article IX or (iii) the disclosure is
required by law or a court order.
6.3 RIGHT TO INDEMNIFICATION. Subject to the limitations and
conditions as provided in this Article VI, each Person who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or arbitrative or in the nature of an alternative dispute
resolution in lieu of any of the foregoing (hereinafter a "Proceeding"), or any
appeal in such a Proceeding or any inquiry or investigation that could lead to
such a Proceeding, by reason of the fact that such Person, or a Person of which
such Person is the legal representative, is or was a Member, a Manager or
Officer or, in each case, a representative thereof shall be indemnified by the
Company to the fullest extent permitted by applicable law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior
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to such amendment) against judgments, penalties (including excise and similar
taxes and punitive damages), fines, settlements and reasonable expenses
(including, without limitation, reasonable attorneys' and experts' fees)
actually incurred by such Person in connection with such Proceeding, appeal,
inquiry or investigation (each a "Loss"), unless (in the case of a Manager or
Officer) such Loss shall have been the result of gross negligence, fraud or
intentional misconduct by such Person or arises in connection with any action,
suit or proceeding brought by one Member against another Member, in which case
such indemnification shall not cover such Loss to the extent resulting from such
gross negligence, fraud or intentional misconduct or action, suit or proceeding
brought by one Member against another Member. Indemnification under this
Article VI shall continue as to a Person who has ceased to serve in the capacity
which initially entitled such Person to indemnity hereunder. The rights granted
pursuant to this Article VI shall be deemed contract rights, and no amendment,
modification or repeal of this Article VI shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings, appeals,
inquiries or investigations arising prior to any amendment, modification or
repeal. Notwithstanding anything in this Section 6.3 to the contrary, the
indemnification provided by this Section 6.3 shall only apply to Proceedings
brought by third-party claimants against such Member, Manager, or Officer and
not Proceedings brought by the Company against such Member, Manager, or Officer.
6.4 ADVANCE PAYMENT. The right to indemnification conferred in this
Article VI shall include the right to be paid or reimbursed by the Company for
the reasonable expenses incurred by a Person (other than an officer of the
Company or any of its Subsidiaries thereof in respect of claims by the Company
or any of its Subsidiaries thereof against such officer in such officer's
capacity as such) entitled to be indemnified under Section 6.3 who was, is or is
threatened to be made a named defendant or respondent in a Proceeding in advance
of the final disposition of the Proceeding and without any determination as to
the Person's ultimate entitlement to indemnification; provided, however, that
the payment of such expenses incurred by any such Person in advance of the final
disposition of a Proceeding shall be made only upon delivery to the Company of a
written affirmation by such Person of his or her good faith belief that he has
met the standard of conduct necessary for indemnification under Article VI and
a written undertaking, by or on behalf of such Person, to repay all amounts so
advanced if it shall ultimately be determined that such indemnified Person is
not entitled to be indemnified under this Article VI or otherwise.
6.5 INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Company, at the
direction of the Board, may indemnify and advance expenses to an employee or
28
<PAGE> 34
agent of the Company to the same extent and subject to the same conditions under
which it may indemnify and advance expenses under Sections 6.4 and 6.5.
6.6 APPEARANCE AS A WITNESS. Notwithstanding any other provision of
this Article VI, the Company may pay or reimburse reasonable out-of-pocket
expenses incurred by a Manager, Member, Officer, employee or agent in connection
with his appearance as a witness or other participation in a Proceeding at a
time when he is not a named defendant or respondent in the Proceeding.
6.7 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the
advancement and payment of expenses conferred in this Article VI shall not be
exclusive of any other right that a Member, Manager, Officer or other Person
indemnified pursuant to this Article VI may have or hereafter acquire under any
law (common or statutory) or provision of this Agreement.
6.8 INSURANCE. The Company may obtain and maintain, at its expense,
insurance to protect the Members, Managers, Officers, employees and agents from
any expense, liability or loss arising out of or in connection with such
Person's status and actions as a Member, Manager, Officer, employee or agent. In
addition, the Company may, without further approval, but is not obligated to,
purchase and maintain insurance, at its expense, to protect itself and any other
Member, Manager, Officer or agent of the Company who is or was serving at the
request of the Company as a manager, director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of a foreign or
domestic limited liability company, corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise against
any expense, liability or loss, whether or not the Company would have the power
to indemnify such Person against such expense, liability or loss under this
Article VI.
6.9 SAVINGS CLAUSE. If this Article VI or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Person indemnified
pursuant to this Article VI as to costs, charges and expenses (including
reasonable attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any such Proceeding, appeal, inquiry or investigation to the
full extent permitted by any applicable portion of this Article VI that shall
not have been invalidated and to the fullest extent permitted by applicable law.
29
<PAGE> 35
ARTICLE VII
TAXES
7.1 TAX RETURNS. The Company shall cause to be prepared and filed all
necessary Federal, state and local income tax returns for the Company, and shall
make any elections the Board may deem appropriate and in the best interests of
the Members. Each Member shall furnish to the Company all pertinent information
in its possession relating to Company operations that is necessary to enable the
Company's income tax returns to be prepared and filed. The Company shall furnish
all pertinent information to the Members that is necessary to determine amounts
includible on their tax returns with respect to the Company (including Schedule
K-1) not later than 75 days after the end of the Taxable Year or any extension
period granted by the relevant authority having jurisdiction over such matters.
7.2 TAX MATTERS MEMBER. The Board shall have the power and authority
to appoint a "tax matters partner" of the Company pursuant to Section 6231(a)(7)
of the Code (the "Tax Matters Member") who shall also be the "notice partner"
within the meaning of Section 6223 of the Code. Each person (for purposes of
this Section 7.2, a "Pass-Thru Member") that holds or controls a Unit on behalf
of, or for the benefit of, another person or persons, or which Pass-Thru Member
is beneficially owned (directly or indirectly) by another person or persons
shall, within 30 days following receipt from the Tax Matters Member of a notice
or document, convey such notice or other document in writing to all holders of
beneficial interests in the Company holding such interest through such Pass-Thru
Member. The Tax Matters Member is authorized to represent the Company before the
Internal Revenue Service and any other governmental agency with jurisdiction.
The Tax Matters Member is not authorized to sign consents or enter into
settlements or other agreements with any governmental agencies, unless the
Board has approved such action.
ARTICLE VIII
BOOKS, REPORTS AND COMPANY FUNDS
8.1 MAINTENANCE OF BOOKS. The Company shall keep books and records of
accounts in accordance with GAAP and shall keep minutes of the proceedings of
its Managers. The Fiscal Year shall be the accounting year of the Company for
financial reporting purposes.
8.2 COMPANY FUNDS. The Company may not commingle the Company's funds
with the funds of any Member or the funds of any Affiliate of any Member.
30
<PAGE> 36
ARTICLE IX
TRANSFERS AND OTHER EVENTS
9.1 RESTRICTION ON TRANSFERS. No Class A Unitholder may, except
pursuant to (i) that certain Option Agreement, dated as of the date hereof, by
and between Translator Management, Inc., a Delaware corporation, and Brera
Translator, Corp. ("Brera Translator"), a Delaware corporation, and (ii) that
certain Option Agreement, dated as of the date hereof, by and between Brera
Translator and Classic Cable, Inc., a Delaware corporation, Transfer all or any
part of such Holder's Membership Interest (including any Unit, Unit Equivalents
or other Economic Interest) or any portion thereof or interest therein.
9.2 REDEMPTION BY THE COMPANY. At the sole election and discretion of
the Board, the Company may on any occasion redeem all Class B Unitholders'
Membership Interests (including any Units, Unit Equivalents or other Economic
Interests) at a redemption price equal to the Capital Contribution made to the
Company as set forth opposite such Class B Unitholder's name on Schedule A
hereto.
9.3 LEGEND. In the event that certificates representing Member ship
Interests are issued ("Certificated Interests"), such certificates will bear the
following legend:
"THE INTEREST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER.
THE TRANSFER OF THE INTEREST REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN A LIMITED LIABILITY COMPANY
AGREEMENT, AS AMENDED, GOVERNING THE ISSUER (THE "COMPANY"), BY AND
AMONG CERTAIN INVESTORS. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED
BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT
CHARGE.
31
<PAGE> 37
9.4 EFFECTIVE DATE. Any Transfer and any related admission of a Person
as a Member in compliance with this Article IX shall be deemed effective on such
date that the transferee or successor in interest complies with the requirements
of this Agreement.
9.5 EFFECT OF INCAPACITY. Except as otherwise provided herein, the
Incapacity of a Member shall not dissolve or terminate the Company. In the event
of such Incapacity, the executor, administrator, guardian, trustee or other
personal representative of the Incapacitated Member shall be deemed to be the
assignee of such Member's Economic Interest and may, subject to the terms and
conditions set forth in Section 9.6, become a substituted Member.
ARTICLE X
DISSOLUTION, LIQUIDATION AND TERMINATION
10.1 DISSOLUTION. The Company shall be dissolved and its affairs shall
be wound up on the first to occur of the following:
(a) a resolution by the Board to dissolve the Company; or
(b) the entry of a decree of judicial dissolution of the
Company under Section 18-802 of the Act.
The death, retirement, resignation, expulsion, Incapacity, bankruptcy or
dissolution of a Member, or the occurrence of any other event that terminates
the continued membership of a Member in the Company, shall not cause a
dissolution of the Company, and the Company shall continue in existence subject
to the terms and conditions of this Agreement.
10.2 LIQUIDATION AND TERMINATION. On dissolution of the Company, the
liquidator(s) shall proceed diligently to wind up the affairs of the Company and
make final distributions as provided herein and in the Act. The costs of
liquidation shall be borne as a Company expense. Until final distribution, the
liquidator(s) shall continue to operate the Company properties with all of the
power and authority of Board and Members, subject to the power of the Board to
remove and replace such liquidator(s). The steps to be accomplished by the
liquidator(s) are as follows:
(a) As promptly as possible after dissolution and again
after final liquidation, the liquidator(s) shall cause a proper accounting to be
made by
32
<PAGE> 38
a nationally recognized firm of certified public accountants of the Company's
assets, liabilities and operations through the date on which the dissolution
occurs or the final liquidation is completed, as applicable.
(b) The liquidator(s) shall pay, satisfy or discharge from
Company funds all of the debts, liabilities and obligations of the Company
(including, without limitation, all expenses incurred in liquidation) or
otherwise make adequate provision for payment and discharge thereof (including,
without limitation, the establishment of a cash fund for contingent liabilities
in such amount and for such term as the liquidator(s) may reasonably determine).
(c) All remaining assets of the Company shall be distributed
to the Holders in accordance with the positive balances in their respective
Capital Accounts, as determined after taking into account all adjustments to
Capital Accounts for the Taxable Year in which the liquidation of the Company
occurs, by the end of the Taxable Year of the Company during which the
liquidation of the Company occurs (or, if later, 90 days after the date of the
liquidation).
The liquidator(s) shall cause only cash, evidences of indebtedness and other
securities to be distributed in any liquidation. The distribution of cash
and/or property (other than cash) to a Holder in accordance with the provisions
of this Section 10.2 constitutes a complete return to such Holder of its Capital
Contributions and a complete distribution to such Holder of its interest in the
Company and all the Company's property and constitutes a compromise to which all
Holders have consented within the meaning of the Act. The distribution of cash
and/or property (other than cash) to a Holder who is not a Member in accordance
with the provisions of this Section 10.2 constitutes a complete distribution to
such Holder of its interest in the Company and all the Company's property and
constitutes a compromise to which all Holders have consented within the meaning
of the Act. To the extent that a Member returns funds to the Company, it has no
claim against any other Member for those funds.
10.3 CANCELLATION OF CERTIFICATE. On completion of the distribution
of Company assets as provided herein, the Company is terminated, and shall file
a certificate of cancellation with the Secretary of State of the State of
Delaware, cancel any other filings made pursuant to Section 2.1 and take such
other actions as may be necessary to terminate the Company.
33
<PAGE> 39
ARTICLE XI
GENERAL/MISCELLANEOUS PROVISIONS
11.1 OFFSET. Whenever the Company is to pay any sum to any Holder, any
amounts that such Holder owes to the Company may be deducted from that sum
before payment.
11.2 NOTICES. Except as expressly set forth to the contrary in this
Agreement, all notices, requests or consents provided for or permitted to be
given under this Agreement must be in writing and must be given either by
depositing that writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested or by
delivering that writing to the recipient in person; and a notice, request, or
consent given under this Agreement is effective upon receipt against the Person
who receives it. All notices, requests and consents to be sent to a Member must
be sent to or made at the address given for that Holder on Schedule A, or such
other address as that Holder may specify by notice to the other Holders. Any
notice, request or consent to the Company or the Board must be given to the
Board or, if appointed, the secretary of the Company at the Company's chief
executive offices. Whenever any notice is required to be given by law or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
11.3 ENTIRE AGREEMENT. This Agreement and other written agreements
among the Holders of even date herewith constitute the entire agreement among
the Holders relating to the Company and supersedes all prior contracts or
agreements with respect to the Company, whether oral or written.
11.4 EFFECT OF WAIVER OR CONSENT. A waiver or consent, express or
implied, to or of any breach or default by any Person in the performance by that
Person of its obligations hereunder or with respect to the Company is not a
consent or waiver to or of any other breach or default in the performance by
that Person of the same or any other obligations of that Person hereunder or
with respect to the Company. Failure on the part of a Person to complain of any
act of any Person or to declare any Person in default hereunder or with respect
to the Company, irrespective of how long that failure continues, does not
constitute a waiver by that Person of its rights with respect to that default
until the applicable statute-of-limitations period has run.
34
<PAGE> 40
11.5 AMENDMENT OR MODIFICATION. This Agreement and any provision
hereof may be amended or modified from time to time only by a written instrument
unanimously adopted by the Board. Notwithstanding the preceding sentence, the
Board may amend and modify the provisions of this Agreement (including Article
IV) and Schedule A hereto to the extent necessary to reflect the issuance of
Additional Interests (including new classes of interests, and including the
issuance or exercise of Unit Equivalents) in the Company or the admission or
substitution of any Holder permitted under this Agreement.
11.6 BINDING EFFECT. Subject to the restrictions on Transfers set
forth in this Agreement, this Agreement is binding on and shall inure to the
benefit of the Members and their respective heirs, legal representatives,
successors and permitted assigns. The terms and provisions of this Agreement are
intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other Person.
11.7 GOVERNING LAW; SEVERABILITY. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE
OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. In the
event of a direct conflict between the provisions of this Agreement and any
provision of the Certificate or any mandatory provision of the Act, the
applicable provision of the Certificate or the Act shall control. If any
provision of this Agreement or the application thereof to any Person or
circumstance is held invalid or unenforceable to any extent, the remainder of
this Agreement and the application of that provision to other Persons or
circumstances is not affected thereby and that provision shall be enforced to
the greatest extent permitted by law.
11.8 FURTHER ASSURANCES. In connection with this Agreement and the
transactions contemplated hereby, each Holder shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
11.9 WAIVER OF CERTAIN RIGHTS. Each Holder irrevocably waives any
right it may have to demand any distributions or withdrawal of property from the
35
<PAGE> 41
Company or to maintain any action for dissolution (except pursuant to Section
18-802 of the Act) of the Company or for partition of the property of the
Company.
11.10 INDEMNIFICATION AND REIMBURSEMENT FOR PAYMENTS ON BEHALF OF A
HOLDER. If the Company is obligated to pay any amount to a govern mental agency
(or otherwise makes a payment) because of a Holder's status or otherwise
specifically attributable to a Holder (including, without limitation, Federal
withholding taxes with respect to foreign Persons, state personal property
taxes, state unincorporated business taxes, etc.), then such Holder (the
"Indemnifying Holder") shall indemnify the Company in full for the entire amount
paid (including, without limitation, any interest, penalties and expenses
associated with such payments). At the option of the Board, either:
(a) promptly upon notification of an obligation to indemnify
the Company, the Indemnifying Holder shall make a cash payment to the Company
equal to the full amount to be indemnified (provided that the amount paid shall
not be treated as a Capital Contribution), or
(b) the Company shall reduce distributions that would
otherwise be made to the Indemnifying Holder, until the Company has recovered
the full amount to be indemnified (provided that the amount of such reduction
shall be deemed to have been distributed for all purposes of this Agreement).
An Indemnifying Holder's obligation to make contributions to the Company under
this Section 11.11 shall survive the termination, dissolution, liquidation and
winding up of the Company and, for purposes of this Section 11.11, the Company
shall be treated as continuing in existence. The Company may pursue and enforce
all rights and remedies it may have against each Indemnifying Holder under this
Section 11.11, including instituting a lawsuit to collect such contribution with
interest calculated at the Company's then existing borrowing rate for its senior
secured debt (but not in excess of the highest rate per annum permitted by law).
11.11 NOTICE TO HOLDERS OF PROVISIONS. By executing this Agreement,
each Holder acknowledges that it has actual notice of (a) all of the provisions
hereof (including, without limitation, the restrictions on the transfer set
forth in Article XI) and (b) all of the provisions of the Certificate.
11.12 COUNTERPARTS. This Agreement may be executed in multiple
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
36
<PAGE> 42
11.13 CONSENT TO JURISDICTION. Each Holder (i) irrevocably submits to
the non-exclusive jurisdiction of the United States District Court for the
District of Delaware and the state courts of the State of Delaware, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby, (ii) agrees that service of any
process, summons, notice or document by U.S. certified or registered mail to
such Holder's respective address set forth on Schedule A shall be effective
service of process in any action, suit or proceeding in Delaware with respect to
any matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence, and (iii) irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in the
United States District Court for the District of Delaware or the state courts of
the State of Delaware, and hereby irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in such court has been brought in an inconvenient forum.
11.14 HEADINGS. The headings used in this Agreement are for the
purpose of reference only and will not otherwise affect the meaning or
interpretation of any provision of this Agreement.
11.15 REMEDIES. The Company and the Holders shall be entitled to
enforce their rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement (including costs of
enforcement) and to exercise any and all other rights existing in their favor.
The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that the
Company or any Holder may in its or his sole discretion apply to any court of
law or equity of competent jurisdiction for specific performance or injunctive
relief (without posting a bond or other security) in order to enforce or prevent
any violation or threatened violation of the provisions of this Agreement.
11.16 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under applicable law or rule in any
jurisdiction, such
37
<PAGE> 43
invalidity, illegality or unenforceability shall not affect any other provision
or any other jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
11.17 SURVIVAL. All indemnities and reimbursement obligations made
pursuant to this Agreement shall survive dissolution and liquidation of the
Company until expiration of the longest applicable statute of limitations
(including extensions and waivers) with respect to the matter for which a party
would be entitled to be indemnified or reimbursed, as the case may be.
38
<PAGE> 44
IN WITNESS WHEREOF, the Members have executed this Agreement as of
the date first set forth above.
TELEVISION ENTERPRISES, INC.
By:/s/ Steven Seach
-----------------------------------------------
Name: Steven Seach
Title: President and Chief Financial Officer
UNIVERSAL CABLE COM, INC. a/k/a
UNIVERSAL CABLE HOLDINGS, INC.
By:/s/ Steven Seach
-----------------------------------------------
Name: Steven Seach
Title: President and Chief Financial Officer
WT ACQUISITION CORPORATION
By:/s/ Steven Seach
-----------------------------------------------
Name: Steven Seach
Title: President and Chief Financial Officer
TRANSLATOR MANAGEMENT, INC.
By:/s/ J. Merritt Belisle
-----------------------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
39
<PAGE> 45
SCHEDULE A
<TABLE>
<CAPTION>
Agreed Upon Value of Agreed Upon Value of Number of Units
Capital Capital representing
Contributions in Respect Contributions in Respect Class A
of Class A Units of Class B Units Membership Interests
------------------------- ------------------------- --------------------
Name and Address of Member
<S> <C> <C> <C>
Television Enterprises, Inc. N/A $32,333.33 N/A
515 Congress Avenue
Suite 2626
Austin, TX 78701
Tel: 512-476-9095
Fax: 512-476-5204
Universal Cable Com, Inc. a/k/a N/A $32,333.33 N/A
Universal Cable Holdings, Inc.
515 Congress Avenue
Suite 2626
Austin, TX 78701
Tel: 512-476-9095
Fax: 512-476-5204
WT Acquisition Corporation N/A $32,333.33 N/A
515 Congress Avenue
Suite 2626
Austin, TX 78701
Tel: 512-476-9095
Fax: 512-476-5204
Translator Management, Inc. $970 N/A 1
515 Congress Avenue
Suite 2626
Austin, TX 78701
Tel: 512-476-9095
Fax: 512-476-5204
</TABLE>
<TABLE>
<CAPTION>
Percentage Allocation of Percentage Allocation of
Number of Units Distributions Pursuant to Distributions Pursuant to
representing Article IV hereof Article IV hereof
Class B relating to Class A relating to Class B
Membership Interests Economic Interests Economic Interests
-------------------- ------------------------- -------------------------
Name and Address of Member
<S> <C> <C> <C>
Television Enterprises, Inc. 33 N/A 331/3%
515 Congress Avenue
Suite 2626
Austin, TX 78701
Tel: 512-476-9095
Fax: 512-476-5204
Universal Cable Com, Inc. a/k/a 33 N/A 331/3%
Universal Cable Holdings, Inc.
515 Congress Avenue
Suite 2626
Austin, TX 78701
Tel: 512-476-9095
Fax: 512-476-5204
WT Acquisition Corporation 33 N/A 331/3%
515 Congress Avenue
Suite 2626
Austin, TX 78701
Tel: 512-476-9095
Fax: 512-476-5204
Translator Management, Inc. N/A 100% N/A
515 Congress Avenue
Suite 2626
Austin, TX 78701
Tel: 512-476-9095
Fax: 512-476-5204
</TABLE>
40
<PAGE> 1
EXHIBIT 4.9
EXECUTION COPY
================================================================================
Classic Cable, Inc.
SERIES A AND SERIES B
10 1/2% SENIOR SUBORDINATED NOTES DUE 2010
----------------------------
INDENTURE
Dated as of February 16, 2000
----------------------------
Chase Bank of Texas, National Association
Trustee
----------------------------
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310(a)(1)............................................................. 7.10
(a)(2)............................................................. 7.10
(a)(3)............................................................. N.A.
(a)(4)............................................................. N.A.
(a)(5)............................................................. 7.10
(b)................................................................ 7.10
(c)................................................................ N.A.
311(a)................................................................ 7.11
(b)................................................................ 7.11
(c)................................................................ N.A.
312(a)................................................................ 2.05
(b)................................................................ 11.03
(c)................................................................ 11.03
313(a)................................................................ 7.06
(b)(1)............................................................. 10.03
(b)(2)............................................................. 7.07
(c)................................................................ 7.06;11.02
(d)................................................................ 7.06
314(a)................................................................ 4.03;11.02
(b)................................................................ 10.02
(c)(1)............................................................. 11.04
(c)(2)............................................................. 11.04
(c)(3)............................................................. N.A.
(d)................................................................ N.A.
(e)................................................................ 11.05
(f)................................................................ N.A.
315(a)................................................................ 7.01
(b)................................................................ 7.05,11.02
(c)................................................................ 7.01
(d)................................................................ 7.01
(e)................................................................ 6.11
316(a) (last sentence)................................................ 2.09
(a)(1)(A).......................................................... 6.05
(a)(1)(B).......................................................... 6.04
(a)(2)............................................................. N.A.
(b)................................................................ 6.07
(c)................................................................ 2.12
317(a)(1)............................................................. 6.08
(a)(2)............................................................. 6.09
(b)................................................................ 2.04
318(a)................................................................ 11.01
(b)................................................................ N.A.
(c)................................................................ 11.01
</TABLE>
N.A. means not applicable.
* This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.....................................................................................1
Section 1.02. Other Definitions..............................................................................22
Section 1.03. Incorporation by Reference of Trust Indenture Act..............................................22
Section 1.04. Rules of Construction..........................................................................23
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating................................................................................23
Section 2.02. Execution and Authentication...................................................................24
Section 2.03. Registrar and Paying Agent.....................................................................25
Section 2.04. Paying Agent to Hold Money in Trust............................................................25
Section 2.05. Holder Lists...................................................................................25
Section 2.06. Transfer and Exchange..........................................................................25
Section 2.07. Replacement Notes..............................................................................37
Section 2.08. Outstanding Notes..............................................................................37
Section 2.09. Treasury Notes.................................................................................37
Section 2.10. Temporary Notes................................................................................38
Section 2.11. Cancellation...................................................................................38
Section 2.12. Defaulted Interest.............................................................................38
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.............................................................................38
Section 3.02. Selection of Notes to Be Redeemed..............................................................39
Section 3.03. Notice of Redemption...........................................................................39
Section 3.04. Effect of Notice of Redemption.................................................................40
Section 3.05. Deposit of Redemption Price....................................................................40
Section 3.06. Notes Redeemed in Part.........................................................................40
Section 3.07. Optional Redemption............................................................................40
Section 3.08. Mandatory Redemption...........................................................................41
Section 3.09. Offer to Purchase by Application of Excess Proceeds............................................41
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes...............................................................................43
Section 4.02. Maintenance of Office or Agency................................................................43
Section 4.03. Reports........................................................................................44
Section 4.04. Compliance Certificate.........................................................................44
Section 4.05. Taxes..........................................................................................45
Section 4.06. Stay, Extension and Usury Laws.................................................................45
Section 4.07. Restricted Payments............................................................................45
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.................................47
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.....................................49
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Section 4.10. Asset Sales....................................................................................51
Section 4.11. Transactions with Affiliates...................................................................52
Section 4.12. Liens..........................................................................................53
Section 4.13. Corporate Existence............................................................................54
Section 4.14. Offer to Repurchase Upon Change of Control.....................................................54
Section 4.15. No Senior Subordinated Debt....................................................................55
Section 4.16. Limitation on Sale and Leaseback Transactions..................................................55
Section 4.17. Limitation on Issuances and Sales of Equity Interests in Wholly Owned Subsidiaries.............56
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries........................................56
Section 4.19. Additional Note Guarantees.....................................................................56
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.......................................................57
Section 5.02. Successor Corporation Substituted..............................................................57
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default..............................................................................58
Section 6.02. Acceleration...................................................................................59
Section 6.03. Other Remedies.................................................................................60
Section 6.04. Waiver of Past Defaults........................................................................60
Section 6.05. Control by Majority............................................................................60
Section 6.06. Limitation on Suits............................................................................61
Section 6.07. Rights of Holders of Notes to Receive Payment..................................................61
Section 6.08. Collection Suit by Trustee.....................................................................61
Section 6.09. Trustee May File Proofs of Claim...............................................................61
Section 6.10. Priorities.....................................................................................62
Section 6.11. Undertaking for Costs..........................................................................62
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee..............................................................................63
Section 7.02. Rights of Trustee..............................................................................64
Section 7.03. Individual Rights of Trustee...................................................................65
Section 7.04. Trustee's Disclaimer...........................................................................65
Section 7.05. Notice of Defaults.............................................................................65
Section 7.06. Reports by Trustee to Holders of the Notes.....................................................65
Section 7.07. Compensation and Indemnity.....................................................................66
Section 7.08. Replacement of Trustee.........................................................................66
Section 7.09. Successor Trustee by Merger, etc...............................................................67
Section 7.10. Eligibility; Disqualification..................................................................67
Section 7.11. Preferential Collection of Claims Against Company..............................................68
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.......................................68
Section 8.02. Legal Defeasance and Discharge.................................................................68
Section 8.03. Covenant Defeasance............................................................................68
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Section 8.04. Conditions to Legal or Covenant Defeasance......................................................69
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions...70
Section 8.06. Repayment to Company............................................................................70
Section 8.07. Reinstatement...................................................................................71
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.............................................................71
Section 9.02. With Consent of Holders of Notes................................................................72
Section 9.03. Compliance with Trust Indenture Act.............................................................73
Section 9.04. Revocation and Effect of Consents...............................................................73
Section 9.05. Notation on or Exchange of Notes................................................................74
Section 9.06. Trustee to Sign Amendments, etc.................................................................74
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate........................................................................74
Section 10.02. Liquidation; Dissolution; Bankruptcy............................................................74
Section 10.03. Default on Designated Senior Debt...............................................................75
Section 10.04. Acceleration of Securities......................................................................76
Section 10.05. When Distribution Must Be Paid Over.............................................................76
Section 10.06. Notice by Company...............................................................................76
Section 10.07. Subrogation.....................................................................................76
Section 10.08. Relative Rights.................................................................................76
Section 10.09. Subordination May Not Be Impaired by Company....................................................77
Section 10.10. Distribution or Notice to Representative........................................................77
Section 10.11. Rights of Trustee and Paying Agent..............................................................77
Section 10.12. Authorization to Effect Subordination...........................................................78
Section 10.13. Amendments......................................................................................78
ARTICLE 11
NOTE GUARANTEES
Section 11.01. Guarantee.......................................................................................78
Section 11.02. Subordination of Note Guarantee.................................................................79
Section 11.03. Limitation on Guarantor Liability...............................................................79
Section 11.04. Execution and Delivery of Note Guarantee........................................................79
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms..............................................80
Section 11.06. Releases Following Sale of Assets...............................................................80
ARTICLE 12
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge......................................................................81
Section 12.02. Application of Trust Money......................................................................82
ARTICLE 13
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls....................................................................82
Section 13.02. Notices.........................................................................................82
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Section 13.03. Communication by Holders of Notes with Other Holders of Notes...................................84
Section 13.04. Certificate and Opinion as to Conditions Precedent..............................................84
Section 13.05. Statements Required in Certificate or Opinion...................................................84
Section 13.06. Rules by Trustee and Agents.....................................................................85
Section 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders........................85
Section 13.08. Governing Law...................................................................................85
Section 13.09. No Adverse Interpretation of Other Agreements...................................................85
Section 13.10. Successors......................................................................................85
Section 13.11. Severability....................................................................................85
Section 13.12. Counterpart Originals...........................................................................85
Section 13.13. Table of Contents, Headings, etc................................................................86
</TABLE>
EXHIBITS
Exhibit A1 FORM OF NOTE
Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE FROM EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
Exhibit E FORM OF NOTE GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
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INDENTURE dated as of February 16, 2000 between Classic Cable, Inc., a
Delaware corporation (the "Company" or "Classic"), the Guarantors listed on
Schedule 1 hereto and Chase Bank of Texas, National Association, as trustee (the
"Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 10 1/2% Series
A Senior Subordinated Notes due 2010 (the "Series A Notes") and the 10 1/2%
Series B Senior Subordinated Notes due 2010 (the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Additional Notes" means up to $100.0 million aggregate principal
amount of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the
Initial Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of more than 5% of
the Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Premium" means, with respect to any Note on any redemption
date, the greater of:
(1) 1.0% of the principal amount of the Note; or
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(2) the excess of:
(a) the present value at such redemption date of (i) the redemption
price of the Note at March 1, 2005 (such redemption price being
set forth in the table in Section 3.07 hereof) plus (ii) all
required interest payments due on the Note through March 1, 2005
(excluding accrued but unpaid interest), computed using a
discount rate equal to the Treasury Rate as of such redemption
date plus 50 basis points; over
(b) the principal amount of the Note, if greater.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Acquisition" means (a) an Investment by Classic or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be consolidated or merged with or into
Classic or any Restricted Subsidiary, or (b) any acquisition by Classic or any
Restricted Subsidiary of the assets of any Person that constitute substantially
all of an operating unit, a division or line of business of such Person or that
is otherwise outside of the ordinary course of business.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or rights,
other than in the ordinary course of business consistent with past
practices; provided that the sale, conveyance or other disposition of all
or substantially all of the assets of Classic and its Subsidiaries taken as
a whole will be governed by the provisions of Section 4.14 hereof and/or
the provisions of Section 5.01 hereof and not by the provisions of Section
4.10 hereof; and
(2) the issuance or sale of Equity Interests in any of Classic's Restricted
Subsidiaries or the sale of Equity Interests in any of its Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed
to be Asset Sales:
(1) any single transaction or series of related transactions that involves
assets having a fair market value of less than $1.0 million or results in
net proceeds to Classic and its Restricted Subsidiaries of less than $1.0
million;
(2) transfers of assets between or among Classic and its Wholly Owned
Restricted Subsidiaries,
(3) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to
Classic or to another Wholly Owned Restricted Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable or other
assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
(6) a Restricted Payment or Permitted Investment that is permitted by Section
4.07 hereof; and
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(7) the sale of property or equipment that has become worn out, damaged or
otherwise unsuitable for use in the business of Classic or any of its
Restricted Subsidiaries.
