<PAGE> 1
FILE NO. 5-37799
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
BOSTON CELTICS LIMITED PARTNERSHIP
(Name of Issuer)
BOSTON CELTICS LIMITED PARTNERSHIP
BOSTON CELTICS LIMITED PARTNERSHIP II
CASTLE CREEK PARTNERS, L.P.
BCLP MERGER, INC.
CELTICS, INC.
PAUL E. GASTON
DON F. GASTON
PAULA B. GASTON
JOHN H.M. LEITHEAD
JOHN B. MARSH, III
UNITS REPRESENTING ASSIGNMENTS OF BENEFICIAL OWNERSHIP OF
LIMITED PARTNERSHIP INTERESTS
(Title of Class of Securities)
100576017
(CUSIP Number of Class of Securities)
PAUL E. GASTON
Chief Executive Officer and Chairman of the Board
Boston Celtics Limited Partnership
151 Merrimac Street
Boston, MA 02114
(617) 523-6050
COPIES TO:
<TABLE>
<S> <C>
JOHN F. OLSON, ESQ. JEFFREY L. HOLDEN, ESQ.
GIBSON, DUNN & CRUTCHER LLP ZAPRUDER & ODELL
1050 Connecticut Ave., N.W. 601 13th Street, N.W.
Washington, D.C. 20036 Washington, D.C. 20005
(202) 955-8500 (202) 508-9600
</TABLE>
(Name, Addresses and Telephone Numbers of Persons Authorized to Receive Notices
and Communications on Behalf of Persons Filing Statement)
THIS STATEMENT IS FILED IN CONNECTION WITH (CHECK THE APPROPRIATE BOX):
a. [ ] The filing of solicitation materials or an information statement subject
to Regulation 14A [17 CFR 240.14a-1 to 240.14b-1], Regulation 14C [17 CFR
240.14c-1 to 240.14c-101] or Rule 13e3 [17 CFR 240.13e3(c)] under the
Securities Exchange Act of 1934.
b. [X] The filing of a registration statement under the Securities Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. [ ]
------------------------
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILLING FEE
- -------------------------------------------------------------------------------------------------------
<S> <C>
$117,869,204.30 $23,573.84
</TABLE>
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* Determined based upon the average of the high and low prices of the Units of
BCLP on April 16, 1998, as reported by the New York Stock Exchange.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: $23,573.84 Form or Registration No.: S-4
Filing Party: Boston Celtics Limited Partnership Date Filed: April 17, 1998
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<PAGE> 2
INTRODUCTORY NOTE
This Rule 13e-3 Transaction Statement on Schedule 13E-3 relates to a
proposed reorganization (the "Reorganization") pursuant to which Unit holders of
Boston Celtics Limited Partnership ("BCLP") will receive, at their option,
either (i) Units of Boston Celtics Limited Partnership II ("BCLP II"), $20 in
principal amount of BCLP's 6% Subordinated Debentures due 2038 and $1 in cash or
(ii) limited partnership interests of Castle Creek Partners, L.P. ("Castle
Creek"). The Reorganization is described in Registration Statement on Form S-4
relating to the Reorganization, a copy of which is attached hereto as Exhibit
17(d) (the "Information Statement/Prospectus").
The information contained in the Information Statement/Prospectus is
incorporated by reference in answer to the items of this Schedule 13E-3, and the
Cross Reference Sheet set forth below shows the location in the Information
Statement/Prospectus of the information required to be included herein. The
information contained in the Information Statement/Prospectus, including the
exhibits thereto, is hereby expressly incorporated by reference, and the
responses to each item herein are qualified in their entirety by the information
contained in the Information Statement/Prospectus and the exhibits thereto.
1
<PAGE> 3
CROSS REFERENCE SHEET
(PURSUANT TO GENERAL INSTRUCTIONS D AND F TO SCHEDULE 13E-3)
<TABLE>
<CAPTION>
ITEM IN SCHEDULE 13E-3 LOCATION IN INFORMATION STATEMENT/PROSPECTUS
---------------------- --------------------------------------------
<S> <C>
Item 1(a)...................... SUMMARY -- The Partnerships.
Item 1(b)-(d).................. Cover Page; MARKET PRICES AND DISTRIBUTIONS.
Item 1(e)...................... Not applicable.
Item 1(f)...................... See Item 1 (f).
Item 2(a)-(d).................. SUMMARY -- The Partnerships; SUMMARY -- Summary of the Terms
of the Reorganization; MANAGEMENT.
Item 2(e)-(f).................. None.
Item 2(g)...................... See Item 2 (g).
Item 3(a)...................... None.
Item 3(b)...................... SUMMARY -- Background of the Reorganization; SPECIAL
FACTORS -- Background of the Reorganization; SPECIAL
FACTORS -- Determinations of the Board of Directors of
Celtics, Inc.
Item 4(a)-(b).................. SUMMARY -- Overview of the Reorganization;
SUMMARY -- Summary of the Terms of the Reorganization;
SPECIAL FACTORS -- Background of the Reorganization; SPECIAL
FACTORS -- Terms of the Reorganization.
Item 5(a)-(b).................. Not applicable.
Item 5(c)...................... SUMMARY -- Restructuring Transactions;
MANAGEMENT -- Directors and Officers after the
Reorganization.
Item 5(d)...................... DESCRIPTION OF BCLP II UNITS; DESCRIPTION OF CASTLE CREEK
INTERESTS.
Item 5(e)...................... SUMMARY -- Restructuring Transactions; SPECIAL FACTORS --
Terms of the Reorganization.
Item 5(f)-(g).................. RISK FACTORS AND OTHER IMPORTANT CONSIDERATIONS -- Risks
Relating to Castle Creek After the Reorganization -- Public
Reporting; DESCRIPTION OF CASTLE CREEK INTERESTS.
Item 6(a)...................... SPECIAL FACTORS -- Financing the Reorganization.
Item 6(b)...................... RISK FACTORS AND OTHER IMPORTANT CONSIDERATIONS -- Risks
Relating to the Reorganization --
Transaction Costs.
Item 6(c)...................... SPECIAL FACTORS -- Financing the Reorganization.
Item 6(d)...................... Not applicable.
Item 7(a)-(c).................. SUMMARY -- Reasons to Reorganize; SUMMARY -- Alternatives to
the Reorganization; SPECIAL FACTORS -- Background of the
Reorganization; SPECIAL FACTORS -- Reasons to Reorganize;
SPECIAL FACTORS -- Alternatives to the Reorganization.
Item 7(d)...................... SUMMARY -- Summary of the Terms of the Reorganization;
SPECIAL FACTORS -- Terms of the Reorganization; SPECIAL
FACTORS -- Determinations of the Board of Directors of
Celtics, Inc.; CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
Item 8(a)-(b).................. SUMMARY -- Background of the Reorganization; SUMMARY --
Recommendation of General Partner and Fairness
Determination; SPECIAL FACTORS -- Background of the
Reorganization; SPECIAL FACTORS -- Reasons to Reorganize;
SPECIAL FACTORS -- Determinations of the Board of Directors
of Celtics, Inc.
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
ITEM IN SCHEDULE 13E-3 LOCATION IN INFORMATION STATEMENT/PROSPECTUS
---------------------- --------------------------------------------
<S> <C>
Item 8(c)...................... SUMMARY -- Conditions to the Reorganization; VOTING
INFORMATION -- Vote Required; Written Consent in Lieu of
Meeting.
Item 8(d)...................... SUMMARY -- Risk Factors; RISK FACTORS AND OTHER IMPORTANT
CONSIDERATIONS -- Risks Relating to the Reorganization -- No
Independent Representation of Holders of BCLP Units; RISK
FACTORS AND OTHER IMPORTANT CONSIDERATIONS -- Risks Relating
to the Reorganization -- No Independent Fairness Opinion or
Appraisal; SPECIAL FACTORS -- Determinations of the Board of
Directors of Celtics, Inc.