"Asset Swap" means an exchange of assets by Classic or a Restricted
Subsidiary of Classic for:
(1) one or more Permitted Businesses;
(2) a controlling equity interest in any Person whose assets consist primarily
of one or more Permitted Businesses;
(3) cash; and/or
(4) long-term assets that are used in a Permitted Business.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such sale and leaseback transaction including any period for which such lease
has been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
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(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock;
(3) in the case of a partnership or limited liability company, partnership or
membership interests (whether general or limited); and
(4) any other interest, other than any straight debt obligation, or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that
the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than six months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each
case, with any domestic commercial bank that is either (x) a party to the
Credit Agreement or (y) a member of the Federal Reserve Bank having capital
and surplus in excess of $500.0 million and a Thompson Bank Watch Rating of
"B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having a P-1 rating from Moody's Investors Service, Inc.
or an A-1 rating from Standard & Poor's Rating Services and in each case
maturing within six months after the date of acquisition; and
(6) money market funds having assets in excess of $100.0 million, at least 95%
of the assets of which constitute Cash Equivalents of the kinds described
in clauses (1) through (5) of this definition.
"CCI" means Classic Communications, Inc., a Delaware corporation, and
the direct parent of Classic.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the properties or
assets of CCI, Classic and its Restricted Subsidiaries, taken as a whole to
any "person" (as that term is used in Section 13(d)(3) of the Exchange
Act), other than Classic or any of its Restricted Subsidiaries;
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(2) the adoption of a plan relating to the liquidation or dissolution of
Classic;
(3) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals and their Related Parties or a
Permitted Group, becomes the Beneficial Owner, directly or indirectly, of
more than 35% of the Voting Stock of CCI, measured by voting power rather
than number of shares;
(4) the first day on which a majority of the members of the Board of Directors
of CCI or Classic are not Continuing Directors;
(5) CCI or Classic consolidates with, or merges with or into, any Person, or
any Person consolidates with, or merges with or into, CCI or Classic, in
any such event pursuant to a transaction in which any of the outstanding
Voting Stock of CCI or Classic or such other Person is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of CCI or Classic outstanding
immediately prior to such transaction is converted into or exchanged for
Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting
Stock of such surviving or transferee Person (immediately after giving
effect to such issuance); or
(6) the first day on which the CCI ceases to own 100% of the outstanding Equity
Interests of Classic.
"Company" or "Classic" means Classic Cable, Inc., a Delaware
corporation, and any and all successors thereto.
"Consolidated Cash Flow" means, with respect to any specified Person
for any period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss realized by
such Person or any of its Restricted Subsidiaries in connection with an
Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for taxes
was deducted in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net of the effect of all payments made or received pursuant
to Hedging Obligations), to the extent that any such expense was deducted
in computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and other
intangibles) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period) of such Person and its Restricted
Subsidiaries
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for such period to the extent that such depreciation, amortization and
other non-cash expenses were deducted in computing such Consolidated Net
Income; plus
(5) all transaction fees paid or accrued on or prior to the date of this
Indenture, to officers of Classic, in connection with transactions
consummated prior to or on the date of this Indenture; plus
(6) all fees paid to officers of Classic after July 28, 1999 in connection with
acquisitions or dispositions, provided that not more than an aggregate of
$1.0 million of such fees may be included pursuant to this clause (6) in
any twelve-month period; minus
(7) non-cash items increasing such Consolidated Net Income (including the
partial or entire reversal of reserves taken in prior periods) for such
period, other than the accrual of revenue in the ordinary course of
business,
in each case, on a consolidated basis and determined in accordance with GAAP.
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the
aggregate liquidation value of all Disqualified Stock of such Person and all
preferred stock of Restricted Subsidiaries of such Person, less (iii) Hedging
Obligations that would be a liability on the balance sheet, in each case,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the consolidated interest
expense of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, all calculated after taking into
account the effect of all Hedging Obligations, and (ii) the consolidated
interest expense of such Person and its Subsidiaries that was capitalized during
such period, and (iii) any interest expense on Indebtedness of another Person
that is guaranteed by such Person or one of its Subsidiaries or secured by a
Lien on assets of such Person or one of its Subsidiaries (whether or not such
Guarantee or Lien is called upon) and (iv) the product of (a) all dividend
payments on any series of preferred stock of such Person or any of its
Subsidiaries, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any specified Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Wholly Owned
Restricted Subsidiary thereof;
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(2) the Net Income of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by
that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has
not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary or its
stockholders;
(3) the Net Income of any Person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition shall be excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded; and
(5) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the specified Person or one of its
Subsidiaries.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of Classic or CCI, as the case may be, who:
(1) was a member of such Board of Directors on the date of this Indenture; or
(2) was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election; or
(3) is a representative of or was approved by Brera Classic, L.L.C., or one of
its Affiliates.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agreement" means that certain Credit Agreement, dated as of
July 28, 1999, as amended, by and among Classic and Goldman Sachs Credit
Partners L.P., The Chase Manhattan Bank and Union Bank of California, providing
for $200.0 million in term loan facilities, up to $75.0 million of revolving
credit borrowings, and an additional $200.0 million incremental facility on a
term loan basis, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and, in each case,
as amended, modified, renewed, refunded, replaced or refinanced from time to
time.
"Credit Facilities" means, one or more debt facilities (including,
without limitation, the Credit Agreement) or commercial paper facilities, in
each case with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
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"Debt to Cash Flow Ratio" means, as of any date of determination (the
"Determination Date"), the ratio of (a) the Consolidated Indebtedness of Classic
as of such Determination Date to (b) four times the Consolidated Cash Flow of
Classic for the latest three months for which financial information is available
preceding such Determination Date (the "Measurement Period"), determined on a
pro forma basis after giving effect to all acquisitions or dispositions of
assets made by Classic and its Subsidiaries from the beginning of such
three-month period through and including such Determination Date (including any
related financing transactions) as if such acquisitions and dispositions had
occurred at the beginning of such three-month period. For purposes of
calculating Consolidated Cash Flow for the Measurement Period immediately prior
to the relevant Determination Date, (i) any Person that is a Restricted
Subsidiary on the Determination Date (or would become a Restricted Subsidiary on
such Determination Date in connection with the transaction that requires the
determination of such Consolidated Cash Flow) will be deemed to have been a
Restricted Subsidiary at all times during the Measurement Period; (ii) any
Person that is not a Restricted Subsidiary on such Determination Date (or would
cease to be a Restricted Subsidiary on such Determination Date in connection
with the transaction that requires the determination of such Consolidated Cash
Flow) will be deemed not to have been a Restricted Subsidiary at any time during
such Measurement Period; and (iii) if Classic or any Restricted Subsidiary shall
have in any manner (x) acquired (including through an Asset Acquisition or the
commencement of activities constituting such operating business) or (y) disposed
of (including by way of an Asset Sale or the termination or discontinuance of
activities constituting such operating business) any operating business during
such Measurement Period or after the end of such period and on or prior to such
Determination Date, such calculation will be made on a pro forma basis in
accordance with generally accepted accounting principles consistently applied,
as if, in the case of an Asset Acquisition or the commencement of activities
constituting such operating business, all such transactions had been consummated
on the first day of such Measurement Period, and, in the case of an Asset Sale
or termination or discontinuance of activities constituting such operating
business, all such transactions had been consummated prior to the first day of
such Measurement Period.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof,
substantially in the form of Exhibit A1 hereto except that such Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Credit Agreement; and
(2) any other Senior Debt permitted under this Indenture the principal amount
of which is $50.0 million or more and that has been designated by Classic
as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof),
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or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option
of the holder thereof, in whole or in part, on or prior to the earlier of the
date on which the Notes mature and the date on which no Notes remain
outstanding. Notwithstanding the preceding sentence, any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require Classic to repurchase such Capital Stock upon the occurrence of
a change of control or an asset sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that Classic may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with Section 4.07 hereof.
"Domestic Subsidiary" means any Restricted Subsidiary that was formed
under the laws of the United States or any state thereof or the District of
Columbia or that guarantees or otherwise provides direct credit support for any
Indebtedness of Classic.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of Classic and its
Subsidiaries, including refinancings thereof, (other than Indebtedness under the
Credit Agreement) in existence on the date of this Indenture, until such amounts
are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in the
form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
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<PAGE> 16
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness, measured as the lesser of the
aggregate outstanding amount of the Indebtedness so guaranteed and the face
amount of the guarantee.
"Guarantors" means each of:
(1) Classic's Domestic Subsidiaries on the date of this Indenture; and
(2) any other subsidiary that executes a Note Guarantee in accordance with the
provisions of this Indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold to Institutional Accredited
Investors.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations of such Person and all Attributable
Debt in respect of sale and leaseback transactions entered into by such
Person;
(5) in respect of the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable; or
(6) representing any Hedging Obligations,
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<PAGE> 17
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and
(2) the outstanding principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means the first $175.0 aggregate principal amount of
Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other extensions of credit), advances or
capital contributions (excluding commission, travel, moving and similar advances
to officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP and include the
designation of a Restricted Subsidiary as an Unrestricted Subsidiary. If Classic
or any Restricted Subsidiary of Classic sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of Classic such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of Classic, Classic shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, hypothecation, assignment for security or encumbrance
of any kind in respect of such asset, whether or not
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<PAGE> 18
filed, recorded or otherwise perfected under applicable law, including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Management and Advisory Fee Agreement" means the agreement by and
between CCI and Brera Classic, L.L.C., dated as of May 24, 1999.
"Net Income" means, with respect to any specified Person, the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for taxes on
such gain (but not loss), realized in connection with: (a) any Asset Sale;
or (b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related provision
for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by Classic or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of:
(1) all legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign and local
taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Sale;
(2) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Sale, in accordance with the terms of any Lien upon
or other security arrangement of any kind with respect to such assets, or
which must by its terms, or in order to obtain a necessary consent to such
Asset Sale, or by applicable law, be repaid out of the proceeds from such
Asset Sale;
(3) all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries or joint ventures as a result
of such Asset Sale; and
(4) the deduction of appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the assets disposed of in such Asset Sale and retained by Classic or any
Restricted Subsidiary after such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither Classic nor any of its Restricted Subsidiaries (a)
provides credit support of any kind (including any undertaking, agreement
or instrument that would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise, or (c) constitutes the
lender;
(2) no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or
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<PAGE> 19
both any holder of any other Indebtedness (other than the Notes) of Classic
or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of Classic or any of its
Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means the Guarantee by each Guarantor of the Company's
payment obligations under this Indenture and on the Notes, executed pursuant to
the provisions of this Indenture.
"Notes" has the meaning assigned to it in the preamble to this
Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Other Permitted Liens" means:
(1) Liens imposed by law, such as carriers', warehousemen's and mechanics'
liens and other similar liens arising in the ordinary course of business
which secure payment of obligations that are not yet delinquent or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and for which an appropriate reserve or
provision shall have been made in accordance with generally accepted
accounting principles consistently applied;
(2) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and for which an
appropriate reserve or provision shall have been made in accordance with
generally accepted accounting principles consistently applied;
(3) easements, rights of way, and other restrictions on use of property or
minor imperfections of title that in the aggregate are not material in
amount and do not in any case materially detract from the
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<PAGE> 20
property subject thereto or interfere with the ordinary conduct of the
business of Classic or its Subsidiaries;
(4) Liens related to Capital Lease Obligations, mortgage financings or purchase
money obligations (including refinancings thereof), in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of Classic or any Restricted Subsidiary or a Permitted Business,
provided that any such Lien encumbers only the asset or assets so financed,
purchased, constructed or improved;
(5) Liens resulting from the pledge by Classic of Equity Interests in a
Restricted Subsidiary in connection with a Credit Facility or in an
Unrestricted Subsidiary in any circumstance, where recourse to Classic is
limited to the value of the Equity Interests so pledged;
(6) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security;
(7) Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds, deposits to secure the performance of bids, trade
contracts, government contracts, leases or licenses or other obligations of
a like nature incurred in the ordinary course of business (including
without limitation, landlord Liens on leased properties);
(8) leases or subleases granted to third Persons not interfering with the
ordinary course of business of Classic;
(9) deposits made in the ordinary course of business to secure liability to
insurance carriers;
(10) Liens securing reimbursement obligations with respect to letters of credit
which encumber documents and other property relating to such letters of
credit and the products and proceeds thereof;
(11) Liens on the assets of Classic to secure Hedging Obligations with respect
to Indebtedness permitted by the Indenture to be incurred;
(12) attachment or judgment Liens not giving rise to a Default or an Event of
Default; and
(13) any interest or title of a lessor under any capital lease or operating
lease.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Business" means a cable television, media and
communications, telecommunications, internet service provider or data
transmission business, and businesses ancillary, complementary or reasonably
related to those businesses.
"Permitted Group" means any group of investors that is deemed to be a
"person" (as that term is used in Section 13(d)(3) of the Exchange Act) by
virtue of the Stockholders' Agreement, as the same may be amended, modified or
supplemented from time to time, provided that no single Person (other than the
Principals and their Related Parties) Beneficially Owns (together with its
Affiliates) more of the Voting
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<PAGE> 21
Stock of Classic that is Beneficially Owned by such group of investors than is
then collectively Beneficially Owned by the Principals and their Related Parties
in the aggregate.
"Permitted Investments" means:
(1) any Investment in Classic or in a Restricted Subsidiary of Classic that is
a Guarantor;
(2) any Investment in Cash Equivalents;
(3) any Investment by Classic or any Subsidiary of Classic in a Person, if as a
result of or concurrently with such Investment:
(a) such Person becomes a Restricted Subsidiary of Classic and a
Guarantor; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, Classic or a Restricted Subsidiary of Classic
that is a Guarantor; provided that such Person's primary business
is a Permitted Business;
(4) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with Section
4.10 hereof;
(5) any Investment in prepaid expenses, negotiable instruments held for
collection and lease, utility and workers' compensation, performance and
other similar deposits;
(6) the extension of credit to vendors, suppliers and customers in the ordinary
course of business;
(7) any Investment existing as of the date of this Indenture, and any
amendment, modification, extension or renewal thereof to the extent such
amendment, modification, extension or renewal does not require Classic or
any Restricted Subsidiary to make any additional cash or non-cash payments
or provide additional services in connection therewith;
(8) any Investment consisting of a Guarantee permitted under clause (1) of the
second paragraph of Section 4.09 hereof;
(9) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of Classic;
(10) any Investment made with the net cash proceeds received by Classic after
July 28, 1999 from the sale of Equity Interests of Classic (other than (i)
sales of Disqualified Stock, (ii) Equity Interests sold to any of Classic's
Subsidiaries and (iii) Equity Interests sold in the Private Equity Sale);
provided that the amount of any such net cash proceeds that are utilized
for such Investment will be excluded from clause 3(b) of Section 4.07
hereof;
(11) Hedging Obligations; and
(12) other Investments, in addition to those in clauses (1) through (11) of this
definition, in any Person, other than CCI or an Affiliate of CCI that is
not also a Subsidiary of Classic, having an aggregate
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<PAGE> 22
fair market value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (12) since the date
of this Indenture, not to exceed $10.0 million at any one time outstanding.
"Permitted Junior Securities" means:
(1) Equity Interests in Classic or any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt and any debt
securities issued in exchange for Senior Debt to substantially the same
extent as, or to a greater extent than, the Notes and the Note Guarantees
are subordinated to Senior Debt under this Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of Classic
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Classic or any of its Subsidiaries (other than intercompany
Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus all accrued interest thereon and the
amount of all expenses and premiums incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by Classic or by the Subsidiary who is
the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Permitted Tower Sale and Leaseback" means the sale and leaseback by
Classic or any of its Restricted Subsidiaries, in one or more transactions, for
aggregate consideration of up to $50.0 million, of any communications towers
used to facilitate the transmission of telecommunication, voice, data and video
signals.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Principals" means Brera Classic, L.L.C., so long as that entity is an
Affiliate of Brera Capital Partners Limited Partnership, Austin Ventures, L.P.,
BT Capital Partners, Inc., The Texas Growth Fund, BA SBIC Management, L.L.C., J.
Merritt Belisle and Steven E. Seach.
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"Private Equity Sale" means the sale for $100.0 million in cash of
common stock of CCI, which was consummated on July 28, 1999, the proceeds of
which were contributed by CCI to Classic.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means an underwritten public offering by
Classic or its direct parent for cash (in an amount not less than $25.0 million)
of its common stock pursuant to the Securities Act registration statement (not
including Forms S-4 or S-8).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated as of February 16, 2000, by and among the Company and
the other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time and, with respect to any
Additional Notes, one or more registration rights agreements between the Company
and the other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A2 hereto bearing the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its
nominee, issued in a denomination equal to the outstanding principal amount of
the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate
family member (in the case of an individual) of any Principal; or
(2) any trust, corporation, partnership or other entity, whose beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or
more controlling interest of such entity consist of any one or more
Principals and/or such other Persons referred to in the immediately
preceding clause (1).
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
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<PAGE> 24
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means:
(1) all Indebtedness of Classic or any Guarantor outstanding under Credit
Facilities and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of Classic or any Guarantor permitted to be incurred
under the terms of this Indenture (which Indebtedness includes interest,
whether or not allowable, accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy
law), unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes or any Note Guarantee; and
(3) all Obligations with respect to the items listed in the preceding clauses
(1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt
will not include:
(1) any liability for federal, state, local or other taxes owed or owing by
Classic;
(2) any Indebtedness of Classic to any of its Subsidiaries or other Affiliates;
(3) any trade payables; or
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<PAGE> 25
(4) the portion of any Indebtedness that is incurred in violation of this
Indenture.
"Senior Guarantees" means the Guarantees by the Guarantors of
Obligations under the Credit Agreement.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Special Interest" means all special interest then owing pursuant to
Section 2 of the Registration Rights Agreement.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Stockholders' Agreement" means the agreement by and between Brera
Classic, L.L.C., CCI, BT Capital Partners, Inc., Austin Ventures, L.P., BA SBIC
Management, L.L.C., as the successor in interest to NationsBanc Capital Corp.,
J. Merritt Belisle, Steven E. Seach and certain other stockholders of CCI, dated
as of the date of the consummation of the Private Equity Sale.
"Strategic Equity Investment" means an investment in CCI or Classic by
a company which is primarily engaged in the media and communications industry or
the telecommunications industry and which has a market capitalization (if a
public company) on the date of such investment in CCI of more than $1.0 billion
or, if not a public company, had total revenues of more than $1.0 billion during
its previous fiscal year.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than
50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the
only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
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"Treasury Rate" means, as of any redemption date, the yield to maturity
as of such redemption date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the redemption date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the redemption date to March 1, 2005; provided,
however, that if the period from the redemption date to March 1, 2005 is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note substantially
in the form of Exhibit A1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of Classic (or any
successor to any of them) that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but
only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding with
Classic or any Restricted Subsidiary of Classic unless the terms of any
such agreement, contract, arrangement or understanding are no less
favorable to Classic or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of Classic;
(3) is a Person with respect to which neither Classic nor any of its Restricted
Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels
of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of Classic or any of its Restricted
Subsidiaries; and
(5) has at least one director on its Board of Directors that is not a director
or executive officer of Classic or any of its Restricted Subsidiaries and
has at least one executive officer that is not a director or executive
officer of Classic or any of its Restricted Subsidiaries.
Any designation of a Subsidiary of Classic as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the preceding conditions and was permitted by Section 4.07 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it shall thereafter
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<PAGE> 27
cease to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of Classic as of such date and, if such Indebtedness is not permitted
to be incurred as of such date under Section 4.09 hereof, Classic shall be in
default of such covenant. The Board of Directors of Classic may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of Classic of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (1) such
Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma
basis as if such designation had occurred at the beginning of the three-month
reference period; and (2) no Default or Event of Default would be in existence
following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any specified Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person or by such Person and one or more Wholly
Owned Restricted Subsidiaries of such Person.
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Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction"............................................................ 4.11
"Asset Sale"....................................................................... 4.10
"Asset Sale Offer"................................................................. 3.09
"Authentication Order"............................................................. 2.02
"Bankruptcy Law"................................................................... 4.01
"Change of Control Offer".......................................................... 4.14
"Change of Control Payment"........................................................ 4.14
"Change of Control Payment Date"................................................... 4.14
"Covenant Defeasance".............................................................. 8.03
"Event of Default"................................................................. 6.01
"Excess Proceeds".................................................................. 4.10
"incur"............................................................................ 4.09
"Legal Defeasance"................................................................. 8.02
"Offer Amount"..................................................................... 3.09
"Offer Period"..................................................................... 3.09
"Paying Agent"..................................................................... 2.03
"Permitted Debt"................................................................... 4.09
"Purchase Date".................................................................... 3.09
"Registrar"........................................................................ 2.03
"Restricted Payments".............................................................. 4.07
"Unit Legend"...................................................................... 2.06
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Note Guarantees means the Company and
the Guarantors, respectively, and any successor obligor upon the Notes and the
Note Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
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<PAGE> 29
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act and the
Exchange Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibits A1 or A2 attached hereto (including the Global Note Legend
thereon and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A1 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
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(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel Bank, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Restricted Period shall be terminated upon
the receipt by the Trustee of (i) a written certificate from the Depositary,
together with copies of certificates from Euroclear and Cedel Bank certifying
that they have received certification of non-United States beneficial ownership
of 100% of the aggregate principal amount of the Regulation S Temporary Global
Note (except to the extent of any beneficial owners thereof who acquired an
interest therein during the Restricted Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Note or an IAI Global Note bearing a Private
Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii)
an Officers' Certificate from the Company. Following the termination of the
Restricted Period, beneficial interests in the Regulation S Temporary Global
Note shall be exchanged for beneficial interests in Regulation S Permanent
Global Notes pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Notes, the Trustee shall cancel
the Regulation S Temporary Global Note. The aggregate principal amount of the
Regulation S Temporary Global Note and the Regulation S Permanent Global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee, as the case may be, in
connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
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<PAGE> 31
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Special Interest, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary
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<PAGE> 32
that it is unwilling or unable to continue to act as Depositary or that it is no
longer a clearing agency registered under the Exchange Act and, in either case,
a successor Depositary is not appointed by the Company within 120 days after the
date of such notice from the Depositary or (ii) the Company in its sole
discretion determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such effect to
the Trustee; provided that in no event shall the Regulation S Temporary Global
Note be exchanged by the Company for Definitive Notes prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities
Act. Upon the occurrence of either of the preceding events in (i) or (ii) above,
Definitive Notes shall be issued in such names as the Depositary shall instruct
the Trustee. Global Notes also may be exchanged or replaced, in whole or in
part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion thereof,
pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). Beneficial interests in any Unrestricted Global
Note may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above, the
transferor of such beneficial interest must deliver to the Registrar either
(A) (1) a written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures directing
the Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to
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<PAGE> 33
effect the transfer or exchange referred to in (1) above; provided that in
no event shall Definitive Notes be issued upon the transfer or exchange of
beneficial interests in the Regulation S Temporary Global Note prior to (x)
the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company in
accordance with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted
Global Notes. Upon satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Notes contained in this
Indenture and the Notes or otherwise applicable under the Securities Act,
the Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by
item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted Global
Note. A beneficial interest in any Restricted Global Note may be exchanged
by any holder thereof for a beneficial interest in an Unrestricted Global
Note or transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1)
a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
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<PAGE> 34
(C) such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the aggregate principal amount of beneficial
interests transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Restricted Definitive
Note, then, upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a
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<PAGE> 35
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(i) Beneficial Interests in Regulation S Temporary Global Note
to Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof,
a beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note only if:
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<PAGE> 36
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest for
a Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall not bear the Private Placement Legend.
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(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person who
takes delivery thereof in the form of a beneficial interest in a Restricted
Global Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (2)(b)
thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144 under
the Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities Act
other than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel required by
item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (C) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an
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Unrestricted Global Note or transfer such Restricted Definitive Note to a
Person who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes
to exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery
thereof in the form of a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the
form of Exhibit B hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the
Definitive Notes and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global
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Notes in an aggregate principal amount equal to the principal amount of
Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and registered
in the name of Persons who take delivery thereof in the form of a
Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or
Rule 904, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (2)
thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person or
Persons who take delivery thereof in the form of an Unrestricted Definitive
Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
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(1) if the Holder of such Restricted Definitive
Notes proposes to exchange such Notes for an Unrestricted
Definitive Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(d)
thereof; or
(2) if the Holder of such Restricted Definitive
Notes proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to
a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer, the
Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Note and each Definitive Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE
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SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii),
(c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section
2.06 (and all Notes issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF CLASSIC CABLE, INC."
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in substantially the
following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an
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endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such reduction; and if the
beneficial interest is being exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Note, such other Global Note shall be increased accordingly and an endorsement
shall be made on such Global Note by the Trustee or by the Depositary at the
direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive Note
for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05
hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period beginning
at the opening of business 15 days before the day of any selection of Notes
for redemption under Section 3.02 hereof and ending at the close of
business on the day of selection, (B) to register the transfer of or to
exchange any Note so selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part or (C) to
register the transfer of or to exchange a Note between a record date and
the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Note is registered as the absolute owner
of such Note for the purpose of receiving payment of principal of and
interest on such Notes and for all other purposes, and none of the Trustee,
any Agent or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this Section
2.06 to effect a registration of transfer or exchange may be submitted by
facsimile.