Item 8(e)...................... SUMMARY -- Recommendation of General Partner and Fairness
Determination; SPECIAL FACTORS -- Background of the
Reorganization; SPECIAL FACTORS -- Determinations of the
Board of Directors of Celtics, Inc.
Item 8(f)...................... Not applicable.
Item 9(a)-(b).................. SUMMARY -- Background of the Reorganization; SUMMARY --
Recommendation of General Partner and Fairness
Determination; SPECIAL FACTORS -- Background of the
Reorganization; SPECIAL FACTORS -- Determinations of the
Board of Directors of Celtics, Inc.
Item 9(c)...................... Not applicable.
Item 10(a)..................... MANAGEMENT -- Security Ownership of Certain Beneficial
Owners and Management.
Item 10(b)..................... SUMMARY -- Overview of the Reorganization; RISK FACTORS AND
OTHER IMPORTANT CONSIDERATIONS -- Risks Relating to the
Reorganization -- Control by Gaston Affiliates.
Item 11........................ SUMMARY -- Overview of the Reorganization; RISK FACTORS AND
OTHER IMPORTANT CONSIDERATIONS -- Risks Relating to the
Reorganization -- Control by Gaston Affiliates.
Item 12(a)..................... SUMMARY -- Overview of the Reorganization; SUMMARY -- Risk
Factors; RISK FACTORS AND OTHER IMPORTANT
CONSIDERATIONS -- Risks Relating to the
Reorganization -- Control by Gaston Affiliates.
Item 12(b)..................... SUMMARY -- Recommendation of General Partner and Fairness
Determination; SPECIAL FACTORS -- Background of the
Reorganization; SPECIAL FACTORS -- Determinations of the
Board of Directors of Celtics, Inc.
Item 13(a)..................... SUMMARY -- No Appraisal Rights; VOTING INFORMATION -- No
Appraisal Rights.
Item 13(b)..................... Not applicable.
Item 13(c)..................... SUMMARY -- Subordinated Debentures; DESCRIPTION OF
SUBORDINATED DEBENTURES.
Item 14(a)-(b)................. SUMMARY -- Summary Historical Consolidated Financial
Information of BCLP and Summary Unaudited Pro Forma
Consolidated Financial Information of BCLP II and Castle
Creek; SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA;
INDEX TO FINANCIAL STATEMENTS.
Item 15(a)-(b)................. Not applicable.
Item 16........................ Information Statement/Prospectus.
Item 17(a)..................... To be filed by amendment.
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
ITEM IN SCHEDULE 13E-3 LOCATION IN INFORMATION STATEMENT/PROSPECTUS
---------------------- --------------------------------------------
<S> <C>
Item 17(b)..................... None.
Item 17(c)..................... Letter Agreement Between Walcott Partners, L.P. and Stephen
C. Schram, dated April 14, 1998.
Item 17(d)..................... Information Statement/Prospectus.
Item 17(e)..................... Not applicable.
Item 17(f)..................... Not applicable.
</TABLE>
4
<PAGE> 6
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION
(a) The issuer of the class of equity securities that is the subject of
this Statement is Boston Celtics Limited Partnership ("BCLP"), whose principal
executive office is located at 151 Merrimac Street, Boston, MA 02114. The
information set forth under the heading "SUMMARY -- The Partnerships" in the
Information Statement/Prospectus is incorporated herein by reference.
(b)-(d) The information set forth on the Cover Page and under the heading
"MARKET PRICES AND DISTRIBUTIONS" in the Information Statement/Prospectus is
incorporated herein by reference.
(e) Not applicable.