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Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note. If, after
the delivery of such replacement Note, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment or
registration such original Note, the Trustee shall be entitled to recover such
replacement Note from the Person to whom it was delivered or any person taking
therefrom, except a bona fide purchaser, and shall be entitled to recover upon
the security or indemnity provided therefor to the extent of any loss, damage,
cost or expense incurred by the Company, the Trustee, any Agent and any
authenticating agent in connection therewith.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
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Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company upon its written request. The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
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Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
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At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Notwithstanding the provisions of clause (b) of this Section 3.07,
at any time prior to March 1, 2003, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes ever issued under
this Indenture at a redemption price equal to 110.500% of the principal amount
of the Notes redeemed plus accrued and unpaid interest and Special Interest, if
any, to the redemption date, with the net cash proceeds of one or more Public
Equity Offerings by the Company or the net cash proceeds of a Strategic Equity
Investment in the Company or a capital contribution to the Company's common
equity made with the net cash proceeds of a concurrent Public Equity Offering
by, or Strategic Equity Investment in, the Company's direct parent; provided
that (1) at least 65% of the Notes ever issued under this Indenture remain
outstanding immediately after each such redemption (excluding Notes held by the
Company and its Subsidiaries) and (2) the redemption occurs within 60 days of
the date of the closing of such Public Equity Offering or Strategic Equity
Investment.
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(b) At any time, the Company may also redeem all or a part of the Notes
upon the occurrence of a Change of Control, upon not less than 30 nor more than
60 days' prior notice (but in no event may any such redemption occur more than
90 days after the occurrence of such Change of Control) mailed by first-class
mail to each Holder's registered address, at a redemption price equal to 100% of
the principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Special Interest, if any, to the date of redemption.
(c) Except as set forth in clause (a) or clause (b) of this Section
3.07, the Company shall not have the option to redeem the Notes pursuant to this
Section 3.07 prior to March 1, 2005. Thereafter, the Company shall have the
option to redeem the Notes, in whole or in part, upon no less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and Special
Interest, if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on March 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2005............................................. 105.250%
2006............................................. 103.500%
2007............................................. 101.750%
2008 and thereafter.............................. 100.000%
</TABLE>
(d) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
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<PAGE> 48
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may elect to have Notes purchased in integral multiples of $1,000
only;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes
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<PAGE> 49
tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon written request
from the Company shall authenticate and mail or deliver such new Note to such
Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Special Interest, if any, in the same manner on the dates and in the amounts set
forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Special Interest (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
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<PAGE> 50
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes, within 15 days of the time periods specified in the SEC's rules and
regulations (i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report on the annual financial statements by
the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports. In addition, following consummation of the
Exchange Offer, whether or not required by the rules and regulations of the SEC,
the Company shall file a copy of all such information and reports with the SEC
for public availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing, in which case the
Company will make such information available to securities analysts and
prospective investors upon request). The Company shall at all times comply with
TIA Section 314(a).
(b) For so long as any Notes remain outstanding, unless the Company is
filing periodic reports pursuant to the Exchange Act, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor
is so required under the TIA) shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred,
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<PAGE> 51
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
Classic will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution on
account of Classic's or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection with
any merger or consolidation involving Classic or any of its Restricted
Subsidiaries) or to the direct or indirect holders of Classic's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of Classic or to Classic or a Restricted
Subsidiary of Classic);
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving Classic) any Equity Interests of Classic or any direct or
indirect parent of Classic;
(3) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated
to the Notes or the Note Guarantees, except a payment of interest or
principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other actions set
forth in clauses (1) through (4) above being collectively referred to as
"Restricted Payments"),
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<PAGE> 52
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or would
occur as a consequence thereof; and
(2) Classic would, at the time of such Restricted Payment and after giving pro
forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable three-month period, have been permitted to
incur at least $1.00 of additional Indebtedness (other than Permitted Debt)
pursuant to the Debt to Cash Flow Ratio test set forth in the first
paragraph of Section 4.09 hereof; and
(3) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments declared or made after July 28, 1999 (excluding
Restricted Payments permitted by clauses (2), (3) and (4) of the next
succeeding paragraph) shall not exceed, at the date of determination, the
sum, without duplication, of:
(a) an amount equal to Classic's Consolidated Cash Flow from July 28,
1999 to the end of Classic's most recently ended three-month
period for which internal financial statements are available,
taken as a single accounting period, less the product of 1.4
times Classic's Consolidated Interest Expense from July 28, 1999
to the end of Classic's most recently ended three-month period
for which internal financial statements are available, taken as a
single accounting period; plus
(b) an amount equal to the net cash proceeds received by Classic from
the sale of Equity Interests after July 28, 1999 (other than (i)
sales of Disqualified Stock, (ii) Equity Interests sold to any of
Classic's Subsidiaries, (iii) Equity Interests sold in the
Private Equity Sale and (iv) Equity Interests that are applied to
make a Permitted Investment pursuant to clause (10) of the
definition of Permitted Investments) or from the issue or sale of
convertible or exchangeable Disqualified Stock or convertible or
exchangeable debt securities of Classic that have been converted
into or exchanged for such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to a
Subsidiary of Classic); plus
(c) to the extent that any Restricted Investment that was made after
July 28, 1999 is sold for cash or otherwise liquidated or repaid
for cash, the lesser of: (i) the cash return of capital with
respect to such Restricted Investment (less the cost of
disposition, if any); and (ii) the initial amount of such
Restricted Investment.
The preceding provisions will not prohibit:
(1) so long as no Default has occurred and is continuing or would be caused
thereby, the payment of any dividend or distribution within 60 days after
the date of declaration thereof, if at the date of declaration such payment
would have complied with the provisions of this Indenture;
(2) the redemption, repurchase, retirement, defeasance or other acquisition of
any subordinated Indebtedness of Classic or any Guarantor or of any Equity
Interests of Classic in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to a Subsidiary of Classic or
an employee stock ownership plan or to a trust established by Classic or
any Subsidiary of Classic for the benefit of its employees) of, Equity
Interests of Classic (other than Disqualified
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<PAGE> 53
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition will be excluded from clause (3)(b) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness of Classic or any Guarantor with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of Classic to the
holders of its Equity Interests on a pro rata basis; and
(5) so long as no Default has occurred and is continuing or would be caused
thereby, the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of CCI, Classic or any Restricted Subsidiary
of Classic held by any employment agreement, member of Classic's (or any of
its Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the date
of this Indenture; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $1.5 million in any twelve-month period.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by Classic or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant will be determined by Classic's Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee. The Board of
Directors' determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $5.0 million. Not later than the date of making any
Restricted Payment, Classic will deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this Section 4.07 were computed,
together with a copy of any fairness opinion or appraisal required by this
Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries.
Classic shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Equity Interests to
Classic or any of its Restricted Subsidiaries, or pay any indebtedness owed
to Classic or any of its Restricted Subsidiaries;
(2) make loans or advances or guarantee any such loans or advances to Classic
or any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets to Classic or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
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(1) encumbrances and restrictions as in effect on the date of this Indenture
pursuant to Existing Indebtedness or Credit Facilities, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole,
with respect to such dividend and other payment restrictions than those
contained in such Existing Indebtedness or Credit Facilities, as in effect
on the date of this Indenture;
(2) this Indenture, the Notes and the Note Guarantees;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person acquired
by Classic or any of its Restricted Subsidiaries as in effect at the time
of such acquisition (except to the extent such Indebtedness or Capital
Stock was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of this
Indenture to be incurred;
(5) customary non-assignment provisions in contracts of Classic or any of its
Restricted Subsidiaries;
(6) purchase money obligations for property acquired in the ordinary course of
business that impose restrictions on the property so acquired of the nature
described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted Subsidiary
that restricts distributions by that Subsidiary pending its sale or other
disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness that limit the right of the debtor to dispose
of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of assets or
property in joint venture agreements, assets sale agreements, stock sale
agreements and other similar agreements entered into in the ordinary course
of business;
(11) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business;
(12) restrictions that are not materially more restrictive than customary
provisions in comparable financings if the management of Classic determines
that such restrictions will not materially impair Classic's ability to make
payments as required under the Notes; and
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<PAGE> 55
(13) restrictions contained in Indebtedness under Credit Facilities permitted to
be incurred under Section 4.09, provided that the restrictions are not more
restrictive than the terms contained in the existing Credit Facilities as
of the date hereof.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
Classic shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and Classic
shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that
Classic may incur Indebtedness (including Acquired Debt) or issue Disqualified
Stock, and the Guarantors may incur Indebtedness or issue preferred stock, if
Classic's Debt to Cash Flow Ratio at the time of incurrence of such Indebtedness
or the issuance of such Disqualified Stock or preferred stock, after giving pro
forma effect to such incurrence or issuance as of such date and to the use of
proceeds therefrom as if the same had occurred at the beginning of the most
recently ended three-month period of Classic for which internal financial
statements are available, would have been no greater than 7.0 to 1.
The first paragraph of this Section 4.09 shall not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by Classic and any Guarantor of additional Indebtedness and
letters of credit under Credit Facilities in an aggregate principal amount
at any one time outstanding under this clause (1) (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of Classic and its Restricted Subsidiaries thereunder) not to
exceed $350.0 million;
(2) the incurrence by Classic and its Restricted Subsidiaries of the Existing
Indebtedness;
(3) the incurrence by Classic and the Guarantors of Indebtedness represented by
the Notes and the related Note Guarantees to be issued on the date hereof
and the Exchange Notes and the related Note Guarantees to be issued
pursuant to the Registration Rights Agreement;
(4) the incurrence by Classic or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations or letters of credit, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of Classic or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (4), not to exceed $15.0 million at any time outstanding;
(5) the incurrence by Classic or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by this Indenture to be
incurred under the first paragraph of this Section 4.09 or clauses (2),
(3), (4) or (5) of this paragraph;
(6) the incurrence by Classic or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Classic and any of its
Restricted Subsidiaries; provided, however, that:
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<PAGE> 56
(a) if Classic or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated
to the prior payment in full in cash of all Obligations with
respect to the Notes, in the case of Classic, or the Note
Guarantee, in the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person
other than Classic or a Restricted Subsidiary thereof and (ii)
any sale or other transfer of any such Indebtedness to a
Person that is not either Classic or a Restricted Subsidiary
of Classic, will be deemed, in each case, to constitute an
incurrence of such Indebtedness by Classic or such Restricted
Subsidiary, as the case may be, that was not permitted by this
clause (6);
(7) the incurrence by Classic or any of its Restricted Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate risk with respect to any floating rate Indebtedness that is permitted
by the terms of this Indenture to be outstanding;
(8) the guarantee by Classic or any of the Guarantors of Indebtedness of
Classic or a Subsidiary of Classic that was permitted to be incurred by
another provision of this Section 4.09;
(9) the accrual of interest, the accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock shall not be deemed to be an incurrence of Indebtedness
or an issuance of Disqualified Stock for purposes of this Section 4.09;
(10) the incurrence of Indebtedness of a Restricted Subsidiary that was
outstanding on or prior to the date on which such Restricted Subsidiary was
acquired by Classic (other than Indebtedness incurred in connection with,
or to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or was
acquired by Classic); provided, however, that on the date of such
acquisition and after giving effect to that acquisition, the Debt to Cash
Flow Ratio would have been less than or equal to the Debt to Cash Flow
Ratio immediately prior to that acquisition;
(11) the incurrence by Classic or any of the Guarantors of Indebtedness in
addition to any Indebtedness described in clauses (1) through (10) and (12)
of this Section 4.09 in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (11), not to exceed $25.0 million; and
(12) the incurrence by Classic's Unrestricted Subsidiaries of Non-Recourse Debt,
provided, however, that if any such Indebtedness ceases to be Non-Recourse
Debt of an Unrestricted Subsidiary, that event will be deemed to constitute
an incurrence of Indebtedness by a Restricted Subsidiary of Classic that
was not permitted by this clause (12).
For purposes of determining compliance with this Section 4.09, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1) through (12) above,
or is entitled to be incurred pursuant to the first paragraph of this Section
4.09, Classic shall be permitted to classify such item of Indebtedness on the
date of its incurrence or later
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reclassify all or a portion of such item of Indebtedness in any manner that
complies with this Section 4.09 and the items will be treated as having been
incurred pursuant only to the first paragraph or clause (1) through (12) of this
Section 4.09. Indebtedness under Credit Facilities outstanding on the date on
which Notes are first issued and authenticated under this Indenture shall be
deemed to have been incurred on such date in reliance on the exception provided
by clause (1) of the definition of Permitted Debt.
Section 4.10. Asset Sales.
Classic shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) Classic (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
(2) such fair market value is determined by Classic's Board of Directors and
evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee; and
(3) at least 75% of the consideration received in such Asset Sale by Classic or
such Restricted Subsidiary is in the form of cash or Cash Equivalents. For
purposes of this provision, each of the following shall be deemed to be
cash:
(a) any Indebtedness or other liabilities, as shown on Classic's
or such Restricted Subsidiary's most recent balance sheet, of
Classic or any Restricted Subsidiary (other than contingent
liabilities and Indebtedness that is by its terms subordinated
to the Notes or any Note Guarantee) that are assumed by the
transferee of any such assets pursuant to an agreement that
releases Classic or such Restricted Subsidiary from further
liability; and
(b) any securities, notes or other obligations received by Classic
or any such Restricted Subsidiary from such transferee that
are converted within 60 days of the applicable Asset Sale by
Classic or such Restricted Subsidiary into cash or Cash
Equivalents, to the extent of the cash received in that
conversion.
Notwithstanding the foregoing, Classic and its Restricted Subsidiaries
may consummate Asset Swaps; provided that, immediately after giving effect to
such Asset Swap, Classic would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt to Cash Flow Ratio test set forth
in the first paragraph of Section 4.09 hereof.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, including any cash received in an Asset Swap, Classic or any of its
Restricted Subsidiaries may apply those Net Proceeds at its option:
(1) to prepay, repay, redeem or purchase Senior Debt and, if the Senior Debt
repaid is revolving credit Indebtedness, to correspondingly reduce
commitments with respect thereto;
(2) to acquire all or substantially all of the assets of a Permitted Business;
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(3) to acquire Voting Stock of a Permitted Business from a Person that is not a
Subsidiary of Classic; provided, that (a) after giving effect thereto,
Classic and its Restricted Subsidiaries collectively own a majority of such
Voting Stock and (b) such acquisition is otherwise made in accordance with
this Indenture, including, without limitation, Section 4.07 hereof;
(4) to make a capital expenditure; or
(5) to acquire other long-term assets that are used or useful in a Permitted
Business;
provided that in the event Classic would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt to Cash Flow Ratio test set forth
in the first paragraph of Section 4.09 hereof at the time it consummates a
Permitted Tower Sale and Leaseback, then the 365-day period referred to above
shall be extended for an additional 365 days as to the Net Proceeds from the
Permitted Tower Sale and Leaseback only.
Pending the final application of any Net Proceeds, Classic may
temporarily reduce revolving credit borrowings or otherwise invest the Net
Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph shall constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $15.0 million, Classic will make an
offer (an "Asset Sale Offer") to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in this Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount of
Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100%
of principal amount plus accrued and unpaid interest and Special Interest, if
any, to the date of purchase, and shall be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, Classic may use such
Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If
the aggregate principal amount of Notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee will select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis based on the principal amount of Notes and such
other pari passu Indebtedness tendered. Upon completion of each Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero. The Company shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes in
connection with an Asset Sale Offer.
Section 4.11. Transactions with Affiliates.
Classic shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any payment to, or sell, lease,
transfer, exchange or otherwise dispose of any of its properties or assets to,
or purchase any property or assets from, or enter into or make or amend any
transaction or series of transactions, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate, officer or
director or Classic (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
Classic or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by Classic or such Restricted
Subsidiary with an unrelated Person; and
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(2) Classic delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (1) of this Section
4.11 and that such Affiliate Transaction has been approved by
a majority of the disinterested members of the Board of
Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment
banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of the prior paragraph:
(1) employment agreements entered into by Classic or any of its Subsidiaries on
or prior to the date of this Indenture and any employment agreement entered
into by Classic or any of its Restricted Subsidiaries in the ordinary
course of business and consistent with the past practice of Classic or such
Restricted Subsidiary;
(2) transactions between or among Classic and/or its Restricted Subsidiaries;
(3) transactions with a Person that is an Affiliate of Classic solely because
Classic owns an Equity Interest in such Person;
(4) payment of reasonable fees to directors who are not employees of Classic or
any of its Restricted Subsidiaries, and customary indemnification and
insurance arrangements in favor of any director;
(5) sales or issuances of Equity Interests (other than Disqualified Stock) to
Affiliates of Classic;
(6) Restricted Payments that are permitted by the provisions of Section 4.07 of
this Indenture;
(7) loans or advances, not to exceed $2.0 million in the aggregate at any time
outstanding, to employees in the ordinary course of business in accordance
with past practice; and
(8) management fees, deal fees or transaction fees paid to employees, directors
and their respective affiliates, in accordance with the provisions of the
Management and Advisory Fee Agreement or the Stockholders' Agreement, as
applicable, as the same are in effect on the date hereof.
Section 4.12. Liens.
Classic shall not, and shall not permit any Restricted Subsidiary to,
incur any Indebtedness secured by a Lien against or on any of its property or
assets now owned or hereafter acquired by the Company or any Restricted
Subsidiary unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with such secured Indebtedness. This
restriction does not, however, apply to Indebtedness secured by (1) Liens
securing Senior Debt or Indebtedness of a Restricted Subsidiary of Classic, (2)
Liens, if any, in effect on the date hereof; (3) Liens in favor of governmental
bodies to secure
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progress or advance payments; (4) Liens on Equity Interests or Indebtedness
existing at the time of the acquisition thereof (including acquisition through
merger or consolidation), provided that such Liens were not incurred in
anticipation of such acquisition; (5) Liens securing the Notes; (6) other Liens,
in addition to those described in clauses (1) through (5), (7) or (8) of this
paragraph, securing Indebtedness of Classic in an amount not to exceed $10.0
million at any time outstanding; (7) Other Permitted Liens; and (8) any
extension, renewal or replacement of any Lien referred to in the foregoing
clauses (1) through (7), inclusive.
Section 4.13. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
Section 4.14. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make
an offer (a "Change of Control Offer") to each Holder to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Special Interest thereon, if any, to the date of
purchase (the "Change of Control Payment"). Within 30 days following any Change
of Control, the Company shall mail a notice to each Holder stating: (1) that the
Change of Control Offer is being made pursuant to this Section 4.14 and that all
Notes tendered will be accepted for payment; (2) the purchase price and the
purchase date, which shall be no later than 30 Business Days from the date such
notice is mailed (the "Change of Control Payment Date"); (3) that any Note not
tendered will continue to accrue interest; (4) that, unless the Company defaults
in the payment of the Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date; (5) that Holders electing to have any Notes
purchased pursuant to a Change of Control Offer will be required to surrender
the Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date; (6) that Holders will be entitled to
withdraw their election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have the Notes
purchased; and (7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company shall comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Notes in connection with a
Change of Control.
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(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Company shall
execute and issue and the Trustee shall promptly authenticate and mail (or cause
to be transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered by such Holder, if
any; provided, that each such new Note shall be in a principal amount of $1,000
or an integral multiple thereof.
Prior to complying with any of the provisions of this Section 4.14, but
in any event within 90 days following a Change of Control, the Company will
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this Section 4.14. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.14, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.14 hereof and all other provisions of this Indenture applicable to a
Change of Control Offer made by the Company and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
Section 4.15. No Senior Subordinated Debt.
Notwithstanding the provisions of Section 4.09 hereof, Classic shall
not incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Debt of Classic and senior in any respect in right of payment to the Notes. No
Guarantor shall incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
the Senior Debt of such Guarantor and senior in any respect in right of payment
to such Guarantor's Note Guarantee.
Section 4.16. Limitation on Sale and Leaseback Transactions.
Classic shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction, unless:
(1) Classic or that Restricted Subsidiary, as applicable, could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction under the Debt to Cash Flow Ratio
test in the first paragraph of Section 4.09 hereof and (b) created a Lien
on such property securing Attributable Debt without equally and ratably
securing the Notes pursuant to Section 4.12 hereof;
(2) the net cash proceeds of that sale and leaseback transaction are at least
equal to the fair market value, as determined in good faith by the Board of
Directors and set forth in an Officers' Certificate delivered to the
Trustee, of the property that is the subject of that sale and leaseback
transaction; and
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(3) the transfer of assets in that sale and leaseback transaction is permitted
by, and Classic or that Restricted Subsidiary applies the proceeds of such
transaction in compliance with, Section 4.10 hereof.
Section 4.17. Limitation on Issuances and Sales of Equity Interests in
Wholly Owned Subsidiaries.
Classic shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Wholly Owned Restricted
Subsidiary of Classic to any Person (other than Classic or a Wholly Owned
Restricted Subsidiary of Classic), unless:
(1) such transfer, conveyance, sale, lease or other disposition is of all the
Equity Interests in such Wholly Owned Restricted Subsidiary; and
(2) the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with Section 4.10 hereof.
In addition, Classic shall not permit any Wholly Owned Restricted
Subsidiary of Classic to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to Classic or a Wholly Owned Restricted
Subsidiary of Classic.
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by Classic and its
Restricted Subsidiaries in the Subsidiary so designated shall be deemed to be an
Investment made as of the time of such designation and will either reduce the
amount available for Restricted Payments under the first paragraph of Section
4.07 hereof or reduce the amount available for future Investments under one or
more clauses of the definition of Permitted Investments, as Classic shall
determine. That designation shall only be permitted if such Investment would be
permitted at that time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. The Board of Directors may redesignate
any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation
would not cause a Default.
Section 4.19. Additional Note Guarantees.
If Classic or any of its Subsidiaries acquires or creates another
Domestic Subsidiary after the date of this Indenture, then that newly acquired
or created Domestic Subsidiary must become a Guarantor and execute a Note
Guarantee in the form of a Supplemental Indenture and deliver an Opinion of
Counsel to the Trustee within 10 Business Days of the date on which it was
acquired or created, unless such Domestic Subsidiary has properly been
designated as an Unrestricted Subsidiary in accordance with this Indenture, for
so long as such Domestic Subsidiary continues to constitute an Unrestricted
Subsidiary. The form of such Note Guarantee is attached as Exhibit E hereto.
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ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
Classic shall not, directly or indirectly: (1) consolidate or merge
with or into another Person (whether or not Classic is the surviving
corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of Classic and its Restricted
Subsidiaries taken as a whole, in one or more related transactions, to another
Person; unless:
(1) either: (a) Classic is the surviving corporation; or (b) the Person formed
by or surviving any such consolidation or merger (if other than Classic) or
to which such sale, assignment, transfer, conveyance or other disposition
shall have been made is a corporation, limited liability company or limited
partnership organized or existing under the laws of the United States, any
state thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if
other than Classic) or the Person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all the
obligations of Classic under the Notes, this Indenture and the Registration
Rights Agreement pursuant to agreements reasonably satisfactory to the
Trustee;
(3) immediately after such transaction no Default or Event of Default exists;
and
(4) Classic or the Person formed by or surviving any such consolidation or
merger (if other than Classic), or to which such sale, assignment,
transfer, conveyance or other disposition shall have been made will, on the
date of such transaction after giving pro forma effect thereto and any
related financing transactions as if the same had occurred at the beginning
of the applicable three-month period, be permitted to incur at least $1.00
of additional Indebtedness pursuant to the Debt to Cash Flow Ratio test set
forth in the first paragraph of Section 4.09 hereof.
In addition, Classic shall not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This Section 5.01 shall not apply to a sale,
assignment, transfer, conveyance or other disposition of assets between or among
Classic and any of the Guarantors.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Special Interest with respect to, the Notes whether or not prohibited by Article
10 hereof and such default continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes whether or not prohibited by Article 10 hereof;
(c) the Company or any of its Subsidiaries fails to comply with the
provisions applicable to them of Section 5.01 hereof;
(d) the Company or any of its Subsidiaries fails to comply with the
provisions applicable to them of Section 4.03, 4.07, 4.08, 4.09, 4.11, 4.14,
4.16, 4.17, 4.18 or 4.19 (in each case other than a failure to purchase Notes)
for 30 days after notice to the Company;
(e) the Company or any of its Subsidiaries fails to observe or perform
any other agreements applicable to them in this Indenture or the Notes for 60
days after notice to the Company;
(f) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, if that default (a) is caused by a
failure to pay principal of such Indebtedness at final maturity or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, if the total principal amount of such Indebtedness unpaid or
accelerated exceeds $5.0 million;
(g) any judgment or decree for the payment of money in excess of $5.0
million is rendered against the Company or any Restricted Subsidiary of the
Company and either (a) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree or (b) such judgment or decree remains
outstanding for a period of 60 days following such judgment and is not
discharged, waived or stayed within 10 days of notice;
(h) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property,
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(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary case;
(ii) appoints a custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
or
(j) except as permitted by this Indenture, any Note Guarantee is held
in any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under such
Guarantor's Note Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Upon any such declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (h) or
(i) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if (a) the Company has deposited with the
Trustee a sum sufficient to pay (1) all sums paid or advanced by the Trustee
under this Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, (2) all overdue interest on
all Notes then outstanding, (3) the principal of and premium, if any, on any
Notes then outstanding which have become due otherwise than by such declaration
of acceleration and interest thereon (including Special Interest) at the rate
borne by the Notes and (4) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by the Notes, (b) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction, and (c) all Events of Default (other than the
non-declaration of acceleration) have been cured or waived.
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Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
After a declaration of acceleration, but before a judgment or decree
for payment of the money due has been obtained by the Trustee, the Holders of a
majority in aggregate principal amount of Notes outstanding by written notice to
Classic and the Trustee, may rescind and annul such declaration and its
consequences if (a) Classic has paid or deposited with the Trustee a sum
sufficient to pay (1) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (2) all overdue interest on all Notes
then outstanding, (3) the principal of and premium, if any, on any Notes then
outstanding which have become due otherwise than by such declaration of
acceleration and interest thereon (including Special Interest) at the rate borne
by the Notes and (4) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Notes; (b) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction; and (c) all Events of Default, other than the
non-declaration of acceleration, have been cured or waived as provided in this
Indenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except (1) a continuing Default or Event of Default in
the payment of the principal of, premium and Special Interest, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration) or
(2) in respect of a covenant or provision which under this Indenture cannot be
modified or amended without the consent of the Holder of each Note affected by
such modification or amendment. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
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Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Special Interest,
if any, and interest on the Note, on or after the respective due dates expressed
in the Note (including in connection with an offer to purchase), or to bring
suit for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Special Interest, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to
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the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee and
the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Special Interest, if any, and interest,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, premium and Special
Interest, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
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ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties that
are specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
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Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
security or indemnity reasonably satisfactory to it against the costs, expenses
and liabilities that might be incurred by it in compliance with such request or
direction.
(g) The Trustee is not required to give any bond or surety with respect
to the performance of its duties or the exercise of its powers under this
Indenture.
(h) In the event the Trustee receives inconsistent or conflicting
requests and indemnity from two or more groups of holders of Notes, each
representing less than a majority in aggregate principal amount of the Notes
outstanding, pursuant to the provisions of this Indenture, the Trustee, in its
sole discretion, may determine what action, if any, shall be taken.
(i) The Trustee's immunities and protections from liability and its
right to indemnification in connection with the performance of its duties under
this Indenture shall extend to the Trustee's officers, directors, agents,
attorneys and employees. Such immunities and protections and the right to
indemnification shall survive the Trustee's resignation or removal, the
discharge of this Indenture and final payment of the Notes.
(j) The permissive right of the Trustee to take the actions permitted
by this Indenture shall not be construed as an obligation or duty to do so.
(k) Except for information provided by the Trustee concerning the
Trustee, the Trustee shall have no responsibility for any information in any
offering circular or other disclosure material distributed with respect to the
Notes, and the Trustee shall have no responsibility for compliance with any
state or federal securities laws in connection with the Notes.
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Section 7.03. Individual Rights of Trustee.