(f) On August 30, 1995, BCLP redeemed an aggregate of 758,444 BCLP Units
that were beneficially owned by Alan Cohen and his son and daughter. BCLP paid
$21.50 per Unit in cash to Mr. Cohen's son and daughter for 90,300 Units, for a
total payment of $1,941,450 and an average purchase price during the first
quarter of fiscal 1995 of $21.50 per Unit. BCLP issued Mr. Cohen two notes for
668,114 Units at $21.50 per Unit, for an aggregate initial face amount of
$14,365,096. These notes are due and payable on July 1, 2000, bear interest
(paid quarterly) at 7.76% per annum and increase by specified amounts on each
July 1 during their term. If Mr. Cohen holds the notes on July 1, 2000, he will
be entitled to payment of $20,044,300, or $30.00 per Unit.
On November 30, 1996, Celtics Capital Corporation, BCLP's indirect wholly
owned subsidiary, acquired a total of 780,000 BCLP Units from Paul R. Dupee, Jr.
and Westbury Partners L.P., an affiliate of Mr. Dupee, at $29.33 per Unit, for a
total of $22,880,000 and an average purchase price during the second quarter of
fiscal 1996 of $29.33 per Unit.
On June 28, 1996, Paul E. Gaston elected to acquire BCLP Units that vest
after ten years and contain certain restrictions as to transferability (the
"1996 Restricted Units") in lieu of a $3,658,363 cash annual incentive payment.
Based on a written report received from an independent employee benefits
consultant regarding the appropriate discount to be applied, Celtics, Inc.'s
Audit Committee awarded Mr. Gaston 234,886 1996 Restricted Units, for an average
price during the fourth quarter of fiscal 1996 of $15.58 per 1996 Restricted
Unit.
On June 30, 1997, Paul E. Gaston elected to exchange options to purchase
250,000 BCLP Units for 250,000 BCLP Units that vest after ten years and contain
certain restrictions as to transferability (the "1997 Restricted Units"). Based
on a written report received from an independent employee benefits consultant
regarding the appropriate discount to be applied, the options that Mr. Gaston
exchanged for the 1997 Restricted Units were valued at $17.325 per Unit, for an
average purchase price during the fourth quarter of fiscal 1997 of $17.325 per
Unit.
On May 8, 1998, Paul E. Gaston purchased 14 BCLP Units in the open market
at a price of $19.75 per Unit, for an average purchase price during the fourth
quarter of fiscal 1998 of $19.75 per Unit.
On May 8, 1998, Don F. Gaston purchased 15 BCLP Units in the open market at
a price of $19.75 per Unit, for an average purchase price during the fourth
quarter of fiscal 1998 of $19.75 per Unit.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d) This Statement is being filed jointly by BCLP, the issuer of the
securities that are the subject of the Rule 13e-3 transaction, BCLP II, Castle
Creek, BCLP Merger, Inc. ("MergerSub"), Celtics, Inc. and each member of
Celtics, Inc.'s Board of Directors (Paul E. Gaston, Don F. Gaston, Paula B.
Gaston, John H.M. Leithead and John B. Marsh, III). The information with respect
to BCLP, BCLP II, and Castle Creek set forth under the heading "SUMMARY -- The
Partnerships" is incorporated herein by reference.
The information with respect to MergerSub set forth under the heading
"SUMMARY -- Summary of the Terms of the Reorganization" is incorporated herein
by reference.
The information with respect to Celtics, Inc., BCLP II GP, Inc. and Castle
Creek GP, Inc. set forth under the heading "SUMMARY -- The Partnerships" is
incorporated herein by reference.
5
<PAGE> 7
The information with respect to the directors and executive officers of
Celtics, Inc., BCLP II GP, Inc. and Castle Creek GP, Inc. set forth under the
heading "MANAGEMENT" is incorporated herein by reference.
(e)-(f) None.
(g) Each of the individuals identified in response to Item 2(a) are U.S.
citizens.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
(a) Not applicable.
(b) The information set forth under the headings "SUMMARY -- Background of
the Reorganization," "SPECIAL FACTORS -- Background of the Reorganization" and
"SPECIAL FACTORS -- Determinations of the Board of Directors of Celtics, Inc."
in the Information Statement/Prospectus is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION
(a)-(b) The information set forth under the headings "SUMMARY -- Overview
of the Reorganization," "SUMMARY -- Summary of the Terms of the Reorganization,"
"SPECIAL FACTORS -- Background of the Reorganization" and "SPECIAL
FACTORS -- Terms of the Reorganization" in the Information Statement/Prospectus
is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE
(a)-(b) Not applicable.
(c) The information set forth under the headings "SUMMARY -- Restructuring
Transactions" and "MANAGEMENT -- Directors and Officers after the
Reorganization" in the Information Statement/ Prospectus is incorporated herein
by this reference.
(d) The information set forth under the headings "DESCRIPTION OF BCLP II
UNITS" and "DESCRIPTION OF CASTLE CREEK INTERESTS" in the Information
Statement/Prospectus is incorporated herein by reference.
(e) The information set forth under the headings "SUMMARY -- Restructuring
Transactions" and "SPECIAL FACTORS -- Terms of the Reorganization" in the
Information Statement/Prospectus is incorporated herein by reference.
(f)-(g) The information set forth under the headings "RISK FACTORS -- Risks
Relating to Castle Creek after the Reorganization -- Public Reporting" and
"DESCRIPTION OF CASTLE CREEK INTERESTS" in the Information Statement/Prospectus
is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION
(a) The information set forth under the heading "SPECIAL
FACTORS -- Financing the Reorganization" in the Information Statement/Prospectus
is incorporated herein by reference.
(b) The information set forth under the heading "RISK FACTORS AND OTHER
IMPORTANT CONSIDERATIONS -- Risks Relating to the Reorganization -- Transaction
Costs" in the Information Statement/Prospectus is incorporated herein by
reference.
The following table sets forth estimates of all expenses payable by BCLP in
connection with the Reorganization.
6
<PAGE> 8
<TABLE>
<S> <C>
Registration Fee............................................ $ 34,921.56
NYSE Fee.................................................... 35,000.00
Printing Expenses........................................... 110,000.00
Legal Fees and Expense...................................... 800,000.00
Accounting Fees and Expenses................................ 50,000.00
Transfer Agent and Registrar Fee............................ *
Miscellaneous............................................... *
-------------
Total....................................................... $1,500,000.00
=============
</TABLE>
- ---------------
* To be completed by amendment.
(c) The information set forth under the heading "SPECIAL
FACTORS -- Financing the Reorganization" in the Information Statement/Prospectus
is incorporated herein by reference.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS
(a)-(c) The information set forth under the headings "SUMMARY -- Reasons to
Reorganize," "SUMMARY -- Alternatives to the Reorganization," "SPECIAL
FACTORS -- Background of the Reorganization," "SPECIAL FACTORS -- Reasons to
Reorganize" and "SPECIAL FACTORS -- Alternatives to the Reorganization" in the
Information Statement/Prospectus is incorporated herein by reference.
(d) The information set forth under the headings "SUMMARY -- Summary of the
Terms of the Reorganization," "SPECIAL FACTORS -- Terms of the Reorganization,"
"SPECIAL FACTORS -- Determinations of the Board of Directors of Celtics, Inc."
and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" in the Information
Statement/Prospectus is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION
(a)-(b) The information set forth under the headings "SUMMARY -- Background
of the Reorganization," "SUMMARY -- Recommendation of General Partner and
Fairness Determination," "SPECIAL FACTORS -- Background of the Reorganization,"
"SPECIAL FACTORS -- Reasons to Reorganize" and "SPECIAL
FACTORS -- Determinations of the Board of Directors of Celtics, Inc." in the
Information Statement/Prospectus is incorporated herein by reference.
(c) The information set forth under the headings "SUMMARY -- Conditions to
the Reorganization" and "VOTING INFORMATION -- Vote Required; Written Consent in
Lieu of Meeting" in the Information Statement/Prospectus is incorporated herein
by reference.