The Trustee in its or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee or resign. Any Agent may do the same with like rights and duties. The
Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Notes a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes. The Trustee is not required to take notice or deemed to have
notice of any Default or Event of Default, except Events of Default under
Section 6.01(a) and 6.01(b), unless a Responsible Officer of the Trustee has
actual knowledge thereof or has received notice in writing of such Default or
Event of Default from the Company or from the holders of at least 25% in
aggregate principal amount of the outstanding Notes, and in the absence of any
such notice, the Trustee may conclusively assume that no such Default or Event
of Default exists.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports
as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
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Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
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(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation,
bank or banking association organized and doing business under the laws of the
United States of America or of any state thereof that is authorized under such
laws to exercise corporate trustee powers, that is subject to supervision or
examination by federal or state authorities and that has a combined capital and
surplus of at least $100 million as set forth in its most recent published
annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
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Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at its option and at any time, elect to have either
Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance
with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from their obligations with respect to all
outstanding Notes and Note Guarantees on the date the conditions set forth below
are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Notes, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.05
hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and the Company and the Guarantors shall be deemed to have satisfied all
their other obligations under such Notes, the Notes Guarantees and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Article 2 and Section 4.02 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Company's and the Guarantors' obligations in connection therewith and
(d) this Article 8. Subject to compliance with this Article 8, the Company may
exercise its option under this Section 8.02 notwithstanding the prior exercise
of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from their obligations under the covenants contained in Sections 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18 and 4.19 hereof and
clause (4) of Section 5.01 hereof with respect to the outstanding Notes and the
Note Guarantees on and after the date the conditions set forth in Section 8.04
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes and such Note
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Guarantees shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes
and Note Guarantees, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes and Note Guarantees shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not
constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes and Note Guarantees:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Special Interest, if any, and
interest on the outstanding Notes on the stated date for payment thereof or on
the applicable redemption date, as the case may be and the Company shall specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article 8
concurrently with such incurrence) or insofar as Sections 6.01(h) or 6.01(i)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
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(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust. The
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Holder of such Note shall thereafter look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Note
Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company pursuant
to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
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(f) to provide for the issuance of Additional Notes in accordance with
the limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture and/or a
Note Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and
4.14 hereof), the Note Guarantees and the Notes with the consent of the Holders
of at least a majority in principal amount of the Notes (including Additional
Notes, if any) then outstanding voting as a single class (including consents
obtained in connection with a tender offer or exchange offer for, or purchase
of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, if any, or interest on the Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture, the Note Guarantees or the
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes (including Additional Notes, if any) voting
as a single class (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional Notes,
if any) then outstanding voting as a single class may waive compliance in a
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particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the Notes
except as provided above with respect to Sections 3.09, 4.10 and 4.14 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium or Special Interest, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes (including Additional
Notes, if any) and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of, or interest or premium or Special Interest, if any, on the
Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 3.09, 4.10 and 4.14 hereof);
(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions; or
(i) release any Guarantor from any of its obligations under its Note
Guarantee or this Indenture, except in accordance with the terms of this
Indenture.
In addition, without the consent of at least 75% in aggregate principal
amount of the Notes then outstanding no waiver or amendment to this Indenture
may make any change in the provisions of Article 10 hereof that adversely
affects the rights of any Holder of Notes.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on
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any Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article 10, to the prior payment
in full of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities:
(i) holders of Senior Debt shall be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the
rate specified in the applicable Senior Debt) before Holders of the Notes
shall be entitled to receive any payment with respect to the Notes (except
that Holders may receive (A)
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Permitted Junior Securities and (B) payments and other distributions made
from any defeasance trust created pursuant to Section 8.01 hereof); and
(ii) until all Obligations with respect to Senior Debt (as
provided in clause (i) above) are paid in full, any distribution to which
Holders would be entitled but for this Article 10 shall be made to holders
of Senior Debt (except that Holders of Notes may receive (A) Permitted
Junior Securities and (B) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof), as their
interests may appear.
Section 10.03. Default on Designated Senior Debt.
(a) The Company may not make any payment or distribution to the Trustee
or any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (A) Permitted Junior Securities and (B) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01 hereof) until
all principal and other Obligations with respect to the Senior Debt have been
paid in full if:
(i) a default in the payment of any principal or other
Obligations with respect to Designated Senior Debt occurs and is continuing
beyond any applicable grace period in the agreement, indenture or other
document governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated
Senior Debt occurs and is continuing that then permits holders of the
Designated Senior Debt to accelerate its maturity and the Trustee receives
a notice of the default (a "Payment Blockage Notice") from a Person who may
give it pursuant to Section 10.11 hereof. If the Trustee receives any such
Payment Blockage Notice, no subsequent Payment Blockage Notice shall be
effective for purposes of this Section unless and until (A) at least 360
days shall have elapsed since the delivery of the immediately prior Payment
Blockage Notice and (B) all scheduled payments of principal, premium and
Special Interest, if any, and interest on the Notes that have come due have
been paid in full in cash. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been waived for a period of not less
than 90 days.
(b) The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(i) the date upon which the default is cured or waived, or
(ii) in the case of a default referred to in clause (ii) of
Section 10.03(a) hereof, 179 days pass after notice is received, unless the
maturity of such Designated Senior Debt has been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
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Section 10.04. Acceleration of Securities.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of the acceleration.
Section 10.05. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes (except in Permitted Junior Securities or
from the trust described under Section 8.01 hereof) at a time when the payment
is prohibited by Section 10.03 hereof and the Trustee or such Holder, as
applicable, has actual knowledge that such payment is prohibited by Section
10.03 hereof, such payment shall be held by the Trustee or such Holder, in trust
for the benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Debt as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to which
Senior Debt may have been issued, as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior Debt
remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
Section 10.06. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 10.
Section 10.07. Subrogation.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders of Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.
Section 10.08. Relative Rights.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
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(i) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(ii) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to holders of
Senior Debt; or
(iii) prevent the Trustee or any Holder of Notes from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
Section 10.09. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
Section 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
Section 10.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights.
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Section 10.12. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Notes.
Section 10.13. Amendments.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11
NOTE GUARANTEES
Section 11.01. Guarantee.
Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the
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Company or the Guarantors, any amount paid by either to the Trustee or such
Holder, this Note Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Note Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
Section 11.02. Subordination of Note Guarantee.
The Obligations of each Guarantor under its Note Guarantee pursuant to
this Article 11 shall be junior and subordinated to the Senior Guarantee of such
Guarantor on the same basis as the Notes are junior and subordinated to Senior
Debt of the Company. For the purposes of the foregoing sentence, the Trustee and
the Holders shall have the right to receive and/or retain payments by any of the
Guarantors only at such times as they may receive and/or retain payments in
respect of the Notes pursuant to this Indenture, including Article 10 hereof.
Section 11.03. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee of
such Guarantor not constitute a fraudulent transfer or conveyance for purposes
of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders
and the Guarantors hereby irrevocably agree that the obligations of such
Guarantor will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Article 11, result
in the obligations of such Guarantor under its Note Guarantee not constituting a
fraudulent transfer or conveyance.
Section 11.04. Execution and Delivery of Note Guarantee.
To evidence its Note Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Note Guarantee substantially in
the form included in Exhibit E shall be endorsed by an Officer of such Guarantor
on each Note authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of such Guarantor by its President or one of its
Vice Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Note Guarantee.
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If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Note Guarantee set forth
in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.19 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture and Note Guarantees in accordance with Section 4.19 hereof and
this Article 11, to the extent applicable.
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 11.06, no Guarantor may sell or
otherwise dispose of all or substantially all of its assets to, or consolidate
with or merge with or into (whether or not such Guarantor is the surviving
Person) another Person other than Classic or another Guarantor unless:
(a) either (1) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such consolidation or
merger assumes all the obligations of that Guarantor under the Indenture, its
Note Guarantee and the Registration Rights Agreement pursuant to a supplemental
indenture satisfactory to the Trustee or (2) the Net Proceeds of such sale or
other disposition are applied in accordance with Section 4.10 hereof; and
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the Note
Guarantee endorsed upon the Notes and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Guarantor,
such successor Person shall succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a Guarantor. Such successor
Person thereupon may cause to be signed any or all of the Note Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the Note
Guarantees so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Note Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Note
Guarantees had been issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 11.06. Releases Following Sale of Assets.
In the event of a sale or other disposition of all or substantially all
of the assets of any Guarantor, by way of merger, consolidation or otherwise, or
a sale or other disposition of all the Capital Stock of any Guarantor, in each
case to a Person that is not (either before or after giving effect to such
transactions) a
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Subsidiary of the Company, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of the Capital
Stock of such Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under its Note
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of this Indenture,
including without limitation Section 4.10 hereof. In addition, the Note
Guarantee of a Guarantor shall be released if the Company properly designates
any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in
accordance with the applicable provisions of this Indenture. Upon delivery by
the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel
to the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee shall execute any documents reasonably required
in order to evidence the release of any Guarantor from its obligations under its
Note Guarantee.
Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge.
This Indenture will be discharged and will cease to be of further
effect as to all Notes issued hereunder, when:
(1) either:
(a) all Notes that have been authenticated (except lost, stolen or
destroyed Notes that have been replaced or paid and Notes for
whose payment money has theretofore been deposited in trust
and thereafter repaid to the Company) have been delivered to
the Trustee for cancellation; or
(b) all Notes that have not been delivered to the Trustee for
cancellation have become due and payable by reason of the
making of a notice of redemption or otherwise or will become
due and payable within one year and the Company or any
Guarantor has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust solely for the
benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such
amounts as will be sufficient without consideration of any
reinvestment of interest, to pay and discharge the entire
indebtedness on the Notes not delivered to the Trustee for
cancellation for principal, premium and Special Interest, if
any, and accrued interest to the date of maturity or
redemption;
(2) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute
a default under, any other instrument to which the Company or any
Guarantor is a party or by which the Company or any Guarantor is bound;
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<PAGE> 88
(3) the Company or any Guarantor has paid or caused to be paid all sums
payable by it under this Indenture; and
(4) the Company has delivered irrevocable instructions to the Trustee under
this Indenture to apply the deposited money toward the payment of the
Notes at maturity or the redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, if
money shall have been deposited with the Trustee pursuant to subclause (b) of
clause (1) of this Section, the provisions of Section 12.02 and Section 8.06
shall survive.
Section 12.02. Application of Trust Money.
Subject to the provisions of Section 8.06, all money deposited with the
Trustee pursuant to Section 12.01 shall be held in trust and applied by it, in
accordance with the provisions of the Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Persons entitled thereto,
of the principal (and premium, if any) and interest for whose payment such money
has been deposited with the Trustee; but such money need not be segregated from
other funds except to the extent required by law.
If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 11.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and any Guarantor's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.01; provided that if the Company has made any payment of principal
of, premium, if any, or interest on any Notes because of the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money or Government Securities held
by the Trustee or Paying Agent.
ARTICLE 13
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
Section 13.02. Notices.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
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<PAGE> 89
If to the Company and/or any Guarantor:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Telecopier No.: (512) 476-9095
Attention: Corporate Secretary
With a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Suite 2100
Chicago, Illinois 60606-1285
Telecopier No.: (312) 407-0411
Attention: Peter Krupp
If to the Trustee:
For payment, registration, transfer and exchange of the Notes:
Chase Bank of Texas, National Association
One Main Place
1201 Main Street, 18th Floor
Dallas, Texas 75202
Telecopier No.: (214) 672-5932
Telephone No: (214) 672-5125 or (800) 275-2048
For all other communications relating to the Notes:
Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
Telecopier No.: (713) 216-5476
Attention: Corporate Trust
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery. Notwithstanding
the foregoing, notices to the Trustee shall be effective only upon receipt.
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<PAGE> 90
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 13.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
Section 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 13.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
Section 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
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<PAGE> 91
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 13.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 13.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator,
manager, member, partner or stockholder of the Company or any Guarantor, as
such, shall have any liability for any obligations of the Company or such
Guarantor under the Notes, the Exchange Notes, the Note Guarantees, this
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
Section 13.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 13.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors. All agreements of each Guarantor in this Indenture shall bind
its successors, except as otherwise provided in Section 11.06.
Section 13.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 13.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
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<PAGE> 92
Section 13.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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<PAGE> 93
SIGNATURES
Dated as of February 16, 2000
CLASSIC CABLE, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
GUARANTORS:
CLASSIC CABLE HOLDING, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
UNIVERSAL CABLE HOLDINGS, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
UNIVERSAL CABLE COMMUNICATIONS INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
UNIVERSAL CABLE OF BEAVER, OKLAHOMA,
INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
Indenture Signature Page
<PAGE> 94
UNIVERSAL CABLE MIDWEST, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
FRIENDSHIP CABLE OF TEXAS, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
CORRECTIONAL CABLE TV, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
CALLCOM 24, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
FRIENDSHIP CABLE OF ARKANSAS, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
CLASSIC TELEPHONE, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
Indenture Signature Page
<PAGE> 95
WT ACQUISITION CORPORATION
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
W.K. COMMUNICATIONS, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
TELEVISION ENTERPRISES, INC.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
BLACK CREEK MANAGEMENT, L.L.C.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
BLACK CREEK COMMUNICATIONS, L.P.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
CLASSIC NETWORK TRANSMISSION, L.L.C.
By: /s/ J. MERRITT BELISLE
-----------------------------------
Name: J. Merritt Belisle
Title: Chief Executive Officer
Indenture Signature Page
<PAGE> 96
Dated as of February 16, 2000
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By: /s/ CARY W. GILLIAM
-----------------------------------
Name: Cary W. Gilliam
Title: Vice President
Indenture Signature Page
<PAGE> 97
EXHIBIT A1
[Face of Note]
- --------------------------------------------------------------------------------
CUSIP/CINS: 18272NAF9
10 1/2% [Series A][Series B] Senior Subordinated Notes due 2010
No. R-1 $
------------
CLASSIC CABLE, INC.
promises to pay to Cede & Co. or registered assigns,
the principal sum of
-----------------------------------------------------------
Dollars on March 1, 2010.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
CLASSIC CABLE, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
(SEAL)
This is one of the Notes referred to
in the within-mentioned Indenture:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By: -------------------------------------- Date of Authentication:
Authorized Signatory February 16, 2000
- --------------------------------------------------------------------------------
A1-1
<PAGE> 98
[Back of Note]
10 1/2% [Series A] [Series B] Senior Subordinated Notes due 2010
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Classic Cable, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10 1/2% per annum from February 16, 2000 until maturity and shall pay the
Special Interest payable pursuant to Section 2(d) of the Registration Rights
Agreement referred to below. The Company will pay interest and Special Interest
semi-annually in arrears on March 1 and September 1 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be September 1, 2000. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Special Interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Special Interest to the Persons who are
registered Holders of Notes at the close of business on the February 15 or
August 15 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Special
Interest, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Special Interest may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Special Interest on, all Global Notes and all other Notes if a Holder of more
than $5.0 million in principal amount of Notes shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Bank of Texas, National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of February 16, 2000 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as
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<PAGE> 99
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $300.0 million
in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Notwithstanding the provisions of clause (b) of this Paragraph 5,
at any time prior to March 1, 2003, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes ever issued under
this Indenture at a redemption price equal to 110.500% of the principal amount
thereof plus accrued and unpaid interest and Special Interest, if any, to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings by the Company or the net cash proceeds of a Strategic Equity
Investment in the Company or a capital contribution to the Company's common
equity made with the net cash proceeds of a concurrent Public Equity Offering
by, or Strategic Equity Investment in, the Company's direct parent; provided
that (1) at least 65% of the Notes ever issued under this Indenture remain
outstanding immediately after each such redemption (excluding Notes held by the
Company and its Subsidiaries) and (2) the redemption occurs within 60 days of
the date of the closing of such Public Equity Offering or Strategic Equity
Investment.
(b) At any time, the Company may also redeem all or a part of the Notes
upon the occurrence of a Change of Control, upon not less than 30 nor more than
60 days' prior notice (but in no event may any such redemption occur more than
90 days after the occurrence of such Change of Control) mailed by first-class
mail to each Holder's registered address, at a redemption price equal to 100% of
the principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Special Interest, if any, to the date of redemption.
(c) Except as set forth in clause (a) of this Paragraph 5, the Company
shall not have the option to redeem the Notes pursuant to this Paragraph 5 prior
to March 1, 2005. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest and
Special Interest, if any, thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on March 1 of the years indicated
below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2005......................................... 105.250%
2006......................................... 103.500%
2007......................................... 101.750%
2008 and thereafter.......................... 100.000%
</TABLE>
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
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<PAGE> 100
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Special Interest thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 30 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$15.0 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the
maximum principal amount of Notes (including any Additional Notes) that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Special Interest thereon, if any, to the date fixed for the closing of such
offer, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes (including any Additional Notes)
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company (or such Subsidiary) may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the subject
of an offer to purchase will receive an Asset Sale Offer from the Company prior
to any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. SUBORDINATION. Payment of principal, interest and premium and
Special Interest, if any, on the Notes is subordinated to the prior payment of
Senior Debt on the terms provided in the Indenture.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least
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<PAGE> 101
a majority in principal amount of the then outstanding Notes and Additional
Notes, if any, voting as a single class, and any existing default or compliance
with any provision of the Indenture, the Note Guarantees or the Notes may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Notes and Additional Notes, if any, voting as a single class.
Without the consent of any Holder of a Note, the Indenture, the Note Guarantees
or the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, to provide for the Issuance of Additional Notes
in accordance with the limitations set forth in the Indenture, or to allow any
Guarantor to execute a supplemental indenture to the Indenture and/or a Note
Guarantee with respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest or Special Interest on the Notes
whether or not prohibited by Article 10 of the Indenture; (ii) default in
payment when due of principal of or premium, if any, on the Notes when the same
becomes due and payable at maturity, upon redemption (including in connection
with an offer to purchase) or otherwise whether or not prohibited by Article 10
of the Indenture, (iii) failure by the Company or any of its Subsidiaries to
comply with the provisions applicable to them of Section 5.01 of the Indenture;
(iv) failure by the Company or any of its Subsidiaries for 30 days after notice
to the Company by the Trustee or the Holders of at least 25% in principal amount
of the Notes (including Additional Notes, if any) then outstanding voting as a
single class to comply with the provisions applicable to them of Sections 4.03,
4.07, 4.08, 4.09, 4.11, 4.14, 4.16, 4.17, 4.18 or 4.19 of the Indenture; (v)
failure by the Company or any of its Subsidiaries for 60 days after notice to
the Company by the Trustee or the Holders of at least 25% in principal amount of
the Notes (including Additional Notes, if any) then outstanding voting as a
single class to comply with certain other agreements in the Indenture or the
Notes; (vi) default under certain other agreements relating to Indebtedness of
the Company which default results in the acceleration of such Indebtedness prior
to its express maturity; (vii) certain final judgments for the payment of money
that remain undischarged for a period of 60 days; (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries; and (ix) except as permitted by the Indenture, any Note Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor or any
Person acting on its behalf shall deny or disaffirm its obligations under such
Guarantor's Note Guarantee. If any Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon
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becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Exchange and
Registration Rights Agreement dated as of February 16, 2000, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attention: Corporate Secretary
A1-6
<PAGE> 103
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
----------------------------------
(Insert assignee's legal name)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
------------------------------
Your Signature:
--------------------------
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee*:
------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A1-7
<PAGE> 104
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased:
$
--------------------
Date:
--------------------------------------
Your Signature:
--------------------------
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:
------------------
Signature Guarantee*:
-----------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A1-8
<PAGE> 105
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount Signature of
Amount of decrease in Amount of increase in of this Global Note authorized officer of
Principal Amount Principal Amount following such decrease Trustee or Note
Date of Exchange this Global Note of this Global Note (or increase) Custodian
---------------- --------------------- --------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
* This schedule should be included only if the Note is issued in global form.
A1-9
<PAGE> 106
EXHIBIT A2
[Face of Regulation S Temporary Global Note]
- --------------------------------------------------------------------------------
CUSIP/CINS: U17965AC5
10 1/2% [Series A] [Series B] Senior Subordinated Notes due 2010
No. S-1
$
------------
CLASSIC CABLE, INC.
promises to pay to Cede & Co. or registered assigns,
the principal sum of
-----------------------------------------------------------
Dollars on March 1, 2010.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
CLASSIC CABLE, INC.
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
(SEAL)
This is one of the Notes referred to
in the within-mentioned Indenture:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By: ---------------------------------------- Date of Authentication:
Authorized Signatory February 16, 2000
- --------------------------------------------------------------------------------
A2-1
<PAGE> 107
[Back of Regulation S Temporary Global Note]
10 1/2% [Series A] [Series B] Senior Subordinated Notes due 2010
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE
HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT
A2-2
<PAGE> 108
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (1) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Classic Cable, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10 1/2% per annum from February 16, 2000 until maturity and shall pay the
Special Interest payable pursuant to Section 2(d) of the Registration Rights
Agreement referred to below. The Company will pay interest and Special Interest
semi-annually in arrears on March 1 and September 1 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be September 1, 2000. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Special Interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Special Interest to the Persons who are
registered Holders of Notes at the close of business on the February 15 or
August 15 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Special
Interest, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Special Interest may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Special Interest on, all Global Notes and all other Notes if a Holder of more
than $5.0 million in principal amount of Notes shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Bank of Texas, National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of February 16, 2000 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and
A2-3
<PAGE> 109
be controlling. The Notes are obligations of the Company limited to $300.0
million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Notwithstanding the provisions of clause (b) of this Paragraph 5,
at any time prior to March 1, 2003, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes ever issued under
this Indenture at a redemption price equal to 110.500% of the principal amount
thereof plus accrued and unpaid interest and Special Interest, if any, to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings by the Company or the net cash proceeds of a Strategic Equity
Investment in the Company or a capital contribution to the Company's common
equity made with the net cash proceeds of a concurrent Public Equity Offering
by, or Strategic Equity Investment in, the Company's direct parent; provided
that (1) at least 65% of the Notes ever issued under this Indenture remain
outstanding immediately after each such redemption (excluding Notes held by the
Company and its Subsidiaries) and (2) the redemption occurs within 60 days of
the date of the closing of such Public Equity Offering or Strategic Equity
Investment.
(b) At any time, the Company may also redeem all or a part of the Notes
upon the occurrence of a Change of Control, upon not less than 30 nor more than
60 days' prior notice (but in no event may any such redemption occur more than
90 days after the occurrence of such Change of Control) mailed by first-class
mail to each Holder's registered address, at a redemption price equal to 100% of
the principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Special Interest, if any, to the date of redemption.
(c) Except as set forth in clause (a) of this Paragraph 5, the Company
shall not have the option to redeem the Notes pursuant to this Paragraph 5 prior
to March 1, 2005. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest and
Special Interest, if any, thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on March 1 of the years indicated
below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2005.................................... 105.250%
2006.................................... 103.500%
2007.................................... 101.750%
2008 and thereafter..................... 100.000%
</TABLE>
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Special Interest thereon, if any, to the date of purchase
(the "Change of
A2-4
<PAGE> 110
Control Payment"). Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder setting forth the procedures governing the
Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$15.0 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the
maximum principal amount of Notes (including any Additional Notes) that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Special Interest thereon, if any, to the date fixed for the closing of such
offer, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes (including any Additional Notes)
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company (or such Subsidiary) may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the subject
of an offer to purchase will receive an Asset Sale Offer from the Company prior
to any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. SUBORDINATION. Payment of principal, interest and premium and
Special Interest, if any, on the Notes is subordinated to the prior payment of
Senior Debt on the terms provided in the Indenture.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes and
Additional Notes, if any, voting as a single class. Without the consent of any
Holder of a Note, the Indenture, the Note Guarantees or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of
A2-5
<PAGE> 111
certificated Notes, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, to provide for the Issuance of Additional Notes
in accordance with the limitations set forth in the Indenture, or to allow any
Guarantor to execute a supplemental indenture to the Indenture and/or a Note
Guarantee with respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest or Special Interest on the Notes
whether or not prohibited by Article 10 of the Indenture; (ii) default in
payment when due of principal of or premium, if any, on the Notes when the same
becomes due and payable at maturity, upon redemption (including in connection
with an offer to purchase) or otherwise whether or not prohibited by Article 10
of the Indenture, (iii) failure by the Company or any of its Subsidiaries to
comply with the provisions applicable to them of Section 5.01 of the Indenture;
(iv) failure by the Company or any of its Subsidiaries for 30 days after notice
to the Company by the Trustee or the Holders of at least 25% in principal amount
of the Notes (including Additional Notes, if any) then outstanding voting as a
single class to comply with the provisions applicable to them of Sections 4.03,
4.07, 4.08, 4.09, 4.11, 4.14, 4.16, 4.17, 4.18 or 4.19 of the Indenture; (v)
failure by the Company or any of its Subsidiaries for 60 days after notice to
the Company by the Trustee or the Holders of at least 25% in principal amount of
the Notes (including Additional Notes, if any) then outstanding voting as a
single class to comply with certain other agreements in the Indenture or the
Notes; (vi) default under certain other agreements relating to Indebtedness of
the Company which default results in the acceleration of such Indebtedness prior
to its express maturity; (vii) certain final judgments for the payment of money
that remain undischarged for a period of 60 days; (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries; and (ix) except as permitted by the Indenture, any Note Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor or any
Person acting on its behalf shall deny or disaffirm its obligations under such
Guarantor's Note Guarantee. If any Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
A2-6
<PAGE> 112
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Exchange and
Registration Rights Agreement dated as of February 16, 2000, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attention: Corporate Secretary
A2-7
<PAGE> 113
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
----------------------------------
(Insert assignee's legal name)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
-----------------
Your Signature:
----------------------------------
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee*:
------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A2-8
<PAGE> 114
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased:
$
---------------------
Date:
--------------------------
Your Signature:
----------------------------------
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:
---------------------------
Signature Guarantee*:
-------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A2-9
<PAGE> 115
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary Global
Note for an interest in another Global Note, or of other Restricted Global Notes
for an interest in this Regulation S Temporary Global Note, have been made:
<TABLE>
<CAPTION>
Principal Amount of
this Signature of
Amount of decrease in Amount of increase in Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
---------------- --------------------- --------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
A2-10
<PAGE> 116
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
Re: 10 1/2% Senior Subordinated Notes due 2010
Reference is hereby made to the Indenture, dated as of February 16,
2000 (the "Indenture"), between Classic Cable, Inc., as issuer (the "Company"),
the Guarantors on the signature pages thereto, and Chase Bank of Texas, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
___________________, (the "Transferor") owns and proposes to transfer
the Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A
DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act
and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person
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<PAGE> 117
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note, the Temporary Regulation S Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY
PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule
904, and the Transferor hereby further certifies that it has not engaged in
any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed,
which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the IAI Global Note and/or the Definitive Notes and in the Indenture and
the Securities Act.
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4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
----------------------------------------
[Insert Name of Transferor]
By:
------------------------------------
Name:
Title:
Dated:
-------------------
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ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP __________ ), or
(ii) [ ] Regulation S Global Note (CUSIP __________ ), or
(iii) [ ] IAI Global Note (CUSIP ___________ ); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP __________ ), or
(ii) [ ] Regulation S Global Note (CUSIP __________ ), or
(iii) [ ] IAI Global Note (CUSIP ___________ ); or
(iv) [ ] Unrestricted Global Note (CUSIP __________ ); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE> 120
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
Re: 10 1/2% Senior Subordinated Notes due 2010
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of February 16,
2000 (the "Indenture"), between Classic Cable, Inc., as issuer (the "Company"),
the Guarantors on the signature pages thereto, and Chase Bank of Texas, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
__________________________, (the "Owner") owns and proposes to exchange
the Note[s] or interest in such Note[s] specified herein, in the principal
amount of $____________ in such Note[s] or interests (the "Exchange"). In
connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
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<PAGE> 121
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL
INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
[ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI Global Note with an
equal principal amount, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
C-2
<PAGE> 122
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
------------------------------------------
[Insert Name of Transferor]
By:
--------------------------------------
Name:
Title:
Dated:
------------------
C-3
<PAGE> 123
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
Re: 10 1/2% Senior Subordinated Notes due 2010
Reference is hereby made to the Indenture, dated as of February 16,
2000 (the "Indenture"), between Classic Cable, Inc., as issuer (the "Company"),
the Guarantors on the signature pages thereto, and Chase Bank of Texas, National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the Definitive Note or beneficial interest
in a Global Note from us in a transaction meeting the requirements of clauses
(A) through (E) of this paragraph a notice advising such purchaser that resales
thereof are restricted as stated herein.
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<PAGE> 124
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased
by us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
------------------------------------------
[Insert Name of Accredited Investor]
By:
--------------------------------------
Name:
Title:
Dated:
------------------
D-2
<PAGE> 125
EXHIBIT E
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of February 16, 2000 (the "Indenture")
among Classic Cable, Inc., the Guarantors listed on Schedule I thereto and Chase
Bank of Texas, National Association, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium, if any, and interest on the Notes
(as defined in the Indenture), whether at maturity, by acceleration, redemption
or otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Note Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Note Guarantee.
Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee, on behalf of such
Holder, to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Note Guarantee shall cease to be so subordinated
and subject in right of payment upon any defeasance of this Note in accordance
with the provisions of the Indenture.
CLASSIC CABLE HOLDING, INC.
By:
--------------------------------------
Name:
Title:
UNIVERSAL CABLE HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS, INC.
By:
--------------------------------------
Name:
Title:
E-1
<PAGE> 126
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC.
By:
--------------------------------------
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
--------------------------------------
Name:
Title:
FRIENDSHIP CABLE OF TEXAS, INC.
By:
--------------------------------------
Name:
Title:
CORRECTIONAL CABLE TV, INC.
By:
--------------------------------------
Name:
Title:
CALLCOM 24, INC.
By:
--------------------------------------
Name:
Title:
FRIENDSHIP CABLE OF ARKANSAS, INC.
By:
--------------------------------------
Name:
Title:
E-2
<PAGE> 127
CLASSIC TELEPHONE, INC.
By:
--------------------------------------
Name:
Title:
WT ACQUISITION CORPORATION
By:
--------------------------------------
Name:
Title:
W.K. COMMUNICATIONS, INC.
By:
--------------------------------------
Name:
Title:
TELEVISION ENTERPRISES, INC.
By:
--------------------------------------
Name:
Title:
BLACK CREEK MANAGEMENT, L.L.C.
By:
--------------------------------------
Name:
Title:
BLACK CREEK COMMUNICATIONS, L.P.
By:
--------------------------------------
Name:
Title:
CLASSIC NETWORK TRANSMISSION, L.L.C.
By:
--------------------------------------
Name:
Title:
E-3
<PAGE> 128
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Classic Cable, Inc. (or its permitted successor), a Delaware
corporation (the "Company"), the Company, the other Guarantors (as defined in
the Indenture referred to herein) and Chase Bank of Texas, National Association,
as trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of February 16, 2000 providing
for the issuance of an aggregate principal amount of up to $300.0 million of
10 1/2% Senior Subordinated Notes due 2010 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as
follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
the Notes or the obligations of the Company hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and
interest on the Notes, if any, if lawful, and all other obligations
of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same
immediately.
F-1
<PAGE> 129
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or
the Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder of the Notes with respect to any provisions hereof or
thereof, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise constitute
a legal or equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence presentment,
demand of payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever.
(d) This Note Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and the
Indenture, and the Guaranteeing Subsidiary accepts all obligations of a
Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any Custodian,
Trustee, liquidator or other similar official acting in relation to either
the Company or the Guarantors, any amount paid by either to the Trustee or
such Holder, this Note Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6
of the Indenture for the purposes of this Note Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in Article 6 of
the Indenture, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Note Guarantee.
(h) The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.
(i) Pursuant to Section 11.03 of the Indenture, after giving
effect to any maximum amount and any other contingent and fixed liabilities
that are relevant under any applicable Bankruptcy or fraudulent conveyance
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under Article 11 of
the Indenture, this new Note Guarantee shall be limited to the maximum
amount permissible such that the obligations of such Guarantor under this
Note Guarantee will not constitute a fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the
Note Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
F-2
<PAGE> 130
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Guarantor
unless:
(i) subject to Sections 11.05 and 11.06 of the Indenture, the
Person formed by or surviving any such consolidation or merger (if other
than a Guarantor or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a supplemental indenture in form
and substance reasonably satisfactory to the Trustee, under the Notes, the
Indenture and the Note Guarantee on the terms set forth herein or therein;
and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Note Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Note Guarantees so issued shall in all
respects have the same legal rank and benefit under the Indenture as the Note
Guarantees theretofore and thereafter issued in accordance with the terms of the
Indenture as though all of such Note Guarantees had been issued at the date of
the execution hereof.
(c) Except as set forth in Articles 4 and 5 and Section 11.06 of the
Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in
the Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into the Company or another Guarantor, or shall prevent
any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, in each case to a
Person that is not (either before or after giving effect to such transaction) a
Subsidiary of the Company, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under its Note
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the Indenture, including
without limitation Section 4.10 of the Indenture. Upon delivery by the Company
to the Trustee of an Officers' Certificate and an Opinion of Counsel to the
effect that such sale or other disposition was made by the Company in accordance
with the provisions of the Indenture, including without limitation Section 4.10
of the Indenture, the Trustee shall execute any documents reasonably required in
order to evidence the release of any Guarantor from its obligations under its
Note Guarantee.
F-3
<PAGE> 131
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under the Indenture
as provided in Article 11 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the SEC that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
F-4
<PAGE> 132
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ,
-------------- ----
[GUARANTEEING SUBSIDIARY]
By:
-------------------------------------
Name:
Title:
CLASSIC CABLE, INC.
By:
-------------------------------------
Name:
Title:
CLASSIC CABLE HOLDING, INC.
By:
-------------------------------------
Name:
Title:
F-5
<PAGE> 133
UNIVERSAL CABLE HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS INC.
By:
-------------------------------------
Name:
Title:
UNIVERSAL CABLE OF BEAVER, OKLAHOMA, INC.
By:
-------------------------------------
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
-------------------------------------
Name:
Title:
FRIENDSHIP CABLE OF TEXAS, INC.
By:
-------------------------------------
Name:
Title:
CORRECTIONAL CABLE TV, INC.
By:
-------------------------------------
Name:
Title:
F-6
<PAGE> 134
CALLCOM 24, INC.
By:
-------------------------------------
Name:
Title:
FRIENDSHIP CABLE OF ARKANSAS, INC.
By:
-------------------------------------
Name:
Title:
CLASSIC TELEPHONE, INC.
By:
-------------------------------------
Name:
Title:
WT ACQUISITION CORPORATION
By:
-------------------------------------
Name:
Title:
W.K. COMMUNICATIONS, INC.
By:
-------------------------------------
Name:
Title:
TELEVISION ENTERPRISES, INC.
By:
-------------------------------------
Name:
Title:
F-7
<PAGE> 135
BLACK CREEK MANAGEMENT, L.L.C.
By:
-------------------------------------
Name:
Title:
BLACK CREEK COMMUNICATIONS, L.P.
By:
-------------------------------------
Name:
Title:
CLASSIC NETWORK TRANSMISSION, L.L.C.
By:
-------------------------------------
Name:
Title:
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By:
-------------------------------------
Authorized Signatory
F-8
<PAGE> 136
SCHEDULE 1
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under the Indenture as of
the date of the Indenture:
Classic Cable Holding, Inc.
Classic Telephone, Inc.
Universal Cable Holdings, Inc.
Universal Cable Communications, Inc.
Universal Cable of Beaver, Oklahoma, Inc.
Universal Cable Midwest, Inc.
WT Acquisition Corporation
W.K. Communications, Inc.
Television Enterprises, Inc.
Black Creek Communications, L.P.
Black Creek Management, L.L.C.
Friendship Cable of Texas, Inc.
Correctional Cable TV, Inc.
CallCom 24, Inc.
Friendship Cable of Arkansas, Inc.
Classic Network Transmission, L.L.C.
<PAGE> 1
EXHIBIT 4.10
- --------------------------------------------------------------------------------
CUSIP/CINS:
Form of
10 1/2% Series A Senior Subordinated Notes due 2010
CLASSIC CABLE, INC.
promises to pay to Cede & Co. or registered assigns,
the principal sum of
on March 1, 2010.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
CLASSIC CABLE, INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
(SEAL)
This is one of the Notes referred to
in the within-mentioned Indenture:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By: Date of Authentication: February 16, 2000
--------------------------------
Authorized Signatory
- --------------------------------------------------------------------------------
<PAGE> 2
10 1/2% Senior Subordinated Notes due 2010
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF CLASSIC CABLE, INC.
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Classic Cable, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10 1/2% per annum from February 16, 2000 until maturity and shall pay the
Special Interest payable pursuant to Section 2(d) of the Registration Rights
Agreement referred to below. The Company will pay interest and Special Interest
semi-annually in arrears on March 1 and September 1 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be September 1, 2000. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Special Interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Special Interest to the Persons who are
registered Holders of Notes at the close of
2
<PAGE> 3
business on the February 15 or August 15 next preceding the Interest Payment
Date, even if such Notes are canceled after such record date and on or before
such Interest Payment Date, except as provided in Section 2.12 of the Indenture
with respect to defaulted interest. The Notes will be payable as to principal,
premium and Special Interest, if any, and interest at the office or agency of
the Company maintained for such purpose within or without the City and State of
New York, or, at the option of the Company, payment of interest and Special
Interest may be made by check mailed to the Holders at their addresses set forth
in the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Special Interest on, all Global Notes and all other Notes
if a Holder of more than $5.0 million in principal amount of Notes shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Bank of Texas, National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of February 16, 2000 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $300.0 million
in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Notwithstanding the provisions of clause (b) of this Paragraph
5, at any time prior to March 1, 2003, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes ever
issued under this Indenture at a redemption price equal to 110.500% of the
principal amount of the Notes redeemed plus accrued and unpaid interest and
Special Interest, if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings by the Company or the net cash proceeds of a
Strategic Equity Investment in the Company or a capital contribution to the
Company's common equity made with the net cash proceeds of a concurrent Public
Equity Offering by, or Strategic Equity Investment in, the Company's direct
parent; provided that (1) at least 65% of the Notes ever issued under this
Indenture remain outstanding immediately after each such redemption (excluding
Notes held by the Company and its Subsidiaries) and (2) the redemption occurs
within 60 days of the date of the closing of such Public Equity Offering or
Strategic Equity Investment.
(b) At any time, the Company may also redeem all or a part of the
Notes upon the occurrence of a Change of Control, upon not less than 30 nor more
than 60 days' prior notice (but in no event may any such redemption occur more
than 90 days after the occurrence of such Change of Control) mailed by
first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued and unpaid interest and Special Interest, if any, to the date of
redemption.
(c) Except as set forth in clause (a) or clause (b) of this
Paragraph 5, the Company shall not have the option to redeem the Notes pursuant
to this Paragraph 5 prior to March 1, 2005. Thereafter, the Company shall have
the option to redeem the Notes, in whole or in part, upon no less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount)
3
<PAGE> 4
set forth below plus accrued and unpaid interest and Special Interest, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on March 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2005........................................................................... 105.250%
2006........................................................................... 103.500%
2007........................................................................... 101.750%
2008 and thereafter............................................................ 100.000%
</TABLE>
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required
to make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Special Interest thereon, if any, to the date of
purchase (the "Change of Control Payment"). Within 30 days following any Change
of Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $15.0 million, the Company shall commence an offer to all Holders of
Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to
purchase the maximum principal amount of Notes (including any Additional Notes)
that may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Special Interest thereon, if any, to the date fixed for the closing
of such offer, in accordance with the procedures set forth in the Indenture. To
the extent that the aggregate amount of Notes (including any Additional Notes)
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company (or such Subsidiary) may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the subject
of an offer to purchase will receive an Asset Sale Offer from the Company prior
to any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. SUBORDINATION. Payment of principal, interest and premium and
Special Interest, if any, on the Notes is subordinated to the prior payment of
Senior Debt on the terms provided in the Indenture.
4
<PAGE> 5
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes and
Additional Notes, if any, voting as a single class. Without the consent of any
Holder of a Note, the Indenture, the Note Guarantees or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's or Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act, to
provide for the Issuance of Additional Notes in accordance with the limitations
set forth in the Indenture, or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Note Guarantee with respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest or Special Interest on the Notes
whether or not prohibited by Article 10 of the Indenture; (ii) default in
payment when due of principal of or premium, if any, on the Notes when the same
becomes due and payable at maturity, upon redemption (including in connection
with an offer to purchase) or otherwise whether or not prohibited by Article 10
of the Indenture, (iii) failure by the Company or any of its Subsidiaries to
comply with the provisions applicable to them of Section 5.01 of the Indenture;
(iv) failure by the Company or any of its Subsidiaries for 30 days after notice
to the Company to comply with the provisions applicable to them of Sections
4.03, 4.07, 4.08, 4.09, 4.11, 4.14, 4.16, 4.17, 4.18 or 4.19 (in each case other
than a failure to purchase Notes) of the Indenture; (v) failure by the Company
or any of its Subsidiaries for 60 days after notice to the Company to comply
with agreements applicable to them in the Indenture or the Notes; (vi) default
under certain other agreements relating to Indebtedness of the Company which
default results in the acceleration of such Indebtedness prior to its express
maturity; (vii) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; (viii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries;
and (ix) except as permitted by the Indenture, any Note Guarantee shall be held
in any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor or any Person acting on
its behalf shall deny or disaffirm its obligations under such Guarantor's Note
Guarantee. If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due
5
<PAGE> 6
and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Exchange and
Registration Rights Agreement dated as of February 16, 2000, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. NOTE GUARANTEES. For value received, each Guarantor (which term
includes any successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of February 16, 2000 (the
"Indenture") among Classic Cable, Inc., the Guarantors listed on Schedule 1
thereto and Chase Bank of Texas, National Association, as trustee (the
"Trustee"), (a) the due and punctual payment of the principal of, premium, if
any, and interest on the Notes (as defined in the Indenture), whether at
maturity, by acceleration, redemption or otherwise, the due and punctual payment
of interest on overdue principal and premium, and, to the extent permitted by
law, interest, and the due and punctual performance of all other
6
<PAGE> 7
obligations of the Company to the Holders or the Trustee all in accordance with
the terms of the Indenture and (b) in case of any extension of time of payment
or renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to the Note Guarantee and the Indenture are expressly set forth in
Article 11 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Note Guarantee. Each Holder of a Note, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee, on behalf of such Holder, to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such
purpose; provided, however, that the Indebtedness evidenced by this Note
Guarantee shall cease to be so subordinated and subject in right of payment upon
any defeasance of this Note in accordance with the provisions of the Indenture.
7
<PAGE> 8
CLASSIC CABLE HOLDING, INC.
By:
---------------------------------
Name:
Title:
UNIVERSAL CABLE HOLDINGS, INC.
By:
---------------------------------
Name:
Title:
UNIVERSAL CABLE COMMUNICATIONS INC.
By:
---------------------------------
Name:
Title:
UNIVERSAL CABLE OF BEAVER, OKLAHOMA,
INC.
By:
---------------------------------
Name:
Title:
UNIVERSAL CABLE MIDWEST, INC.
By:
---------------------------------
Name:
Title:
FRIENDSHIP CABLE OF TEXAS, INC.
By:
---------------------------------
Name:
Title:
CORRECTIONAL CABLE TV, INC.
By:
---------------------------------
Name:
Title:
<PAGE> 9
CALLCOM 24, INC.
By:
---------------------------------
Name:
Title:
FRIENDSHIP CABLE OF ARKANSAS, INC.
By:
---------------------------------
Name:
Title:
CLASSIC TELEPHONE, INC.
By:
---------------------------------
Name:
Title:
WT ACQUISITION CORPORATION
By:
---------------------------------
Name:
Title:
W.K. COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
TELEVISION ENTERPRISES, INC.
By:
---------------------------------
Name:
Title:
BLACK CREEK MANAGEMENT, L.L.C.
By:
---------------------------------
Name:
Title:
<PAGE> 10
BLACK CREEK COMMUNICATIONS, L.P.
By:
---------------------------------
Name:
Title:
CLASSIC NETWORK TRANSMISSION, L.L.C.
By:
---------------------------------
Name:
Title:
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attention: Corporate Secretary
<PAGE> 11
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
-----------------------------------
(Insert assignee's legal name)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint)________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
---------------------
Your Signature:
------------------------------------
(Sign exactly as your name appears on the face of
this Note)
Signature Guarantee*:
--------------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE> 12
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased:
$
------------------------
Date:
----------------------------
Your Signature:
--------------------------------
(Sign exactly as your name
appears on the face of this Note)
Tax Identification No.:
-------------------------
Signature Guarantee*:
----------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
<PAGE> 13
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount Signature of
Amount of decrease in Amount of increase in of this Global Note authorized officer of
Principal Amount Principal Amount following such decrease Trustee or Note
Date of Exchange this Global Note of this Global Note (or increase) Custodian
- ---------------- --------------------- --------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 4.11
EXECUTION COPY
CLASSIC CABLE, INC.
10 1/2% SENIOR SUBORDINATED NOTES DUE 2010
UNCONDITIONALLY GUARANTEED AS TO THE
PAYMENT OF PRINCIPAL, PREMIUM,
IF ANY, AND INTEREST BY
EACH ENTITY LISTED ON SCHEDULE I HERETO
--------------
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
February 16, 2000
Goldman, Sachs & Co.
Merrill Lynch & Co.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette
As representatives of the several Purchasers named
in Schedule I to the Purchase Agreement
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Classic Cable, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the Purchasers (as defined herein) upon the terms set forth
in the Purchase Agreement (as defined herein) its 10 1/2% Senior Subordinated
Notes due 2010 (the "Securities"), which are unconditionally guaranteed by the
Guarantors named on Schedule I hereto. As an inducement to the Purchasers to
enter into the Purchase Agreement and in satisfaction of a condition to the
obligations of the Purchasers thereunder, the Company and the Guarantors agree
with the Purchasers for the benefit of holders (as defined herein) from time to
time of the Registrable Securities (as defined herein) as follows:
1. Certain Definitions. For purposes of this Exchange and Registration
Rights Agreement, the following terms shall have the following respective
meanings:
"Base Interest" shall mean the interest that would otherwise accrue on
the Securities under the terms thereof and the Indenture, without giving
effect to the provisions of this Exchange and Registration Rights
Agreement.
<PAGE> 2
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing Date" shall mean the date on which the Securities are
initially issued.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Conduct Rules" has the meaning assigned thereto in Section 3(d)(xix).
"Effective Time," in the case of (i) an Exchange Registration, shall
mean the time and date as of which the Commission declares the Exchange
Registration Statement effective or as of which the Exchange Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall
mean the time and date as of which the Commission declares the Shelf
Registration Statement effective or as of which the Shelf Registration
Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Securities that
has returned a completed and signed Notice and Questionnaire to the Company
in accordance with Section 3(d)(ii) or 3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Registration" shall have the meaning assigned thereto in
Section 3(c) hereof.
"Exchange Registration Statement" shall have the meaning assigned
thereto in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
"Guarantors" shall have the meaning assigned thereto in the Indenture.
The term "holder" shall mean each of the Purchasers and other persons
who acquire Registrable Securities from time to time (including any
successors or assigns), in each case for so long as such person owns any
Registrable Securities.
"Indenture" shall mean the Indenture, dated as of February 16, 2000,
between the Company, the Guarantors and Chase Bank of Texas, National
Association, as Trustee, as the same shall be amended from time to time.
"Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Exhibit A
hereto.
The term "person" shall mean a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
2
<PAGE> 3
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
February __, 2000, between the Purchasers, the Guarantors and the Company
relating to the Securities.
"Purchasers" shall mean the Purchasers named in Schedule I to the
Purchase Agreement.
"Registrable Securities" shall mean the Securities; provided, however,
that a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, the Security has been
exchanged for an Exchange Security in an Exchange Offer as contemplated in
Section 2(a) hereof (provided that any Exchange Security that, pursuant to
the last two sentences of Section 2(a), is included in a prospectus for use
in connection with resales by broker-dealers shall be deemed to be a
Registrable Security with respect to Sections 5, 6 and 9 until resale of
such Registrable Security has been effected within the 180-day period
referred to in Section 2(a)); (ii) in the circumstances contemplated by
Section 2(b) hereof, a Shelf Registration Statement registering such
Security under the Securities Act has been declared or becomes effective
and such Security has been sold or otherwise transferred by the holder
thereof pursuant to and in a manner contemplated by such effective Shelf
Registration Statement; (iii) such Security is sold pursuant to Rule 144
under circumstances in which any legend borne by such Security relating to
restrictions on transferability thereof, under the Securities Act or
otherwise, is removed by the Company or pursuant to the Indenture; (iv)
such Security is eligible to be sold pursuant to paragraph (k) of Rule 144;
or (v) such Security shall cease to be outstanding.
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section 2(a)
hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of the
Company within the meaning of Rule 405, (ii) a holder who acquires Exchange
Securities outside the ordinary course of such holder's business, (iii) a
holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing Exchange
Securities and (iv) a holder that is a broker-dealer, but only with respect
to Exchange Securities received by such broker-dealer pursuant to an
Exchange Offer in exchange for Registrable Securities acquired by the
broker-dealer directly from the Company.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"Securities" shall mean, collectively, the 10 1/2% Senior Subordinated
Notes due 2010 of the Company to be issued and sold to the Purchasers, and
securities issued in exchange therefor or in lieu thereof pursuant to the
Indenture. Each Security is entitled to the benefit of the guarantee
provided for in the Indenture (the "Guarantee") and, unless the context
otherwise requires, any reference herein to a "Security," an "Exchange
Security" or a "Registrable Security" shall include a reference to the
related Guarantee.
3
<PAGE> 4
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in Section
2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned thereto
in Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in Section
2(c) hereof.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Exchange and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to
file under the Securities Act, as soon as practicable, but no later than 60 days
after the Closing Date, a registration statement relating to an offer to
exchange (such registration statement, the "Exchange Registration Statement,"
and such offer, the "Exchange Offer") any and all of the Securities for a like
aggregate principal amount of debt securities issued by the Company and
guaranteed by the Guarantors, which debt securities and guarantees are
substantially identical to the Securities and the related Guarantees,
respectively (and are entitled to the benefits of a trust indenture which is
substantially identical to the Indenture or is the Indenture and which has been
qualified under the Trust Indenture Act), except that they have been registered
pursuant to an effective registration statement under the Securities Act and do
not contain provisions for the additional interest contemplated in Section 2(c)
below (such new debt securities hereinafter called "Exchange Securities"). The
Company agrees to use its best efforts to cause the Exchange Registration
Statement to become effective under the Securities Act as soon as practicable,
but no later than 210 days after the Closing Date. The Exchange Offer will be
registered under the Securities Act on the appropriate form and will comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Company further agrees to use its best efforts to commence and complete the
Exchange Offer promptly, but no later than 45 days after such Exchange
Registration Statement has become effective, hold the Exchange Offer open for at
least 30 days and exchange Exchange Securities for all Registrable Securities
that have been properly tendered and not validly withdrawn on or prior to the
expiration of the Exchange Offer. The Exchange Offer will be deemed to have been
"completed" only if the debt securities and related guarantees received by
holders other than Restricted Holders in the Exchange Offer for Registrable
Securities are, upon receipt, transferable by each such holder without
restriction under the Securities Act and the Exchange Act (except for the
requirement to deliver a prospectus included in the Exchange Registration
Statement applicable to resales by any broker-dealer pursuant to an Exchange
Offer in exchange for Registrable Securities other than those acquired by the
broker-dealer directly
4
<PAGE> 5
from the Company) and without material restrictions under the blue sky or
securities laws of a substantial majority of the States of the United States of
America. The Exchange Offer shall be deemed to have been completed upon the
earlier to occur of (i) the Company having exchanged the Exchange Securities for
all outstanding Registrable Securities pursuant to the Exchange Offer and (ii)
the Company having exchanged, pursuant to the Exchange Offer, Exchange
Securities for all Registrable Securities that have been properly tendered and
not withdrawn before the expiration of the Exchange Offer, which shall be on a
date that is at least 30 days following the commencement of the Exchange Offer.
The Company agrees (x) to include in the Exchange Registration Statement a
prospectus for use in any resales by any holder of Exchange Securities that is a
broker-dealer and (y) to keep such Exchange Registration Statement effective for
a period (the "Resale Period") beginning when Exchange Securities are first
issued in the Exchange Offer and ending upon the earlier of the expiration of
the 180th day after the Exchange Offer has been completed or such time as such
broker-dealers no longer own any Registrable Securities. With respect to such
Exchange Registration Statement, such holders shall have the benefit of the
rights of indemnification and contribution set forth in Sections 6(a), (c), (d)
and (e) hereof.
(b) If (i) the Company and the Guarantors are not (a) required to file
the Exchange Offer Registration Statement; or (b) permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy; or (ii) any Restricted Holder notifies the Company prior to
the 20th day following consummation of the Exchange Offer that (a) it is
prohibited by law or Commission policy from participating in the Exchange Offer;
or (b) that it may not resell the Exchange Securities acquired by it in the
Exchange Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales; or (c) that it is a broker-dealer and owns
Securities acquired directly from the Company or an affiliate of the Company,
the Company shall, in lieu of (or, in the case of clause (ii), in addition to)
conducting the Exchange Offer contemplated by Section 2(a), file under the
Securities Act as soon as practicable, but no later than the later of 45 days
after the time such obligation to file arises, a "shelf" registration statement
providing for the registration of, and the sale on a continuous or delayed basis
by the holders of, all of the Registrable Securities, pursuant to Rule 415 or
any similar rule that may be adopted by the Commission (such filing, the "Shelf
Registration" and such registration statement, the "Shelf Registration
Statement"). The Company agrees to use its best efforts (x) to cause the Shelf
Registration Statement to become or be declared effective no later than 120 days
after such Shelf Registration Statement is filed and to keep such Shelf
Registration Statement continuously effective for a period ending on the earlier
of the second anniversary of the Effective Time or such time as there are no
longer any Registrable Securities outstanding, provided, however, that no holder
shall be entitled to be named as a selling securityholder in the Shelf
Registration Statement or to use the prospectus forming a part thereof for
resales of Registrable Securities unless such holder is an Electing Holder, and
(y) after the Effective Time of the Shelf Registration Statement, promptly upon
the request of any holder of Registrable Securities that is not then an Electing
Holder, to take any action reasonably necessary to enable such holder to use the
prospectus forming a part thereof for resales of Registrable Securities,
including, without limitation, any action necessary to identify such holder as a
selling securityholder in the Shelf Registration Statement, provided, however,
that nothing in this Clause (y) shall relieve any such holder of the obligation
to return a completed and signed Notice and Questionnaire to the Company in
accordance with Section 3(d)(iii) hereof. The Company further agrees to
supplement or make amendments to the Shelf
5
<PAGE> 6
Registration Statement, as and when required by the rules, regulations or
instructions applicable to the registration form used by the Company for such
Shelf Registration Statement or by the Securities Act or rules and regulations
thereunder for shelf registration, and the Company agrees to furnish to each
Electing Holder copies of any such supplement or amendment prior to its being
used or promptly following its filing with the Commission.
Notwithstanding the foregoing, the Company may postpone, for a period
not to exceed 30 days, supplementing or amending the Shelf Registration
Statement if (i) the Company is in possession of material non-public information
related to a proposed financing, recapitalization, acquisition, business
combination or other material transaction and the Board of Directors of the
Company determines (in good faith in a written resolution) that disclosure of
such information would have a material adverse effect on the business or
operations of the Company or any of its subsidiaries and disclosure of such
information is not otherwise required by law and (ii) the Company delivers
notice (which shall include a copy of the resolution of the Board of Directors
with respect to such determination) to the Electing Holders and any placement
agent or underwriting as contemplated by Section 3(d)(viii)(F) to the effect
that Electing Holders may not make offers or sales under the Shelf Registration
Statement; provided, however, that the Company may deliver only two such notices
within any twelve-month period. Promptly upon the earlier of (x) public
disclosure of such material non-public information, (y) the date on which such
non-public information is no longer material and (z) 30 days after the notice is
given by the Company pursuant to clause (ii) above, the Company shall supplement
or amend the Shelf Registration Statement as required by the immediately
preceding sentence and give notice to the Electing Holders that offers and sales
under the Shelf Registration Statement may be resumed.
(c) In the event that (i) the Company has not filed the Exchange
Registration Statement or Shelf Registration Statement on or before the date on
which such registration statement is required to be filed pursuant to Section
2(a) or 2(b) hereof, respectively, or (ii) such Exchange Registration Statement
or Shelf Registration Statement has not become effective or been declared
effective by the Commission on or before the date on which such registration
statement is required to become or be declared effective pursuant to Section
2(a) or 2(b), respectively, or (iii) the Exchange Offer has not been completed
within 45 days after the initial effective date of the Exchange Registration
Statement relating to the Exchange Offer (if the Exchange Offer is then required
to be made) or (iv) any Exchange Registration Statement or Shelf Registration
Statement required by Section 2(a) or 2(b) hereof is filed and declared
effective but shall thereafter either be withdrawn by the Company or shall
become subject to an effective stop order issued pursuant to Section 8(d) of the
Securities Act suspending the effectiveness of such registration statement
(except as specifically permitted herein) without being succeeded immediately by
an additional registration statement filed and declared effective (each such
event referred to in clauses (i) through (iv), a "Registration Default" and each
period during which a Registration Default has occurred and is continuing, a
"Registration Default Period"), then, as liquidated damages for such
Registration Default, subject to the provisions of Section 9(b), special
interest ("Special Interest"), in addition to the Base Interest, shall accrue in
an amount equal to $0.05 per week per $1,000 principal amount of Securities held
by such holder, which amount shall increase after the first 90-day period
following the occurrence of the first Registration Default and at the beginning
of each subsequent 90-day period during such Registration Default by an
additional $0.05 per week per $1,000 principal amount of Securities with respect
to each subsequent week during which
6
<PAGE> 7
any Registration Default exists up to a maximum amount of $0.50 per week per
$1,000 principal amount of Securities, for the period from and including the
date of occurrence of the first Registration Default until such time as no
Registration Default is in effect (after which such Special Interest shall cease
to be payable and the interest rate shall return to the Base Interest). In the
event that any Special Interest becomes payable, the Company shall promptly
notify the Trustee of such event, including any subsequent increase in the
amount of Special Interest, and the beginning and ending dates therefor. All
accrued Special Interest will be paid by the Company on each February 1 and
August 1 to the holder of Securities by wire transfer of immediately available
funds or by federal funds check, and to holders of certificated Securities by
wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified; provided that the
Company will in no event be required to pay Special Interest for more than one
Registration Default at a time. Notwithstanding anything to the contrary set
forth herein, (1) upon filing of the Exchange Registration Statement and/or the
Shelf Registration Statement, in the case of (i) above, (2) upon the
effectiveness of the Exchange Registration Statement and/or the Shelf
Registration Statement, in the case of (ii) above, (3) upon completion of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
post-effective amendment or an additional registration statement that causes the
Exchange Registration Statement and/or the Shelf Registration Statement to again
be declared effective or made usable, in the case of (iv) above, the Special
Interest payable as a result of such clause (i), (ii), (iii) or (iv), as
applicable, shall cease accruing and the interest rate shall return to the Base
Interest.