(d) The information under the headings "SUMMARY -- Risk Factors" "RISK
FACTORS AND OTHER IMPORTANT CONSIDERATIONS -- Risks Relating to the
Reorganization -- No Independent Representation of Holders of BCLP Units," "RISK
FACTORS AND OTHER IMPORTANT CONSIDERATIONS -- Risks Relating to the
Reorganization -- No Independent Fairness Opinion or Appraisal" and "SPECIAL
FACTORS -- Determinations of the Board of Directors of Celtics, Inc." in the
Information Statement/Prospectus is incorporated herein by reference.
(e) The information under the headings "SUMMARY -- Recommendation of
General Partner and Fairness Determination," "SPECIAL FACTORS -- Background of
the Reorganization" and "SPECIAL FACTORS -- Determinations of the Board of
Directors of Celtics, Inc." in the Information Statement/ Prospectus is
incorporated herein by reference.
(f) Not applicable.
7
<PAGE> 9
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS
(a)-(b) The information under the headings "SUMMARY -- Background of the
Reorganization," "SUMMARY -- Recommendation of General Partner and Fairness
Determination," "SPECIAL FACTORS
- -- Background of the Reorganization" and "SPECIAL FACTORS -- Determinations of
the Board of Directors of Celtics, Inc." in the Information Statement/Prospectus
is incorporated herein by reference.
(c) Not applicable.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER
(a) The information set forth under the heading "MANAGEMENT -- Security
Ownership of Certain Beneficial Owners and Management" in the Information
Statement/Prospectus is incorporated herein by reference.
(b) The information under the headings "SUMMARY -- Overview of the
Reorganization" and "RISK FACTORS AND OTHER IMPORTANT CONSIDERATIONS -- Risks
Relating to the Reorganization -- Control by Gaston Affiliates" in the
Information Statement/Prospectus is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES
The information under the headings "SUMMARY -- Overview of the
Reorganization" and "RISK FACTORS AND OTHER IMPORTANT CONSIDERATIONS -- Risks
Relating to the Reorganization -- Control by Gaston Affiliates" in the
Information Statement/Prospectus is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION
(a) The information set forth under the headings "SUMMARY -- Overview of
the Reorganization," "SUMMARY -- Risk Factors" and "RISK FACTORS AND OTHER
IMPORTANT CONSIDERATIONS -- Risks Relating to the Reorganization -- Control by
Gaston Affiliates" in the Information Statement/Prospectus is incorporated
herein by reference.
(b) The information under the headings "SUMMARY -- Recommendation of
General Partner and Fairness Determination," "SPECIAL FACTORS -- Background of
the Reorganization" and "SPECIAL FACTORS -- Determinations of the Board of
Directors of Celtics, Inc." in the Information Statement/Prospectus is
incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION
(a) The information set forth under the headings "SUMMARY -- No Appraisal
Rights" and "VOTING INFORMATION -- No Appraisal Rights" in the Information
Statement/Prospectus is incorporated herein by reference.
(b) Not applicable.
(c) The information set forth under the headings "SUMMARY -- Subordinated
Debentures" and "DESCRIPTION OF SUBORDINATED DEBENTURES" is hereby incorporated
by reference.
ITEM 14. FINANCIAL INFORMATION
(a)-(b) The information set forth under the headings "SUMMARY -- Summary
Historical Consolidated Financial Information of BCLP and Summary Unaudited Pro
Forma Consolidated Financial Information of BCLP II and Castle Creek," "SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA" and "INDEX TO FINANCIAL STATEMENTS" in
the Information Statement/Prospectus is incorporated herein by reference.
8
<PAGE> 10
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED
(a)-(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION
The information included in the Information Statement/Prospectus is
incorporated herein by reference.