(d) The Company shall take, and shall cause the Guarantors to take, all
actions reasonably necessary or advisable to be taken by it to ensure that the
transactions contemplated herein are effected as so contemplated, including all
actions reasonably necessary or desirable to register the Guarantee under the
registration statement contemplated in Section 2(a) or 2(b) hereof, as
applicable.
(e) Any reference herein to a registration statement as of any time
shall be deemed to include any document incorporated, or deemed to be
incorporated, therein by reference as of such time and any reference herein to
any post-effective amendment to a registration statement as of any time shall be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures.
If the Company files a registration statement pursuant to
Section 2(a) or Section 2(b) hereof, the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, whichever may be first, the Company shall qualify the Indenture
under the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment
of a new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
7
<PAGE> 8
(c) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) hereof (the
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) prepare and file with the Commission, as soon as
practicable but no later than 60 days after the Closing Date, an
Exchange Registration Statement on any form which may be utilized by
the Company and which shall permit the Exchange Offer and resales of
Exchange Securities by broker-dealers during the Resale Period to be
effected as contemplated by Section 2(a), and use its best efforts to
cause such Exchange Registration Statement to become effective as soon
as practicable thereafter, but no later than 210 days after the Closing
Date;
(ii) as soon as practicable prepare and file with the
Commission such amendments and supplements to such Exchange
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Exchange
Registration Statement for the periods and purposes contemplated in
Section 2(a) hereof and as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to the
form of such Exchange Registration Statement, and promptly provide each
broker-dealer holding Exchange Securities with such number of copies of
the prospectus included therein (as then amended or supplemented), in
conformity in all material respects with the requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder, as such broker-dealer
reasonably may request prior to the expiration of the Resale Period,
for use in connection with resales of Exchange Securities;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such Exchange
Registration Statement, and confirm such advice in writing, (A) when
such Exchange Registration Statement or the prospectus included therein
or any prospectus amendment or supplement or post-effective amendment
has been filed, and, with respect to such Exchange Registration
Statement or any post-effective amendment, when the same has become
effective, (B) if requested by such broker-dealer, of any comments by
the Commission and by the blue sky or securities commissioner or
regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such Exchange Registration
Statement or prospectus or for additional information, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of such Exchange Registration Statement or the initiation
or threatening of any proceedings for that purpose, (D) if at any time
the representations and warranties of the Company contemplated by
Section 5 cease to be true and correct in all material respects, (E) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Exchange Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose, or (F) at any time during the Resale Period when a
prospectus is required to be delivered under the Securities Act, that
such Exchange Registration Statement, prospectus, prospectus amendment
or supplement or post-effective amendment does not conform in all
material respects to the applicable requirements of the Securities Act
and the Trust Indenture Act and the rules and regulations of the
Commission thereunder or contains an untrue statement of
8
<PAGE> 9
a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(iv) in the event that the Company would be required, pursuant
to Section 3(e)(iii)(F) above, to notify any broker-dealers holding
Exchange Securities, reasonably promptly prepare and furnish to each
such holder a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to purchasers of such
Exchange Securities during the Resale Period, such prospectus shall
conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(v) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such Exchange Registration Statement or
any post-effective amendment thereto at the earliest practicable date;
(vi) use its best efforts to (A) register or qualify the
Exchange Securities under the securities laws or blue sky laws of such
jurisdictions as are contemplated by Section 2(a) no later than the
commencement of the Exchange Offer, (B) keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers, sales and dealings therein in such jurisdictions
until the expiration of the Resale Period and (C) take any and all
other actions as may be reasonably necessary or advisable to enable
each broker-dealer holding Exchange Securities to consummate the
disposition thereof in such jurisdictions; provided, however, that
neither the Company nor the Guarantors shall be required for any such
purpose to (1) qualify as a foreign corporation in any jurisdiction
wherein it would not otherwise be required to qualify but for the
requirements of this Section 3(c)(vi), (2) consent to general service
of process or taxation in any such jurisdiction or (3) make any changes
to its certificate of incorporation or by-laws or any agreement between
it and its stockholders;
(vii) use its best efforts to obtain the consent or approval
of each governmental agency or authority, whether federal, state or
local, which may be required to effect the Exchange Registration, the
Exchange Offer and the offering and sale of Exchange Securities by
broker-dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange Securities, not
later than the applicable Effective Time of the Exchange Registration
Statement;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon
as practicable but no later than eighteen months after the effective
date of such Exchange Registration Statement, an earning statement of
the Company and its subsidiaries complying with Section 11(a) of the
Securities Act (including, at the option of the Company, Rule 158
thereunder).
9
<PAGE> 10
(d) In connection with the Company's obligations with respect to the
Shelf Registration, if applicable, the Company shall, as soon as practicable (or
as otherwise specified):
(i) prepare and file with the Commission, as soon as
practicable but in any case within the time periods specified in
Section 2(b) hereof, a Shelf Registration Statement on any form which
may be utilized by the Company and which shall register all of the
Registrable Securities for resale by the holders thereof in accordance
with such method or methods of disposition as may be specified by such
of the holders as, from time to time, may be Electing Holders and use
its best efforts to cause such Shelf Registration Statement to become
effective as soon as practicable after such filing but in any case
within the time periods specified in Section 2(b) hereof;
(ii) not less than 30 calendar days prior to the Effective
Time of the Shelf Registration Statement, mail the Notice and
Questionnaire to the holders of Registrable Securities; no holder shall
be entitled to be named as a selling securityholder in the Shelf
Registration Statement as of the Effective Time, and no holder shall be
entitled to use the prospectus forming a part thereof for resales of
Registrable Securities at any time, unless such holder has returned a
completed and signed Notice and Questionnaire to the Company by the
deadline for response set forth therein; provided, however, holders of
Registrable Securities shall have at least 28 calendar days from the
date on which the Notice and Questionnaire is first mailed to such
holders to return a completed and signed Notice and Questionnaire to
the Company;
(iii) after the Effective Time of the Shelf Registration
Statement, upon the request of any holder of Registrable Securities
that is not then an Electing Holder, promptly send a Notice and
Questionnaire to such holder; provided that the Company shall not be
required to take any action to name such holder as a selling
securityholder in the Shelf Registration Statement or to enable such
holder to use the prospectus forming a part thereof for resales of
Registrable Securities until such holder has returned a completed and
signed Notice and Questionnaire to the Company;
(iv) as soon as practicable prepare and file with the
Commission such amendments and supplements to such Shelf Registration
Statement and the prospectus included therein as may be necessary to
effect and maintain the effectiveness of such Shelf Registration
Statement for the period specified in Section 2(b) hereof and as may be
required by the applicable rules and regulations of the Commission and
the instructions applicable to the form of such Shelf Registration
Statement, and furnish to the Electing Holders copies of any such
supplement or amendment simultaneously with or prior to its being used
or filed with the Commission;
(v) comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Securities covered
by such Shelf Registration Statement in accordance with the intended
methods of disposition by the Electing Holders provided for in such
Shelf Registration Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters
(which term, for purposes of this Exchange and Registration Rights
Agreement, shall include a person
10
<PAGE> 11
deemed to be an underwriter within the meaning of Section 2(a)(11) of
the Securities Act), if any, thereof, (C) any sales or placement agent
therefor, (D) counsel for any such underwriter or agent and (E) not
more than one counsel for all the Electing Holders the opportunity to
participate in the preparation of such Shelf Registration Statement,
each prospectus included therein or filed with the Commission and each
amendment or supplement thereto;
(vii) for a reasonable period prior to the filing of such
Shelf Registration Statement, and throughout the period specified in
Section 2(b) hereof, make available at reasonable times at the
Company's principal place of business or such other reasonable place
for inspection by the persons referred to in Section 3(d)(vi) who shall
certify to the Company that they have a current intention to sell the
Registrable Securities pursuant to the Shelf Registration, such
financial and other information and books and records of the Company,
and cause the officers, employees, counsel and independent certified
public accountants of the Company to respond to such inquiries, as
shall be reasonably necessary, in the judgment of the respective
counsel referred to in such Section 3(d)(vi), to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that each such party shall be required to maintain
in confidence and not to disclose to any other person any information
or records reasonably designated by the Company as being confidential,
until such time as (A) such information becomes a matter of public
record (whether by virtue of its inclusion in such Shelf Registration
Statement or otherwise but not because of disclosure by such person or
its representatives), or (B) such person shall be required so to
disclose such information pursuant to a subpoena or order of any court
or other governmental agency or body having jurisdiction over the
matter (subject to the requirements of such order, and only after such
person shall have given the Company prompt prior written notice of such
requirement), or (C) such information is required to be set forth in
such Shelf Registration Statement or the prospectus included therein or
in an amendment to such Shelf Registration Statement or an amendment or
supplement to such prospectus so that such Shelf Registration
Statement, prospectus, amendment or supplement, as the case may be,
complies with applicable requirements of the federal securities laws
and the rules and regulations of the Commission and does not contain an
untrue statement of a material fact or omit to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(viii) promptly notify each of the Electing Holders, any sales
or placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose) and confirm such
advice in writing, (A) when such Shelf Registration Statement or the
prospectus included therein or any prospectus amendment or supplement
or post-effective amendment has been filed, and, with respect to such
Shelf Registration Statement or any post-effective amendment, when the
same has become effective, (B) if requested, of any comments by the
Commission and by the blue sky or securities commissioner or regulator
of any state with respect thereto or any request by the Commission for
amendments or supplements to such Shelf Registration Statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such Shelf
Registration Statement or the
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<PAGE> 12
initiation or threatening of any proceedings for that purpose, (D) if
at any time the representations and warranties of the Company
contemplated by Section 3(d)(xvii) or Section 5 cease to be true and
correct in all material respects, (E) of the receipt by the Company of
any notification with respect to the suspension of the qualification of
the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, or (F) if
at any time when a prospectus is required to be delivered under the
Securities Act, that such Shelf Registration Statement, prospectus,
prospectus amendment or supplement or post-effective amendment does not
conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(ix) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of such Shelf Registration Statement
or any post-effective amendment thereto at the earliest practicable
date;
(x) if requested by any managing underwriter or underwriters,
any placement or sales agent or any Electing Holder, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of
the Commission and as such managing underwriter or underwriters, such
agent or such Electing Holder reasonably specifies should be included
therein relating to the terms of the sale of such Registrable
Securities, including information with respect to the principal amount
of Registrable Securities being sold by such Electing Holder or agent
or to any underwriters, the name and description of such Electing
Holder, agent or underwriter, the offering price of such Registrable
Securities and any discount, commission or other compensation payable
in respect thereof, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the offering of the
Registrable Securities to be sold by such Electing Holder or agent or
to such underwriters, as applicable; and make all required filings of
such prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(xi) furnish to each Electing Holder, each placement or sales
agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(d)(vi) an executed copy
(or, in the case of an Electing Holder, a conformed copy) of such Shelf
Registration Statement, each such amendment and supplement thereto (in
each case including all exhibits thereto (in the case of an Electing
Holder of Registrable Securities, upon request) and documents
incorporated by reference therein) and such number of copies of such
Shelf Registration Statement (excluding exhibits thereto and documents
incorporated by reference therein unless specifically so requested by
such Electing Holder, agent or underwriter, as the case may be) and of
the prospectus included in such Shelf Registration Statement (including
each preliminary prospectus and any summary prospectus), in conformity
in all material respects with the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder, and such other
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<PAGE> 13
documents, as such Electing Holder, agent, if any, and underwriter, if
any, may reasonably request in order to facilitate the offering and
disposition of the Registrable Securities owned by such Electing
Holder, or offered or sold by such agent or underwritten by such
underwriter, as applicable, and to permit such Electing Holder, agent
and underwriter to satisfy the prospectus delivery requirements of the
Securities Act; and the Company hereby consents to the use of such
prospectus (including such preliminary and summary prospectus) and any
amendment or supplement thereto by each such Electing Holder and by any
such agent and underwriter, in each case in the form most recently
provided to such person by the Company, in connection with the offering
and sale of the Registrable Securities covered by the prospectus
(including such preliminary and summary prospectus) or any supplement
or amendment thereto;
(xii) use its best efforts to (A) register or qualify the
Registrable Securities to be included in such Shelf Registration
Statement under such securities laws or blue sky laws of such
jurisdictions as any Electing Holder and each placement or sales agent,
if any, therefor and each underwriter, if any, thereof shall reasonably
request, (B) keep such registrations or qualifications in effect and
comply with such laws so as to permit the continuance of offers, sales
and dealings therein in such jurisdictions during the period the Shelf
Registration is required to remain effective under Section 2(b) above
and for so long as may be necessary to enable any such Electing Holder,
agent or underwriter to complete its distribution (so long as such
distribution is commenced during the period the Shelf Registration is
required to remain effective under Section 2(b) above) of Securities
pursuant to such Shelf Registration Statement and (C) take any and all
other actions as may be reasonably necessary or advisable to enable
each such Electing Holder, agent, if any, and underwriter, if any, to
consummate the disposition in such jurisdictions of such Registrable
Securities; provided, however, that neither the Company nor the
Guarantors shall be required for any such purpose to (1) qualify as a
foreign corporation in any jurisdiction wherein it would not otherwise
be required to qualify but for the requirements of this Section
3(d)(xii), (2) consent to general service of process or taxation in any
such jurisdiction or (3) make any changes to its certificate of
incorporation or by-laws or any agreement between it and its
stockholders;
(xiii) use its best efforts to obtain the consent or approval
of each governmental agency or authority, whether federal, state or
local, which may be required to effect the Shelf Registration or the
offering or sale in connection therewith or to enable the selling
holder or holders to offer, or to consummate the disposition of, their
Registrable Securities;
(xiv) Unless any Registrable Securities shall be in book-entry
only form, cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold, which
certificates, if so required by any securities exchange upon which any
Registrable Securities are listed, shall be printed, penned,
lithographed or engraved, or produced by any combination of such
methods, on steel engraved borders, and which certificates shall not
bear any restrictive legends; and, in the case of an underwritten
offering, enable such Registrable Securities to be in such
denominations and registered
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<PAGE> 14
in such names as the managing underwriters may request at least two
business days prior to any sale of the Registrable Securities;
(xv) provide a CUSIP number for all Registrable Securities,
not later than the applicable Effective Time;
(xvi) enter into one or more underwriting agreements,
engagement letters, agency agreements, "best efforts" underwriting
agreements or similar agreements, as appropriate, including customary
provisions relating to indemnification and contribution, and take such
other actions in connection therewith as any Electing Holders
aggregating at least 30% in aggregate principal amount of the
Registrable Securities at the time outstanding shall request in order
to expedite or facilitate the disposition of such Registrable
Securities;
(xvii) whether or not an agreement of the type referred to in
Section 3(d)(xvi) hereof is entered into and whether or not any portion
of the offering contemplated by the Shelf Registration is an
underwritten offering or is made through a placement or sales agent or
any other entity, (A) make such representations and warranties to the
Electing Holders and the placement or sales agent, if any, therefor and
the underwriters, if any, thereof in form, substance and scope as are
customarily made in connection with an offering of debt securities
pursuant to any appropriate agreement or to a registration statement
filed on the form applicable to the Shelf Registration; (B) obtain an
opinion of counsel to the Company in customary form and covering such
matters, of the type customarily covered by such an opinion, as the
managing underwriters, if any, or as any Electing Holders of at least
30% in aggregate principal amount of the Registrable Securities at the
time outstanding may reasonably request, addressed to such Electing
Holder or Electing Holders and the placement or sales agent, if any,
therefor and the underwriters, if any, thereof and dated the effective
date of such Shelf Registration Statement (and if such Shelf
Registration Statement contemplates an underwritten offering of a part
or all of the Registrable Securities, dated the date of the closing
under the underwriting agreement relating thereto) (it being agreed
that the matters to be covered by such opinion shall include the due
organization and good standing of the Company and its subsidiaries in
their respective states of organization; the qualification of the
Company and its subsidiaries to transact business as foreign entities
in states where they transact business; the due authorization,
execution and delivery of the relevant agreement of the type referred
to in Section 3(d)(xvi) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of
the Registrable Securities; the absence of material legal or
governmental proceedings involving the Company not otherwise disclosed
in the Shelf Registration Statement; the absence of governmental
approvals required to be obtained in connection with the Shelf
Registration, the offering and sale of the Registrable Securities, this
Exchange and Registration Rights Agreement or any agreement of the type
referred to in Section 3(d)(xvi) hereof, except such approvals as may
be required under state securities or blue sky laws; the material
compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indenture with
the requirements of the Securities Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder, respectively;
and, as of the date of the opinion and of the Shelf Registration
Statement
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<PAGE> 15
or most recent post-effective amendment thereto, as the case may be,
the absence from such Shelf Registration Statement and the prospectus
included therein, as then amended or supplemented, and from the
documents incorporated by reference therein (in each case other than
the financial statements and other financial information contained
therein) of an untrue statement of a material fact or the omission to
state therein a material fact necessary to make the statements therein
not misleading (in the case of the prospectus and such documents, in
the light of the circumstances then existing at the time that such
documents were filed with the Commission under the Exchange Act)); (C)
obtain a "cold comfort" letter or letters from the independent
certified public accountants of the Company addressed to the selling
Electing Holders, the placement or sales agent, if any, therefor or the
underwriters, if any, thereof, dated (i) the effective date of such
Shelf Registration Statement and (ii) the effective date of any
prospectus supplement to the prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the
latest such statements included in such prospectus (and, if such Shelf
Registration Statement contemplates an underwritten offering pursuant
to any prospectus supplement to the prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the
latest such statements included in such prospectus, dated the date of
the closing under the underwriting agreement relating thereto), such
letter or letters to be in customary form and covering such matters of
the type customarily covered by letters of such type; (D) deliver such
documents and certificates, including officers' certificates, as may be
reasonably requested by any Electing Holders of at least 30% in
aggregate principal amount of the Registrable Securities at the time
outstanding or the placement or sales agent, if any, therefor and the
managing underwriters, if any, thereof to evidence the accuracy of the
representations and warranties made pursuant to clause (A) above or
those contained in Section 5(a) hereof and the compliance with or
satisfaction of any agreements or conditions contained in the
underwriting agreement or other agreement entered into by the Company
or the Guarantors; and (E) undertake such obligations relating to
expense reimbursement, indemnification and contribution as are provided
in Section 6 hereof;
(xviii) notify in writing each holder of Registrable
Securities affected thereby of any proposal by the Company to amend or
waive any provision of this Exchange and Registration Rights Agreement
pursuant to Section 9(h) hereof and of any amendment or waiver effected
pursuant thereto, each of which notices shall contain the text of the
amendment or waiver proposed or effected, as the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate
as a member of an underwriting syndicate or selling group or "assist in
the distribution" (within the meaning of the Conduct Rules (the
"Conduct Rules") of the National Association of Securities Dealers,
Inc. ("NASD") or any successor thereto, as amended from time to time)
thereof, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in
respect thereof, or otherwise, assist such broker-dealer in complying
with the requirements of such Conduct Rules, including
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<PAGE> 16
by (A) if such Conduct Rules shall so require, engaging a "qualified
independent underwriter" (as defined in such Conduct Rules) to
participate in the preparation of the Shelf Registration Statement
relating to such Registrable Securities, to exercise usual standards of
due diligence in respect thereto and, if any portion of the offering
contemplated by such Shelf Registration Statement is an underwritten
offering or is made through a placement or sales agent, to recommend
the yield of such Registrable Securities, (B) indemnifying any such
qualified independent underwriter to the extent of the indemnification
of underwriters provided in Section 6 hereof (or to such other
customary extent as may be requested by such underwriter), and (C)
providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the
Conduct Rules; and
(xx) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon
as practicable but in any event not later than eighteen months after
the effective date of such Shelf Registration Statement, an earning
statement of the Company and its subsidiaries complying with Section
11(a) of the Securities Act (including, at the option of the Company,
Rule 158 thereunder).
(e) In the event that the Company would be required, pursuant to
Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement or
sales agent, if any, therefor and the managing underwriters, if any, thereof,
the Company shall reasonably promptly prepare and furnish to each of the
Electing Holders, to each placement or sales agent, if any, and to each such
underwriter, if any, a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to purchasers of Registrable
Securities, such prospectus shall conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. Each Electing Holder agrees that upon
receipt of any notice from the Company pursuant to Section 3(d)(viii)(F) hereof,
such Electing Holder shall forthwith discontinue the disposition of Registrable
Securities pursuant to the Shelf Registration Statement applicable to such
Registrable Securities until such Electing Holder shall have received copies of
such amended or supplemented prospectus, and if so directed by the Company, such
Electing Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Electing Holder's
possession of the prospectus covering such Registrable Securities at the time of
receipt of such notice.
(f) In the event of a Shelf Registration, in addition to the
information required to be provided by each Electing Holder in its Notice and
Questionnaire, the Company may require such Electing Holder to furnish to the
Company such additional information regarding such Electing Holder and such
Electing Holder's intended method of distribution of Registrable Securities as
may be required or necessary in order to comply with the Securities Act. Each
such Electing Holder agrees to notify the Company as promptly as practicable of
any inaccuracy or change in information previously furnished by such Electing
Holder to the Company or of the occurrence of any event in either case as a
result of which any prospectus relating to such Shelf Registration contains or
would contain an untrue statement of a material
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<PAGE> 17
fact regarding such Electing Holder or such Electing Holder's intended method of
disposition of such Registrable Securities or omits to state any material fact
regarding such Electing Holder or such Electing Holder's intended method of
disposition of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to such Electing Holder or the disposition of such Registrable Securities, an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(g) Until the expiration of two years after the Closing Date, the
Company will not, and will not permit any of its "affiliates" (as defined in
Rule 144) to, resell any of the Securities that have been reacquired by any of
them except pursuant to an effective registration statement under the Securities
Act.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly all
expenses incident to the Company's performance of or compliance with this
Exchange and Registration Rights Agreement, including (a) all Commission and any
NASD registration, filing and review fees and expenses including reasonable fees
and disbursements of counsel for the placement or sales agent or underwriters in
connection with such registration, filing and review, (b) all fees and expenses
in connection with the qualification of the Registrable Securities for offering
and sale under the State securities and blue sky laws referred to in Section
3(d)(xii) hereof and determination of their eligibility for investment under the
laws of such jurisdictions as any managing underwriters or the Electing Holders
may designate, including any reasonable fees and disbursements of one counsel
for the Electing Holders or underwriters in connection with such qualification
and determination, (c) all expenses relating to the preparation, printing,
production, distribution and reproduction of each registration statement
required to be filed hereunder, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing, the
expenses of preparing the Securities for delivery and the expenses of printing
or producing any underwriting agreements, agreements among underwriters, selling
agreements and blue sky or legal investment memoranda and all other documents in
connection with the offering, sale or delivery of Securities to be disposed of
(including certificates representing the Securities), (d) messenger, telephone
and delivery expenses relating to the offering, sale or delivery of Securities
and the preparation of documents referred in clause (c) above, (e) fees and
expenses of the Trustee under the Indenture, any agent of the Trustee and any
counsel for the Trustee and of any collateral agent or custodian, (f) internal
expenses of the Company (including all salaries and expenses of the Company's
officers and employees performing legal or accounting duties), (g) fees,
disbursements and expenses of counsel and independent certified public
accountants of the Company (including the expenses of any opinions or "cold
comfort" letters required by or incident to such performance and compliance),
(h) fees, disbursements and expenses of any "qualified independent underwriter"
engaged pursuant to Section 3(d)(xix) hereof, (i) reasonable fees, disbursements
and expenses of one counsel for the Electing Holders retained in connection with
a Shelf Registration, as selected by the Electing Holders of at least a majority
in aggregate principal amount of the Registrable Securities held by Electing
Holders
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<PAGE> 18
(which counsel shall be reasonably satisfactory to the Company), (j) any fees
charged by securities rating services for rating the Securities, and (k) fees,
expenses and disbursements of any other persons, including special experts,
retained by the Company in connection with such registration (collectively, the
"Registration Expenses"). To the extent that any Registration Expenses are
incurred, assumed or paid by any holder of Registrable Securities or any
placement or sales agent therefor or underwriter thereof, the Company shall
reimburse such person for the full amount of the Registration Expenses so
incurred, assumed or paid promptly after receipt of a request therefor.
Notwithstanding the foregoing, the holders of the Registrable Securities being
registered shall pay all agency fees and commissions and underwriting discounts
and commissions attributable to the sale of such Registrable Securities and the
fees and disbursements of any counsel or other advisors or experts retained by
such holders (severally or jointly), other than the counsel and experts
specifically referred to above.
5. Representations and Warranties.
The Company and the Guarantors represent and warrant to, and agree
with, each Purchaser and each of the holders from time to time of Registrable
Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof and any
further amendments or supplements to any such registration statement or
prospectus, when it becomes effective or is filed with the Commission, as the
case may be, and, in the case of an underwritten offering of Registrable
Securities, at the time of the closing under the underwriting agreement relating
thereto, will conform in all material respects to the requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, and with respect to any prospectus, in the light
of the circumstances then existing, not misleading; and at all times subsequent
to the applicable Effective Time when a prospectus would be required to be
delivered under the Securities Act, other than (A) from (i) such time as a
notice has been given to holders of Registrable Securities pursuant to Section
3(d)(viii)(F) or Section 3(c)(iii)(F) hereof until (ii) such time as the Company
furnishes an amended or supplemented prospectus pursuant to Section 3(e) or
Section 3(c)(iv) hereof or (B) during any suspension of offering and sale
pursuant to the second paragraph of Section 2(b) hereof, each such registration
statement, and each prospectus (including any summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof, as then
amended or supplemented, will conform in all material respects to the
requirements of the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by a holder of Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or were
filed with the Commission, as the case may be, will conform or conformed in all
material respects to the
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<PAGE> 19
requirements of the Securities Act or the Exchange Act, as applicable, and none
of such documents will contain or contained an untrue statement of a material
fact or will omit or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, and with respect to any
prospectus, in the light of the circumstances then existing, not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by a holder of Registrable Securities
expressly for use therein.
(c) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any subsidiary of the Company is a party or by which the
Company or any subsidiary of the Company is bound or to which any of the
property or assets of the Company or any subsidiary of the Company is subject,
other than any such conflict, breach or violation as would not have a material
adverse effect on the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, nor will such action result in any violation of
the provisions of the certificate of incorporation, as amended, or the by-laws
of the Company or the Guarantors or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over the Company
or any subsidiary of the Company or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the consummation by
the Company and the Guarantors of the transactions contemplated by this Exchange
and Registration Rights Agreement, except in connection with the registration
under the Securities Act of the Registrable Securities, qualification of the
Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under State
securities or blue sky laws in connection with the offering and distribution of
the Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company and the Guarantors. The Company and
the Guarantors, jointly and severally, will indemnify and hold harmless each of
the holders of Registrable Securities included in an Exchange Registration
Statement, each of the Electing Holders of Registrable Securities included in a
Shelf Registration Statement and each person who participates as a placement or
sales agent or as an underwriter in any offering or sale of such Registrable
Securities against any losses, claims, damages or liabilities, joint or several,
to which such holder, agent or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Exchange Registration Statement or Shelf Registration Statement, as the case may
be, under which such Registrable Securities were registered under the Securities
Act, or any preliminary, final or summary prospectus contained therein or
furnished by the
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<PAGE> 20
Company to any such holder, Electing Holder, agent or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, and with respect to any
prospectus, in the light of the circumstances under which they were made, not
misleading, and will reimburse such holder, such Electing Holder, such agent and
such underwriter for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that neither the Company nor the
Guarantors shall be liable to any such person in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, or preliminary, final or summary
prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by such person
expressly for use therein.
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any Shelf Registration Statement filed pursuant to Section 2(b) hereof and to
entering into any underwriting agreement with respect thereto, that the Company
shall have received an undertaking reasonably satisfactory to it from the
Electing Holder of such Registrable Securities and from each underwriter named
in any such underwriting agreement, severally and not jointly, to (i) indemnify
and hold harmless the Company, the Guarantors, and all other holders of
Registrable Securities, against any losses, claims, damages or liabilities to
which the Company, the Guarantors or such other holders of Registrable
Securities may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such registration statement, or any preliminary,
final or summary prospectus contained therein or furnished by the Company to any
such Electing Holder, agent or underwriter, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Electing Holder or underwriter
expressly for use therein, and (ii) reimburse the Company and the Guarantors for
any legal or other expenses reasonably incurred by the Company and the
Guarantors in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that no such Electing
Holder shall be required to undertake liability to any person under this Section
6(b) for any amounts in excess of the dollar amount of the proceeds to be
received by such Electing Holder from the sale of such Electing Holder's
Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party otherwise than under the indemnification provisions of or
contemplated by
20
<PAGE> 21
Section 6(a) or 6(b) hereof. In case any such action shall be brought against
any indemnified party and it shall notify an indemnifying party of the
commencement thereof, such indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) hereof are unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party and the indemnified
party in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 6(d) were determined by pro rata allocation (even if the holders or any
agents or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6(d), no holder shall
be required to contribute any amount in excess of the amount by which the dollar
amount of the proceeds received by such holder from the sale of any Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) exceeds the amount of any damages which such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
21
<PAGE> 22
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Company and the Guarantors under this
Section 6 shall be in addition to any liability which the Company or the
Guarantors may otherwise have and shall extend, upon the same terms and
conditions, to each officer, director and partner of each holder, agent and
underwriter and each person, if any, who controls any holder, agent or
underwriter within the meaning of the Securities Act; and the obligations of the
holders and any agents or underwriters contemplated by this Section 6 shall be
in addition to any liability which the respective holder, agent or underwriter
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company or the Guarantors, including any person who,
with his consent, is named in any registration statement as about to become a
director of the Company or the Guarantors, and to each person, if any, who
controls the Company or the Guarantors within the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by the Shelf Registration are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be designated
by Electing Holders holding at least a majority in aggregate principal amount of
the Registrable Securities to be included in such offering, provided that such
designated managing underwriter or underwriters is or are reasonably acceptable
to the Company.
(b) Participation by Holders. Each holder of Registrable Securities
hereby agrees with each other such holder that no such holder may participate in
any underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that
to the extent it shall be required to do so under the Exchange Act, the Company
shall timely file the reports required to be filed by it under the Exchange Act
or the Securities Act (including the reports under Section 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the
Commission under the Securities Act) and the rules and regulations adopted by
the Commission thereunder, and shall take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such
22
<PAGE> 23
Rule may be amended from time to time, or any similar or successor rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Registrable Securities in connection with that holder's sale pursuant to Rule
144, the Company shall deliver to such holder a written statement as to whether
it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant, registration
rights with respect to Registrable Securities or any other securities which
would be inconsistent with the terms contained in this Exchange and Registration
Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if the Company fails to perform any of its
obligations hereunder and that the Purchasers and the holders from time to time
of the Registrable Securities may be irreparably harmed by any such failure, and
accordingly agree that the Purchasers and such holders, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
compel specific performance of the obligations of the Company under this
Exchange and Registration Rights Agreement in accordance with the terms and
conditions of this Exchange and Registration Rights Agreement, in any court of
the United States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at 515 Congress Avenue, Suite 2626, Austin TX 78701, and if to a holder, to the
address of such holder set forth in the security register or other records of
the Company, or to such other address as the Company or any such holder may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange
and Registration Rights Agreement shall be binding upon, shall inure to the
benefit of and shall be enforceable by the parties hereto and the holders from
time to time of the Registrable Securities and the respective successors and
assigns of the parties hereto and such holders. In the event that any transferee
of any holder of Registrable Securities shall acquire Registrable Securities, in
any manner, whether by gift, bequest, purchase, operation of law or otherwise,
such transferee shall, without any further writing or action of any kind, be
deemed a beneficiary hereof for all purposes and such Registrable Securities
shall be held subject to all of the terms of this Exchange and Registration
Rights Agreement, and by taking and holding such Registrable Securities such
transferee shall be entitled to receive the benefits of, and be conclusively
deemed to have agreed to be bound by all of the applicable terms and provisions
of this Exchange and Registration Rights Agreement. If the Company shall so
request, any such successor, assign or transferee shall agree in writing to
acquire and hold the Registrable Securities subject to all of the applicable
terms hereof.
23
<PAGE> 24
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Registrable Securities, any director, officer or
partner of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and shall
survive delivery of and payment for the Registrable Securities pursuant to the
Purchase Agreement and the transfer and registration of Registrable Securities
by such holder and the consummation of an Exchange Offer.
(f) GOVERNING LAW. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of at least a majority in aggregate principal amount of the Registrable
Securities at the time outstanding. Each holder of any Registrable Securities at
the time or thereafter outstanding shall be bound by any amendment or waiver
effected pursuant to this Section 9(h), whether or not any notice, writing or
marking indicating such amendment or waiver appears on such Registrable
Securities or is delivered to such holder.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and, upon three days' notice, a complete list of the names and addresses of all
the holders of Registrable Securities shall be made available for inspection and
copying on any business day by any holder of Registrable Securities for proper
purposes only (which shall include any purpose related to the rights of the
holders of Registrable Securities under the Securities, the Indenture and this
Exchange and Registration Rights Agreement) at the office of the Trustee under
the Indenture.
(j) Counterparts. This Exchange and Registration Rights Agreement may
be executed by the parties in counterparts, each of which shall be deemed to be
an original, but all such respective counterparts shall together constitute one
and the same instrument.
24
<PAGE> 25
If the foregoing is in accordance with your understanding,
please sign and return to us one for the Company, the Guarantors and each of the
Representatives plus one for each counsel, counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Purchasers, this letter and
such acceptance hereof shall constitute a binding agreement between each of the
Purchasers, the Guarantors and the Company. It is understood that your
acceptance of this letter on behalf of each of the Purchasers is pursuant to the
authority set forth in a form of Agreement among Purchasers, the form of which
shall be submitted to the Company for examination upon request, but without
warranty on your part as to the authority of the signers thereof.
25
<PAGE> 26
Very truly yours,
CLASSIC CABLE, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
CLASSIC CABLE HOLDING, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
CLASSIC TELEPHONE, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
UNIVERSAL CABLE HOLDINGS, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
UNIVERSAL CABLE COMMUNICATIONS INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
UNIVERSAL CABLE OF BEAVER, OKLAHOMA,
INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
<PAGE> 27
UNIVERSAL CABLE MIDWEST, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
WT ACQUISITION CORPORATION
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
W.K. COMMUNICATIONS, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
TELEVISION ENTERPRISES, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
BLACK CREEK MANAGEMENT, L.L.C.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
BLACK CREEK COMMUNICATIONS, L.P.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
FRIENDSHIP CABLE OF TEXAS, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
<PAGE> 28
CALLCOM24, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
CORRECTIONAL CABLE TV, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
FRIENDSHIP CABLE OF ARKANSAS, INC.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
CLASSIC NETWORK TRANSMISSION, L.L.C.
By: /s/ STEVEN E. SEACH
---------------------------------
Name: Steven E. Seach
Title: President and Chief
Financial Officer
<PAGE> 29
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
By: /s/ GOLDMAN, SACHS & CO.
------------------------------------
(Goldman, Sachs & Co.)
<PAGE> 30
SCHEDULE I
GUARANTORS
Classic Cable Holding, Inc.
Universal Cable Holdings, Inc.
Universal Cable Communications Inc.
Universal Cable of Beaver, Oklahoma, Inc.
Universal Cable Midwest, Inc.
Friendship Cable of Texas, Inc.
Correctional Cable TV, Inc.
CallCom 24, Inc.
Friendship Cable of Arkansas, Inc.
Classic Telephone, Inc.
Black Creek Management, L.L.C.
Black Creek Communications, L.P.
Classic Network Transmission, L.L.C.
WT Acquisition Corporation
W.K. Communications, Inc.
Television Enterprises, Inc.
<PAGE> 31
EXHIBIT A
CLASSIC CABLE, INC.
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: _______[INSERT DATE] *
The Depository Trust Company ("DTC") has identified you as a DTC Participant
through which beneficial interests in the Classic Cable, Inc. (the "Company")
____% Senior Subordinated Notes due 2010 of the Company (the "Securities") are
held.
The Company is in the process of registering the Securities under the Securities
Act of 1933 for resale by the beneficial owners thereof. In order to have their
Securities included in the registration statement, beneficial owners must
complete and return the enclosed Notice of Registration Statement and Selling
Securityholder Questionnaire.
It is important that beneficial owners of the Securities receive a copy of the
enclosed materials as soon as possible as their rights to have the Securities
included in the registration statement depend upon their returning the Notice
and Questionnaire by _____________ [Insert Deadline For Response]. Please
forward a copy of the enclosed documents to each beneficial owner that holds
interests in the Securities through you. If you require more copies of the
enclosed materials or have any questions pertaining to this matter, please
contact Classic Cable, Inc., 515 Congress Avenue, Suite 2626, Austin TX 78701,
(512) 476-9095.
- ---------------
* Not less than 28 calendar days from date of mailing.
A-1
<PAGE> 32
Classic Cable, Inc.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
Reference is hereby made to the Exchange and Registration Rights Agreement (the
"Exchange and Registration Rights Agreement") between Classic Cable, Inc. (the
"Company") and the Purchasers named therein. Pursuant to the Exchange and
Registration Rights Agreement, the Company has filed with the United States
Securities and Exchange Commission (the "Commission") a registration statement
on Form ___ (the "Shelf Registration Statement") for the registration and resale
under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"),
of the Company's ____% Senior Subordinated Notes due 2010 (the "Securities"). A
copy of the Exchange and Registration Rights Agreement is attached hereto. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined below) is entitled
to have the Registrable Securities beneficially owned by it included in the
Shelf Registration Statement. In order to have Registrable Securities included
in the Shelf Registration Statement, this Notice of Registration Statement and
Selling Securityholder Questionnaire ("Notice and Questionnaire") must be
completed, executed and delivered to the Company's counsel at the address set
forth herein for receipt ON OR BEFORE _______________ [Insert Deadline For
Response]. Beneficial owners of Registrable Securities who do not complete,
execute and return this Notice and Questionnaire by such date (i) will not be
named as selling securityholders in the Shelf Registration Statement and (ii)
may not use the Prospectus forming a part thereof for resales of Registrable
Securities.
Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration Statement and related Prospectus. Accordingly, holders
and beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Shelf Registration Statement and
related Prospectus.
The term "Registrable Securities" is defined in the Exchange and Registration
Rights Agreement.
A-2
<PAGE> 33
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable Securities
hereby elects to include in the Shelf Registration Statement the Registrable
Securities beneficially owned by it and listed below in Item (3). The
undersigned, by signing and returning this Notice and Questionnaire, agrees to
be bound with respect to such Registrable Securities by the terms and conditions
of this Notice and Questionnaire and the Exchange and Registration Rights
Agreement, including, without limitation, Section 6 of the Exchange and
Registration Rights Agreement, as if the undersigned Selling Securityholder were
an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Company
and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and
as Exhibit B to the Exchange and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Company and represents and warrants to the Company that such information is
accurate and complete:
A-3
<PAGE> 34
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
-----------------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as in (a) above)
of Registrable Securities Listed in Item (3) below:
-----------------------------------------------------------------------
(c) Full Legal Name of DTC Participant (if applicable and if not the
same as (b) above) Through Which Registrable Securities Listed in
Item (3) below are Held:
-----------------------------------------------------------------------
(2) Address for Notices to Selling Securityholder:
--------------------------------
--------------------------------
Telephone: --------------------------------
Fax: --------------------------------
Contact Person: --------------------------------
(3) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities.
(a) Principal amount of Registrable Securities beneficially owned: ________
CUSIP No(s). of such Registrable Securities:___________________________
(b) Principal amount of Securities other than Registrable Securities
beneficially owned:
_______________________________________________________________________
CUSIP No(s). of such other Securities: ________________________________
(c) Principal amount of Registrable Securities which the undersigned wishes
to be included in the Shelf Registration Statement: ___________________
CUSIP No(s). of such Registrable Securities to be included in the
Shelf Registration Statement:__________________________________________
(4) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other
securities of the Company, other than the Securities listed above in
Item (3).
State any exceptions here:
A-4
<PAGE> 35
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any
of its affiliates, officers, directors or principal equity holders (5%
or more) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates)
during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item
(3) only as follows (if at all): Such Registrable Securities may be
sold from time to time directly by the undersigned Selling
Securityholder or, alternatively, through underwriters, broker-dealers
or agents. Such Registrable Securities may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time
of sale, at varying prices determined at the time of sale, or at
negotiated prices. Such sales may be effected in transactions (which
may involve crosses or block transactions) (i) on any national
securities exchange or quotation service on which the Registered
Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv)
through the writing of options. In connection with sales of the
Registrable Securities or otherwise, the Selling Securityholder may
enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the Registrable Securities in the course of
hedging the positions they assume. The Selling Securityholder may also
sell Registrable Securities short and deliver Registrable Securities to
close out such short positions, or loan or pledge Registrable
Securities to broker-dealers that in turn may sell such securities.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it understands
its obligation to comply, and agrees that it will comply, with the provisions of
the Exchange Act and the rules and regulations thereunder, particularly
Regulation M.
In the event that the Selling Securityholder transfers all or any portion of the
Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Company, the Selling Securityholder agrees to
notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such information
will be relied upon by the Company in connection with the preparation of the
Shelf Registration Statement and related Prospectus.
A-5
<PAGE> 36
In accordance with the Selling Securityholder's obligation under Section 3(d) of
the Exchange and Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Shelf Registration Statement, the
Selling Securityholder agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Exchange and Registration
Rights Agreement shall be made in writing, by hand-delivery, first-class mail,
or air courier guaranteeing overnight delivery as follows:
(i) To the Company:
Classic Cable, Inc.
515 Congress Avenue
Suite 2626
Austin, Texas 78701
Attention: Corporate Secretary
(ii) With a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinios)
333 West Wacker Drive
Suite 2100
Chicago, IL 60606-1285
Attention: Peter Krupp
Once this Notice and Questionnaire is executed by the Selling Securityholder and
received by the Company's counsel, the terms of this Notice and Questionnaire,
and the representations and warranties contained herein, shall be binding on,
shall inure to the benefit of and shall be enforceable by the respective
successors, heirs, personal representatives, and assigns of the Company and the
Selling Securityholder (with respect to the Registrable Securities beneficially
owned by such Selling Securityholder and listed in Item (3) above). This
Agreement shall be governed in all respects by the laws of the State of New
York.
A-6
<PAGE> 37
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
Dated:
--------------------
--------------------------------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable
Securities)
By:
-----------------------------------------------------------
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE __________, 2000 TO THE COMPANY'S COUNSEL AT:
Skadden, Arps, Slate, Meagher & Flom (Illinios)
333 West Wacker Drive
Suite 2100
Chicago, IL 60606-1285
Attention: Peter Krupp
A-7
<PAGE> 38
EXHIBIT B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Chase Bank of Texas, National Association
Classic Cable, Inc.
c/o Chase Bank of Texas, National Association
600 Travis
Houston, Texas 77002
Attention: Trust Officer
Re: Classic Cable, Inc. (the "Company")
____% Senior Subordinate Notes due 2010
Dear Sirs:
Please be advised that ___________________ has transferred $____________________
aggregate principal amount of the above-referenced Notes pursuant to an
effective Registration Statement on Form ____ (File No. 333-__________ ) filed
by the Company.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus
dated ________, 2000 or in supplements thereto, and that the aggregate principal
amount of the Notes transferred are the Notes listed in such Prospectus opposite
such owner's name.
Dated:
Very truly yours,
-----------------------------------
(Name)
By:
-----------------------------------
(Authorized Signature)
B-1
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Year Ended December 31,
1999 1998 1997
------- ------- --------
<S> <C> <C> <C>
Loss before income tax benefit, minority
interest and extraordinary loss (42,096) (23,515) (20,936)
Fixed Charges:
Interest expense 31,201 20,688 20,759
Interest portion of rental expense 893 514 464
Dividends on unconsolidated subsidiary -- 67 101
------- ------- -------
Earnings (10,002) (2,246) 388
======= ======= =======
Fixed charges:
Interest expense 31,201 20,688 20,759
Interest portion of rental expense 893 514 464
Dividends on unconsolidated subsidiary -- 67 101
------- ------- -------
Total fixed charges 32,094 21,269 21,324
------- ------- -------
Ratio of earnings to fixed charges n/a n/a n/a
Earnings inadequate to cover fixed charges:
Total fixed charges 32,094 21,269 21,324
Earnings (10,002) (2,246) 388
------- ------- -------
Deficiency of earnings to fixed charges (42,096) (23,515) (20,936)
======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of Classic Cable, Inc.
Classic Cable Holding, Inc.
Classic Telephone, Inc.
Universal Cable Holdings, Inc.
Universal Cable Communications, Inc.
Universal Cable of Beaver Oklahoma, Inc.
Universal Cable Midwest, Inc.
WT Acquisition Corporation
W.K. Communications, Inc.
Television Enterprises, Inc.
Black Creek Communications, L.P.
Black Creek Management, L.L.C.
Friendship Cable of Texas, Inc.
Correctional Cable TV, Inc.
CallCom 24, Inc.
Friendship Cable of Arkansas, Inc.
Classic Network Transmission, L.L.C.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
our reports dated February 23, 2000 relating to the financial statements of
Classic Cable, Inc., which appear in such Registration Statement. We also
consent to the reference to us under the heading "Experts" and "Selected
Historical Consolidated Financial Data -- Classic Cable, Inc." in such
Registration Statement.
PricewaterhouseCoopers LLP
Austin, Texas
April 12, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form
S-4 of our report dated February 29, 2000 relating to the financial statements
of Star Cable Associates, which appear in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
PricewaterhouseCoopers LLP
Pittsburgh, PA
April 12, 2000
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Buford Group, Inc.:
We consent to the use of our report included herein and to the references to our
firm under the headings "Experts" and "Selected Historical Consolidated
Financial Data -- Buford Group, Inc." in the prospectus.
/s/ KPMG LLP
Dallas, Texas
April 12, 2000
<PAGE> 1
================================================================================
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ____
----------------------
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
74-0800980
(I.R.S. Employer Identification Number)
712 MAIN STREET, HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip code)
LEE BOOCKER, 712 MAIN STREET, 26TH FLOOR
HOUSTON, TEXAS 77002 (713) 216-2448
(Name, address and telephone number of agent for service)
CLASSIC CABLE, INC.
(Exact name of obligor as specified in its charter)
SEE TABLE OF ADDITIONAL OBLIGORS BELOW
DELAWARE 74-2750981
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
515 CONGRESS AVENUE, SUITE 2626
AUSTIN, TEXAS 78701
(Address of principal executive offices) (Zip code)
10 1/2% SENIOR SUBORDINATED NOTES DUE 2010
(Title of indenture securities)
================================================================================
<PAGE> 2
TABLE OF ADDITIONAL OBLIGORS
<TABLE>
<CAPTION>
ADDRESS, INCLUDING ZIP
CODE, AND TELEPHONE
NUMBER,INCLUDING AREA
STATE OR OTHER CODE, OF REGISTRANT'S
JURISDICTION OF IRS EMPLOYER PRINCIPAL EXECUTIVE
NAME INCORPORATION ID NO. OFFICES
---- ------------- ------ -------
<S> <C> <C> <C>
Classic Cable Holding, Inc. Delaware 74-2807609 *
Classic Telephone, Inc. Delaware 75-2590205 *
Universal Cable Holdings, Inc. Delaware 75-2077867 *
Universal Cable Communications, Inc. Delaware 84-0913858 *
Universal Cable of Beaver Oklahoma, Inc. Delaware 75-2243788 *
Universal Cable Midwest, Inc. Delaware 75-2205815 *
WT Acquisition Corporation Delaware 74-2644608 *
W.K. Communications, Inc. Kansas 48-1037491 *
Television Enterprises, Inc. Texas 74-1532349 *
Black Creek Communications, L.P. Delaware 74-2881867 *
Black Creek Management, L.L.C. Delaware 74-2881870 *
Friendship Cable of Texas, Inc. Texas 75-2237583 *
Correctional Cable TV, Inc. Texas 75-2443515 *
CallCom 24, Inc. Texas 75-2774129 *
Friendship Cable of Arkansas, Inc. Texas 71-0634055 *
Classic Network Transmission, L.L.C. Delaware 74-2924093 *
</TABLE>
* 515 Congress Avenue, Suite 2626, Austin, Texas 78701, Telephone (512)476-9095.
<PAGE> 3
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C. Federal Deposit
Insurance Corporation, Washington, D.C. Board of Governors of the
Federal Reserve System, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee. (See Note on Page 7.)
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING
SECURITIES OF THE TRUSTEE.
<TABLE>
<CAPTION>
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
-------------- ------------------
<S> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
(a) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER
INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
1
<PAGE> 4
ITEM 4. (CONTINUED)
(b) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE
CLAIM THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION
310(b)(1) OF THE ACT ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY
SUCH OTHER INDENTURE, INCLUDING A STATEMENT AS TO HOW THE INDENTURE
SECURITIES WILL RANK AS COMPARED WITH THE SECURITIES ISSUED UNDER SUCH
OTHER INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH OBLIGOR OR
UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICER OF THE
TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR REPRESENTATIVE
OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON
HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
- ------------- -------------- ------------ ------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
2
<PAGE> 5
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
- -------------- -------------- ------------ ------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO THE SECURITIES OF THE OBLIGOR
OWNED BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY
THE TRUSTEE.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED
WHETHER THE BENEFICIALLY OR PERCENT OF
SECURITIES HELD AS COLLATERAL CLASS
ARE VOTING SECURITY FOR REPRESENTED BY
OR NONVOTING OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS SECURITIES DEFAULT COL. C
- -------------- ---------- ------- ------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
3
<PAGE> 6
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY
OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
NAME OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C
- -------------- ----------- ------------------ ---------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR OR (2)
IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE FOLLOWING
INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
NAME OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C
- -------------- ----------- ------------------ ------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
4
<PAGE> 7
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OR SUCH PERSON ANY OF WHICH
ARE SO OWNED OR HELD BY THE TRUSTEE.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
NAME OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C
- -------------- ----------- ------------------ ------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
<TABLE>
<CAPTION>
COL. A COL. B COL. C
NATURE OF AMOUNT
INDEBTEDNESS OUTSTANDING DATE DUE
- ------------ ----------- --------
<S> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There is not, nor has there been, a default with respect to the securities
under this indenture. (See Note on Page 7.)
5
<PAGE> 8
ITEM 13. (CONTINUED)
(b) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There has not been a default under any such indenture or series. (See Note
on Page 7.)
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
o 1. A copy of the articles of association of the trustee now in
effect.
# 2. A copy of the certificate of authority of the trustee to commence
business.
* 3. A copy of the certificate of authorization of the trustee to
exercise corporate trust powers issued by the Board of Governors of
the Federal Reserve System under date of January 21, 1948.
+ 4. A copy of the existing bylaws of the trustee.
5. Not applicable.
6. The consent of the United States institutional trustees required
by Section 321(b) of the Act.
6
<PAGE> 9
v 7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
NOTE REGARDING INCORPORATED EXHIBITS
Effective January 20, 1998, the name of the Trustee was changed from Texas
Commerce Bank National Association to Chase Bank of Texas, National Association.
Certain of the exhibits incorporated herein by reference, except for Exhibit 7,
were filed under the former name of the Trustee.
o Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-3 File No. 33-56195.
# Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-3 File No. 33-42814.
* Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-11 File No. 33-25132.
+ Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-3 File No. 33-65055.
v Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-4 File No. 333-32254.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Items 2 and 13, the
answers to said Items are based on incomplete information. Such Items may,
however, be considered as correct unless amended by an amendment to this Form
T-1.
7
<PAGE> 10
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939 THE
TRUSTEE, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, FORMERLY KNOWN AS TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, A NATIONAL BANKING ASSOCIATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, HAS DULY CAUSED THIS
STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO AUTHORIZED, ALL IN THE CITY OF HOUSTON, AND STATE OF TEXAS, ON THE
14TH DAY OF APRIL, 2000.
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, AS TRUSTEE
/s/ MAURI J. COHEN
By: -----------------------------------------
Mauri J. Cowen
Vice President and Trust Officer
8
<PAGE> 11
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
The undersigned is trustee under an Indenture dated as of February 16,
2000, by and between Classic Cable, Inc., a Delaware corporation (the
"Company"), together with certain subsidiary guarantors, as obligors, and Chase
Bank of Texas, National Association, as Trustee, entered into in connection with
the issuance of the Company's Senior Subordinated Notes.
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned hereby consents that reports of examinations of the undersigned,
made by Federal or State authorities authorized to make such examinations, may
be furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very truly yours,
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By: /s/ MAURI J. COWEN
--------------------------------------
Mauri J. Cowen
Vice President and Trust Officer
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER 10 1/2% SENIOR SUBORDINATED NOTES DUE 2010
OF
CLASSIC CABLE, INC.
PURSUANT TO THE PROSPECTUS
DATED , 2000
OF
CLASSIC CABLE, INC.
THE OFFER TO EXCHANGE WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 2000, UNLESS EXTENDED TO A DATE NOT LATER THAN ,
2000 (THE "EXPIRATION DATE"). TENDERED NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR
TO THE EXPIRATION DATE.
Deliver to the Exchange Agent:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
<TABLE>
<S> <C> <C>
By Registered or Certified By Overnight Carrier: By Hand Delivery:
Mail:
600 Travis, Suite 1150 600 Travis, Suite 1150
600 Travis, Suite 1150 Houston, Texas 77002 Houston, Texas 77002
Houston, Texas 77002 Attention: Mauri J. Cowen Attention: Mauri J. Cowen
Attention: Mauri J. Cowen
</TABLE>
<TABLE>
<S> <C>
Facsimile Transmission Number: Confirm Receipt of Facsimile by Telephone:
(713) 216-5476 (713) 216-6686
</TABLE>
Delivery of this instrument to an address other than as set forth above
will not constitute a valid delivery. The accompanying instructions should be
read carefully before this Letter of Transmittal is completed.
The undersigned acknowledges that the undersigned has received and reviewed
the Prospectus dated , 2000 (the "Prospectus") of Classic Cable,
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal
(the "Letter of Transmittal"), which together constitute the Company's offer to
exchange (the "Exchange Offer") $1,000 principal amount of 10 1/2% Senior
Subordinated Notes due 2010 (the "Exchange Notes") for each $1,000 principal
amount of its outstanding 10 1/2% Senior Subordinated Notes due 2010 (the "Old
Notes") as set forth in the Prospectus. The Old Notes that are not exchanged
will remain restricted securities and may be resold only (i) to the Company,
(ii) pursuant to Rule 144A or Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), (iii) outside the United States to a foreign
person pursuant to the requirements of Rule 904 under the Securities Act, or
(iv) pursuant to an effective registration statement under the Securities Act.
<PAGE> 2
Upon the terms and subject to the conditions set forth in the Prospectus
and in this Letter of Transmittal, the Company will exchange $1,000 principal
amount of the Exchange Notes, registered under the Securities Act pursuant to a
registration statement on Form S-4 filed by the Company, for each $1,000
principal amount of its outstanding Old Notes properly delivered by a Holder
thereof to Chase Bank of Texas, National Association, as exchange agent (the
"Exchange Agent"), and not withdrawn on or prior to the Expiration Date. No
Holder may withdraw a tender following the Expiration Date. In order to be
entitled to receive the Exchange Notes, a tendering Holder must properly tender
the Old Notes to the Exchange Agent, and not withdraw such tender, on or prior
to the Expiration Date. If a Holder's Old Notes are not properly tendered by the
Expiration Date pursuant to the Exchange Offer, such Holder will not receive
Exchange Notes.
By executing the Letter of Transmittal, the undersigned represents to the
Company that, among other things, (i) the Exchange Notes to be acquired by the
Holder of the Old Notes in connection with the Exchange Offer are being acquired
by the Holder in the ordinary course of business of the Holder, (ii) the Holder
has no arrangement or understanding with any person to participate in the
distribution of Exchange Notes, (iii) the Holder acknowledges and agrees that
any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the staff of the Commission set forth in no-action letters, (iv) the
Holder understands that a secondary resale transaction described in clause (iii)
above and any resales of Exchange Notes obtained by such Holder in exchange for
Old Notes acquired by such Holder directly from the Company should be covered by
an effective registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K of the Securities and
Exchange Commission (the "Commission"), and (v) the Holder is not an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company. If
the Holder is a broker-dealer that will receive Exchange Notes for its own
account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, by executing this Letter
of Transmittal, the Holder acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes. However, by so acknowledging
and by delivering a prospectus, the Holder will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. See "The Exchange
Offer -- Procedures for Tendering."
The Exchange Offer may be extended, terminated, amended or consummated as
provided in the Prospectus. During any such extension of the Exchange Offer, all
Old Notes previously tendered and not withdrawn pursuant to such Exchange Offer
will remain subject to the Exchange Offer and may be accepted thereafter for
exchange by the Company.
No alternative, conditional or contingent tenders will be accepted. A
tendering Holder, by execution of this Letter of Transmittal, or facsimile
hereof, waives all rights to receive notice of acceptance of such Holder's Old
Notes for exchange. Capitalized terms used but not defined herein have the
meanings given to them in the Prospectus.
2
<PAGE> 3
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
This Letter of Transmittal is to be completed by Holders of Old Notes if
certificates representing such Old Notes are to be forwarded herewith or if
delivery of such certificates are to be made by book-entry transfer to the
account maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Procedures for Tendering."
Holders whose certificates representing the Old Notes are not immediately
available or who cannot deliver certificates and all other required documents to
the Exchange Agent or complete the procedure for book-entry transfer on or prior
to the Expiration Date may nevertheless tender Old Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2 below.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent. In order to ensure participation in the Exchange
Offer, Old Notes must be properly tendered on or before the Expiration Date.
List below the Old Notes that are to be tendered pursuant to this Letter of
Transmittal. If the space below is inadequate, list the information requested
below on a separate signed schedule and affix the original signed schedule to
this Letter of Transmittal.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL
AMOUNT PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S), CERTIFICATE REPRESENTED AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBERS(S)(1) BY NOTE(S) TENDERED(2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL PRINCIPAL AMOUNT TENDERED
------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
(1) Need not be completed by Holders who tender by book-entry.
(2) Unless otherwise indicated in this column, any tendering Holder will be deemed to have tendered the
entire principal amount represented by the Old Notes indicated in the column labeled "Aggregate
Principal Amount Represented by Certificate(s)." See Instruction 5.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A
BOOK-ENTRY TRANSFER FACILITY MAY DELIVER NOTES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution:
- ------------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
3
<PAGE> 4
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Holder(s):
-----------------------------------------------------------
Window Ticket Number (if any):
--------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
Name of Eligible Institution that guaranteed delivery:
--------------------------
[ ] Check box if delivered by Book-Entry Transfer
Account Number:
-----------------------------------------------------------------
Transaction Code Number:
--------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Only Holders are entitled to tender their Old Notes in the Exchange Offer.
Any financial institution that is a participant in the Book-Entry Transfer
Facility's system and whose name appears on a security position listing as the
record owner of the Old Notes and who wishes to make book-entry delivery of Old
Notes as described above must complete and execute a participant's letter (which
will be distributed to participants by the Book-Entry Transfer Facility)
instructing the Book-Entry Transfer Facility's nominee to complete and sign the
power of attorney attached thereto. Persons who are beneficial owners of Old
Notes but are not Holders and who seek to tender Old Notes should (i) contact
the Holder of such Old Notes and instruct such Holder to tender on his behalf,
(ii) obtain and include with this Letter of Transmittal Old Notes properly
endorsed for transfer by the Holder, with signatures on the endorsement
guaranteed by a firm that is a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States of an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act which is a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP"), or
the New York Stock Exchange, Inc. Medallion Signature Program ("MSP") (each, an
"Eligible Institution") or (iii) effect a record transfer of such Old Notes from
the Holder to such beneficial owner and comply with the requirements applicable
to Holders for tendering Old Notes prior to 5:00 p.m., New York City time, on
the Expiration Date.
HOLDERS WHO WISH TO RECEIVE THE EXCHANGE NOTES MUST TENDER THEIR OLD NOTES
ON OR PRIOR TO THE EXPIRATION DATE.
See "The Exchange Offer -- Procedures for Tendering" in the Prospectus.
4
<PAGE> 5
To: Classic Cable, Inc. (the "Company")
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the Old Notes indicated above. Subject
to, and effective upon, acceptance for exchange of the Old Notes tendered
herewith, the undersigned hereby sells, assigns and transfers to or upon the
order of the Company, all right, title and interest in and to all such Old Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned
(with full knowledge that the Exchange Agent also acts as agent of the Company)
with respect to such Old Notes, with full power of substitution and
resubstitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to (a) deliver certificates representing such Old
Notes, or transfer ownership of such Old Notes on the account books maintained
by the Book-Entry Transfer Facility, together, in each such case, with all
accompanying evidences of transfer and authenticity to or upon the order of the
Company, (b) present such Old Notes for transfer on the relevant register, and
(c) receive all benefits or otherwise exercise all rights of beneficial
ownership of such Old Notes (except that the Exchange Agent will have no rights
to or control, except as agent for the Company, over the Exchange Notes
delivered in connection with the Exchange Offer) all in accordance with the
terms of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, SELL, ASSIGN AND TRANSFER THE OLD NOTES
TENDERED HEREBY AND, THAT WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE COMPANY
WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF
ALL SECURITY INTERESTS, LIENS, RESTRICTIONS, CLAIMS, CHARGES, ENCUMBRANCES,
CONDITIONAL SALES AGREEMENTS OR OTHER OBLIGATIONS RELATING TO THE SALE OR
TRANSFER THEREOF, AND NOT BE SUBJECT TO ANY ADVERSE CLAIM. THE UNDERSIGNED WILL,
UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE
EXCHANGE AGENT OR THE COMPANY TO BE NECESSARY OR DESIRABLE TO COMPLETE THE
ASSIGNMENT, TRANSFER AND PURCHASE OF THE OLD NOTES TENDERED HEREBY. THE
UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS AND CONDITIONS OF THE
EXCHANGE OFFER. DELIVERY OF ENCLOSED OLD NOTES SHALL BE EFFECTED, AND RISK OF
LOSS AND TITLE TO SUCH OLD NOTES SHALL PASS, ONLY UPON PROPER DELIVERY THEREOF
TO THE EXCHANGE AGENT.
All authority conferred or agreed to be conferred pursuant to this Letter
of Transmittal and every obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators, trustees
in bankruptcy, and personal and legal representatives of the undersigned and
shall not be affected by, and shall survive, the death or incapacity of the
undersigned. Old Notes properly tendered may be withdrawn at any time prior to
the Expiration Date. Holders will receive the Exchange Notes only if their
tenders have been properly delivered on or prior to the Expiration Date and not
revoked on or prior to the Expiration Date.
Old Notes may not be withdrawn after the Expiration Date unless the
Exchange Offer with respect to such Old Notes is terminated without any Old
Notes being accepted for exchange thereunder. In the event of such a
termination, such Old Notes tendered by the undersigned will be returned to the
undersigned as promptly as practicable.
The Exchange Offer is subject to a number of conditions, each of which may
be waived or modified by the Company, in whole or in part, at any time and from
time to time, as described in the Prospectus under the caption "The Exchange
Offer -- Certain Conditions to the Exchange Offer." The undersigned recognizes
that as a result of such conditions the Company may not be required to accept
the Old Notes properly tendered hereby. In such event, the tendered Old Notes
not accepted for exchange will be returned to the undersigned without cost to
the undersigned as soon as practicable following the earlier to occur of the
Expiration Date or the date on which the Exchange Offer with respect to such
issue is terminated without any Old Notes being purchased thereunder, at the
address shown below the undersigned's signature(s) unless otherwise indicated
under "Special Issuance Instructions" below.
5
<PAGE> 6
Unless otherwise indicated under "Special Issuance Instructions" below, the
Exchange Agent will issue the Exchange Notes for any Old Notes tendered hereby
that are accepted for exchange, and/or return any certificates representing Old
Notes not tendered or not accepted for exchange in the name(s) of the Holder(s)
appearing under "Description of Securities Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," the Exchange Notes,
and/or any certificates representing Old Notes not tendered or not accepted for
exchange (and accompanying documents, as appropriate) to be returned will be
sent to the address(es) of the Holder(s) appearing under "Description of
Securities Tendered." In the event that both the Special Issuance Instructions
and the Special Delivery Instructions are completed, the Exchange Notes will be
issued, if applicable, and the certificates representing any Old Notes not
tendered or not accepted for exchange (and any accompanying documents, as
appropriate) will be returned in the name of, and delivered to, the person or
persons so indicated. Unless otherwise indicated under "Special Issuance
Instructions," in the case of a book-entry delivery of Old Notes, the account
maintained at the Book-Entry Transfer Facility indicated above will be credited
with any Old Notes not tendered or not accepted for exchange. The undersigned
recognizes that neither the Exchange Agent nor the Company has any obligation
pursuant to the Special Issuance Instructions to transfer any Old Notes from the
name of the Holder thereof if the Company does not accept for exchange any of
the Old Notes so tendered.
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the certificates representing the Exchange Notes
and/or certificates representing Old Notes not to be accepted for exchange are
to be issued in the name of someone other than the undersigned, or if Old Notes
delivered by book-entry transfer not accepted for exchange are to be returned by
credit to an account maintained at a Book-Entry Transfer Facility other than the
account indicated above.
Issue Certificate(s) to:
Name:
- ----------------------------------------
(Please Print)
Address:
- -------------------------------------
- ------------------------------------------------
- ------------------------------------------------
(Including Zip Code)
- ------------------------------------------------
(Taxpayer Identification or Social Security Number)
Credit unaccepted Old Notes delivered by book-entry transfer to the Book-
Entry Transfer Facility account set forth below:
- ------------------------------------------------
(Account Number)
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the Exchange Notes and/or certificates representing
Old Notes not accepted for exchange are to be sent to someone other than the
undersigned or to the undersigned at an address other than that shown above.
Mail Certificate(s) to:
Name:
- ----------------------------------------
(Please Print)
Address:
- -------------------------------------
- ------------------------------------------------
- ------------------------------------------------
(Including Zip Code)
- ------------------------------------------------
(Taxpayer Identification or Social Security Number)
6
<PAGE> 7
SIGNATURES
HOLDERS OF OLD NOTES
SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN
THIS LETTER OF TRANSMITTAL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature(s) of Holder(s) of Notes)
Date: , 2000
(Must be signed by the Holder(s) exactly as name(s) appear(s) on certificate(s)
representing the Old Notes or on a security position listing or by person(s)
authorized to become Holder(s) by certificates and documents transmitted
herewith. If signature is by attorney-in-fact, executor, administrator, trustee,
guardian, officer of a corporation or other person acting in a fiduciary or
representative capacity, please provide the following information and see
Instruction 6.)
Capacity (Full Title):
- --------------------------------------------------------------------------------
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Type or Print)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
- ---------------------------------------------------------------------
Tax Identification or Social Security No.
- ----------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 6)
- --------------------------------------------------------------------------------
(Authorized Signature)
Name:
- --------------------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address -- Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Date:
- --------------------------------------------------------------------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal need
not be guaranteed if the Old Notes tendered hereby are tendered (a) by the
registered Holder(s) (which term, for purposes of this document, shall include
any participant in the Book-Entry Transfer Facility's system and whose name
appears on a security position listing as the record owner of the Old Notes)
thereof, unless such Holder has completed either the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" on the
preceding page, or (b) for the account of a firm that is a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of STAMP,
SEMP or MSP (each, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. Persons who are beneficial owners of Old Notes but are not Holders
and who seek to tender Old Notes should (i) contact the Holder of such Old Notes
and instruct such Holder to tender on his behalf, (ii) obtain and include with
this Letter of Transmittal, Old Notes properly endorsed for transfer by the
Holder, with signatures on the endorsement guaranteed by an Eligible
Institution, or (iii) effect a record transfer of such Old Notes from the Holder
to such beneficial owner and comply with the requirements applicable to Holders
for tendering Old Notes on or prior to the Expiration Date. See Instruction 6.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
Holders either if certificates are to be forwarded herewith or if delivery of
Old Notes is to be made pursuant to the procedures for book-entry transfer set
forth in the Prospectus under the caption "The Exchange Offer -- Procedures for
Tendering." For a Holder to properly tender Old Notes pursuant to the Exchange
Offer, a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof), together with any signature guarantees and any other
documents required by these Instructions, must be received by the Exchange Agent
at one of the addresses set forth herein on or prior to the Expiration Date and
either (i) certificates representing such Old Notes must be received by the
Exchange Agent at such address or (ii) such Old Notes must be transferred
pursuant to the procedures for book-entry transfer described in the Prospectus
under the caption "The Exchange Offer -- Procedures for Tendering" and a
Book-Entry Confirmation must be received by the Exchange Agent, in each case, on
or prior to the Expiration Date. A Holder who desires to tender Old Notes and
who cannot comply with procedures set forth herein for tender on a timely basis
or whose Old Notes are not immediately available must comply with the guaranteed
delivery procedures described below.
Holders whose certificates representing Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent or complete the procedures for book-entry
transfer prior to the Expiration Date may tender their Old Notes by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures." Pursuant to such procedures,
(a) the tender must be made by or through an Eligible Institution; (b) a Notice
of Guaranteed Delivery, substantially in the form provided herewith, properly
completed and duly executed, must be received by the Exchange Agent as provided
below on or prior to the Expiration Date; and (c) the certificates representing
all tendered Old Notes, or a Book-Entry Confirmation with respect to all
tendered Old Notes, together with this Letter of Transmittal, properly completed
and duly executed, and any required signature guarantees and all other documents
required by the Letter of Transmittal, must be received by the Exchange Agent
within three New York Stock Exchange trading days after the date of execution of
the Notice of Guaranteed Delivery.
8
<PAGE> 9
THE METHOD OF DELIVERY OF CERTIFICATES REPRESENTING OLD NOTES, THIS LETTER
OF TRANSMITTAL, REQUIRED SIGNATURE GUARANTEES AND ANY OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION
AND RISK OF THE TENDERING HOLDER AND DELIVERY WILL BE DEEMED MADE WHEN ACTUALLY
RECEIVED BY THE EXCHANGE AGENT. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED
TO ENSURE TIMELY DELIVERY.
All tendering Holders, by execution of this Letter of Transmittal waive any
right to any notice of the acceptance of their Old Notes for exchange.
3. WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS. Tenders of Old Notes
may be withdrawn at any time until the Expiration Date. Tendered Old Notes may
not be withdrawn on or after the Expiration Date, unless the Exchange Offer is
terminated without any Old Notes being accepted for exchange thereunder. In the
event of such termination, such Old Notes will be returned to the tendering
Holder as promptly as practicable.
Any Holder of Old Notes who has tendered Old Notes or who succeeds to the
record ownership of Old Notes in respect of which such tenders have previously
been given may withdraw such Old Notes on or prior to the Expiration Date by
delivery of a written notice of withdrawal subject to the limitations described
herein. To be effective, a written or facsimile transmission notice of
withdrawal of a tender must (i) be received by the Exchange Agent, at one of the
addresses specified on the back cover of this Letter of Transmittal, on or
before the Expiration Date, (ii) specify the name of the Holder of the Old Notes
to be withdrawn, (iii) contain the description of the Old Notes to be withdrawn,
the certificate numbers shown on the particular certificates representing such
Old Notes and the aggregate principal amount represented by such Old Notes, and
(iv) be signed by the Holder of such Old Notes in the same manner as the
original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee register the transfer of relevant Old Notes into the name of
the person withdrawing such Old Notes. The signature(s) on the notice of
withdrawal of any tendered Old Notes must be guaranteed by an Eligible
Institution unless the relevant Old Notes have been tendered for the account of
an Eligible Institution. If the Old Notes to be withdrawn have been delivered or
otherwise identified to the Exchange Agent, a signed notice of withdrawal is
effective immediately upon receipt by the Exchange Agent of written or facsimile
transmission of the notice of withdrawal even if physical release is not yet
effected. A withdrawal of Notes can only be accomplished in accordance with the
foregoing procedures. No Holder may withdraw Old Notes following the Expiration
Date.
All questions as to the validity, form and eligibility (including the time
of receipt) of notices of withdrawal will be determined by the Company, whose
determination will be final and binding on all parties. A purported notice of
withdrawal that is not received by the Exchange Agent in a timely fashion will
not be effective to withdraw tendered Old Notes. Any Old Notes that have been
tendered but that are not accepted for exchange will be returned to the Holder
thereof without cost to such Holder as soon as practicable following the
Expiration Date.
A withdrawal of a tender of Old Notes may not be rescinded and any Old
Notes properly withdrawn will not be deemed to be validly tendered for purposes
of the Exchange Offer and no Exchange Notes will be issued with respect thereto.
However, withdrawn Old Notes may be retendered by repeating one of the
procedures described in Instruction 2 above at any time on or prior to the
Expiration Date.
4. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF OLD NOTES WHO TENDER BY
BOOK-ENTRY TRANSFER). If less than the entire principal amount of any Old Notes
evidenced by a submitted certificate is tendered, the tendering holder should
fill in the applicable principal amount of the Old Notes that are to be tendered
in the box entitled "Description of Old Notes Tendered." The entire principal
amount represented by the certificates for all Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all
9
<PAGE> 10
Old Notes is not tendered or not accepted for payment, new certificate(s)
representing the remainder of the principal amount of the Old Notes that were
evidenced by the old certificate(s) will be sent to the Holder, unless otherwise
provided in the boxes entitled "Special Payment Instructions" or "Special
Delivery Instructions" above, as soon as practicable after the expiration of the
Exchange Offer.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; ENDORSEMENTS. If this Letter
of Transmittal is signed by the Holder(s) of the Old Notes tendered hereby, the
signature(s) must correspond exactly with the name(s) as written on the face of
the certificate(s) without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal. If any
tendered Old Notes are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many separate Letters of
Transmittal as there are names in which certificates are held.
If this Letter of Transmittal or any certificates are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Company of their authority so to act must be submitted, unless waived by the
Company.
If this Letter of Transmittal is signed by the Holder(s) of the Old Notes
listed and transmitted hereby, no endorsements of certificates are required
unless payment is to be made to, or certificates for Old Notes not tendered or
not accepted for purchase are to be issued to, a person other than the
Holder(s). Signatures on such certificates must be guaranteed by an Eligible
Institution (unless signed by an Eligible Institution).
If this Letter of Transmittal is signed by a person other than the
Holder(s) of the Old Notes listed, the certificates representing such Notes must
be properly endorsed for transfer by the Holder, together with a properly
completed irrevocable proxy that authorizes such person to consent on behalf of
such Holder, with signatures on the endorsement guaranteed by an Eligible
Institution.
6. TRANSFER TAXES. The Company will pay or cause to be paid any transfer
taxes with respect to the transfer and sale of Old Notes to it or its order
pursuant to the Exchange Offer. If, however, the Exchange Notes are to be
registered in the name of any person other than the Holder(s), or if tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any transfer taxes (whether
imposed on the Holder(s) or such other person) payable on account of the
transfer to such person will be deducted from the interest paid on the Exchange
Offer unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Notes are to be
issued in the name of, and/or certificates representing Old Notes not accepted
for exchange are to be returned to, a person other than the person(s) signing
this Letter of Transmittal or if Exchange Notes are to be sent and/or such
certificates are to be returned to a person other than the person(s) signing
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed. Holders
delivering Old Notes by book-entry transfer may request that Old Notes not
accepted for payment be credited to such account maintained at a Book-Entry
Transfer Facility as such Holder(s) may designate hereon. If no such
instructions are given, such Old Notes not accepted for payment will be returned
by crediting the account at the Book-Entry Transfer Facility designated above.
10
<PAGE> 11
8. WAIVER OF CONDITIONS. To the extent permitted by applicable law, the
Company reserves the right to waive any and all conditions to the Exchange Offer
and accept for exchange any Old Notes tendered.
9. TAX IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax law
generally requires that a Holder whose tendered Old Notes are accepted for
exchange, or such Holder's assignee (in either case, the "Payee"), provide the
Company (the "Payor"), with the Holder's correct Taxpayer Identification Number
("TIN"), which, in the case of a Payee who is an individual, is his or her
social security number. If the Payor is not provided with the correct TIN or an
adequate basis for an exemption, such Payee may be subject to a $50 penalty
imposed by the Internal Revenue Service and backup withholding in an amount
equal to 31% of the interest paid on the Exchange Offer. If withholding results
in an overpayment of taxes, a refund may be obtained.
To prevent backup withholding, each Payee must provide his correct TIN by
completing the "Substitute Form W-9" set forth herein, certifying that the TIN
provided is correct (or that such Payee is awaiting a TIN) and that (i) the
Payee is exempt from backup withholding, (ii) the Payee has not been notified by
the Internal Revenue Service that he is subject to backup withholding as a
result of a failure to report all interest or dividends, or (iii) the Internal
Revenue Service has notified the Payee that he is no longer subject to backup
withholding.
If the Payee does not have a TIN, such Payee should consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 (the "W-9 Guidelines") for instructions on applying for a TIN, write
"Applied For" in the space for the TIN in Part I of the Substitute Form W-9, and
sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer
Identification Number set forth herein. Note: Writing "Applied For" on the form
means that the Payee has already applied for a TIN or that such Payee intends to
apply for one in the near future.
If the Old Notes are held in more than one name or are not in the name of
the actual owner, consult the W-9 Guidelines for information on which TIN to
report.
Exempt Payees (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt Payee
should write "Exempt" in Part 2 of Substitute Form W-9. See the W-9 Guidelines
for additional instructions. In order for a nonresident alien or foreign entity
to qualify as exempt, such person must submit a completed Form W-8, "Certificate
of Foreign Status."
10. MUTILATED, LOST, STOLEN OR DESTROYED SECURITIES. Any Holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at one of the addresses indicated above for further instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Dealer Manager at its address set forth below or from the
tendering Holder's broker, dealer, commercial bank or trust company. Additional
copies of the Prospectus, this Letter of Transmittal, the Notice of Guaranteed
Delivery, and the Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9 may be obtained from the Exchange Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL, TOGETHER WITH CERTIFICATES FOR, OR
CONFIRMATION OF BOOK-ENTRY TRANSFER WITH RESPECT TO, ANY TENDERED OLD NOTES,
WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE EXPIRATION DATE.
11
<PAGE> 12
TO BE COMPLETED BY ALL PAYEES
(SEE INSTRUCTION 9)
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
--------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Name: -------------------------------------------------------------------
FORM W-9 Address:-----------------------------------------------------------------
(Number and Street)
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE ----------------------------------------------------------------------------
(City) (State) (Zip Code)
PAYOR'S REQUEST FOR PART 1 -- Please provide your TIN in TIN --------------------------------
TAXPAYER IDENTIFICATION the box at right and certify by (Social Security Number or
NUMBER (TIN) AND signing and dating below Employer Identification Number)
CERTIFICATION
PART 2 -- For Payees exempt from backup withholding please write "Exempt" here
(See Instructions) -------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PART 3 -- CERTIFICATION UNDER PENALTIES OF PERJURY. I CERTIFY THAT (1) The number shown on this form is my correct
TIN (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because: (a)
I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a result of a failure to report all interest or dividends or (c) the IRS
has notified me that I am no longer subject to backup withholding.
SIGNATURE DATE
-------------------------------------------------------- ------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
You must Cross out Part 2 above if you have been notified by the IRS that
you are currently subject to backup withholding because of underreporting
interest or dividends on your tax return.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
IN PART 1 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and that I have mailed or delivered an application to
receive a taxpayer identification number of the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a taxpayer identification number to the Payor, the Payor is required to
withhold 31 percent of all cash payments made to me until I provide a number.
SIGNATURE DATE
------------------------------------------- ----------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31 PERCENT OF ANY CASH PAYMENTS. PLEASE REVIEW THE ENCLOSED GUIDELINES
FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM 2-9
FOR ADDITIONAL DETAILS.
12
<PAGE> 13
The Exchange Agent is:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
<TABLE>
<S> <C> <C>
By Registered or Certified By Overnight Carrier: By Hand Delivery:
Mail: 600 Travis, Suite 1150
600 Travis, Suite 1150 Houston, Texas 77002
600 Travis, Suite 1150 Houston, Texas 77002 Attention: Mauri J. Cowen
Houston, Texas 77002 Attention: Mauri J. Cowen
Attention: Mauri J. Cowen
</TABLE>
<TABLE>
<S> <C>
Facsimile Transmission Number: Confirm Receipt of Facsimile by Telephone:
(713) 216-5476 (713) 216-6686
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13
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
CLASSIC CABLE, INC.
OFFER TO EXCHANGE
ANY AND ALL OF ITS 10 1/2% SENIOR SUBORDINATED NOTES DUE 2010
BY
CLASSIC CABLE, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 2000, UNLESS EXTENDED TO A DATE NOT LATER THAN , 2000 (THE
"EXPIRATION DATE"). TENDERED NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
AS SET FORTH IN THE PROSPECTUS DATED , 2000 (THE "PROSPECTUS") UNDER
THE CAPTIONS "THE EXCHANGE OFFER -- PROCEDURES FOR TENDERING" AND "THE EXCHANGE
OFFER -- GUARANTEED DELIVERY PROCEDURES" AND THE ACCOMPANYING LETTER OF
TRANSMITTAL (THE "LETTER OF TRANSMITTAL"), THIS FORM, OR ONE SUBSTANTIALLY
EQUIVALENT HERETO, MUST BE USED TO ACCEPT THE EXCHANGE OFFER IF CERTIFICATES
REPRESENTING THE 10 1/2% SENIOR SUBORDINATED NOTES DUE 2010 (THE "NOTES") OF
CLASSIC CABLE, INC., A DELAWARE CORPORATION (THE "COMPANY"), ARE NOT IMMEDIATELY
AVAILABLE OR IF THE PROCEDURE FOR BOOK-ENTRY TRANSFER CANNOT BE COMPLETED ON A
TIMELY BASIS OR TIME WILL NOT PERMIT A HOLDER'S CERTIFICATES OR OTHER REQUIRED
DOCUMENTS TO REACH THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. SUCH
FORM MAY BE DELIVERED BY HAND OR TRANSMITTED BY TELEGRAM, TELEX, FACSIMILE
TRANSMISSION OR MAIL TO THE EXCHANGE AGENT AND MUST INCLUDE A GUARANTEE BY AN
ELIGIBLE INSTITUTION UNLESS SUCH FORM IS SUBMITTED ON BEHALF OF AN ELIGIBLE
INSTITUTION. CAPITALIZED TERMS USED AND NOT DEFINED HEREIN HAVE THE RESPECTIVE
MEANINGS ASCRIBED TO THEM IN THE PROSPECTUS.
Deliver to the Exchange Agent:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
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By Registered or Certified By Overnight Carrier: By Hand Delivery:
Mail:
600 Travis, Suite 1150 600 Travis, Suite 1150
600 Travis, Suite 1150 Houston, Texas 77002 Houston, Texas 77002
Houston, Texas 77002 Attention: Mauri J. Cowen Attention: Mauri J. Cowen
Attention: Mauri J. Cowen
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<S> <C>
Facsimile Transmission Number: Confirm Receipt of Facsimile by Telephone:
(713) 216-5476 (713) 216-6686
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies & Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus
and accompanying Letter of Transmittal, receipt of which is hereby acknowledged,
the undersigned hereby tenders to Classic Cable, Inc., a Delaware corporation
(the "Company"), $ principal amount (at maturity) of Old Notes,
pursuant to the Guaranteed Delivery Procedures set forth in the Prospectus and
accompanying Letter of Transmittal.
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<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBERS OF OLD NOTES
(IF AVAILABLE) PRINCIPAL AMOUNT TENDERED
- -----------------------------------------------------------------------------------------------------------------
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------------------------------------------------------ ------------------------------------------------------
------------------------------------------------------ ------------------------------------------------------
------------------------------------------------------ ------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
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If Old Notes will be tendered by book-entry transfer: (check one)
Name of Tendering Institution:
[ ] The Depository Trust Company
[ ] The Midwest Securities Trust Company
[ ] The Philadelphia Depository Trust Company
Account No. at
The undersigned authorizes the Exchange Agent to deliver this Notice of
Guaranteed Delivery to the Company and Chase Bank of Texas, National Association
with respect to the Old Notes tendered pursuant to the Exchange Offer.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
SIGN HERE
- --------------------------------------------------------------------------------
Signature(s) of Registered Holder(s) or Authorized Signatory
- --------------------------------------------------------------------------------
Name(s) of Registered Holder(s)
(Please Type or Print)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
Zip Code
- --------------------------------------------------------------------------------
Area Code and Telephone Number
Dated: -------------------------------------------------------------------, 1999
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office in the United States, or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934 which is a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP"), or
the New York Stock Exchange, Inc. Medallion Signature Program ("MSP"), hereby
(a) represents that the above-named person(s) has a net long position in the Old
Notes tendered hereby within the meaning of Rule 14e-4, under the Securities
Exchange Act of 1934, as amended, (b) represents that such tender of Old Notes
complies with Rule 14e-4, and (c) guarantees delivery to the Exchange Agent of
certificates representing the Old Notes tendered hereby, in proper form for
transfer, or confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at a Book-Entry Transfer Facility (as defined in the
Prospectus), in each case together with a properly completed and duly executed
Letter of Transmittal with any required signature guarantees and any other
documents required by the Letter of Transmittal, within three New York Stock
Exchange trading days after the date hereof.
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- -------------------------------------------- --------------------------------------------
Name of Firm Title
- -------------------------------------------- --------------------------------------------
Authorized Signature Name (Please Type or Print)
- -------------------------------------------- --------------------------------------------
Address
- -------------------------------------------- --------------------------------------------
Area Code and Telephone Number Dated , 1999
</TABLE>
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OLD NOTES WITH THIS FORM.
CERTIFICATES FOR OLD NOTES MUST BE SENT WITH YOUR LETTER OF TRANSMITTAL.