ITEM 17. MATERIALS TO BE FILED AS EXHIBITS
(a)Credit Agreement Between Boston Celtics Limited Partnership and Citizens
Bank of
Massachusetts, dated May 20, 1998.
(b) Not applicable.
(c) Letter Agreement Between Walcott Partners, L.P. and Stephen C. Schram,
dated April 14, 1998.
(d) Information Statement/Prospectus.
(e) Not applicable.
(f) Not applicable.
9
<PAGE> 11
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: May 22, 1998
BOSTON CELTICS LIMITED PARTNERSHIP
By: Celtics, Inc.
Its: General Partner
By: /s/ PAUL E. GASTON
------------------------------------
PAUL E. GASTON
Chief Executive Officer and
President
BOSTON CELTICS LIMITED PARTNERSHIP II
By: BCLP II GP, Inc.
Its: General Partner
By: /s/ PAUL E. GASTON
------------------------------------
PAUL E. GASTON
Chief Executive Officer and
President
CASTLE CREEK LIMITED PARTNERSHIP
By: Castle Creek GP, Inc.
Its: General Partner
By: /s/ PAUL E. GASTON
------------------------------------
PAUL E. GASTON
Chief Executive Officer and
President
BCLP MERGER, INC.
By: /s/ PAUL E. GASTON
------------------------------------
PAUL E. GASTON
Chief Executive Officer and
President
CELTICS, INC.
By: /s/ PAUL E. GASTON
------------------------------------
PAUL E. GASTON
Chief Executive Officer and
President
/s/ PAUL E. GASTON
------------------------------------
PAUL E. GASTON
10
<PAGE> 12
/s/ DON E. GASTON
---------------------------------
DON E. GASTON
/s/ PAULA B. GASTON
-----------------------------------
PAULA B. GASTON
/s/ JOHN H.M. LEITHEAD
-----------------------------------
JOHN H.M. LEITHEAD
/s/ JOHN B. MARSH, III
-----------------------------------
JOHN B. MARSH, III
11
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
17.(a) Credit Agreement Between Boston Celtics Limited Partnership
and Citizens Bank of
Massachusetts, dated May 20, 1998.
17.(b) Not applicable.
17.(c) Letter Agreement Between Walcott Partners, L.P. and Stephen
C. Schram, dated April 14, 1998.
17.(d) Information Statement/Prospectus.
17.(e) Not applicable.
17.(f) Not applicable.
</TABLE>
<PAGE> 1
================================================================================
CREDIT AGREEMENT
Dated as of May 20, 1998
Among
BOSTON CELTICS LIMITED PARTNERSHIP
as Borrower,
THE LENDERS PARTY HERETO,
and
CITIZENS BANK OF MASSACHUSETTS,
as Agent for the Lenders
================================================================================
Credit Agreement
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS...............................1
Section 1.1. DEFINITIONS...............................................1
Section 1.2. ACCOUNTING TERMS.........................................10
ARTICLE 2. THE REVOLVING CREDIT.........................................10
Section 2.1. THE REVOLVING CREDIT.....................................10
Section 2.2. MAKING OF REVOLVING CREDIT ADVANCES......................11
Section 2.3. INTEREST ON REVOLVING CREDIT ADVANCES....................12
Section 2.4. ELECTION OF LIBOR PRICING OPTIONS........................12
Section 2.5. ADDITIONAL PAYMENTS......................................13
Section 2.6. COMPUTATION OF INTEREST, ETC.............................13
Section 2.7. FEES. ..................................................13
Section 2.8. SET-OFF..................................................14
Section 2.9. SHARING OF PAYMENTS......................................14
Section 2.10. REDUCTION OF COMMITMENT BY THE BORROWER..................14
Section 2.11. INCREASED COSTS, ETC.....................................14
Section 2.12 CHANGED CIRCUMSTANCES....................................16
Section 2.13. USE OF PROCEEDS..........................................17
ARTICLE 3. CONDITIONS TO LOANS AND ADVANCES.............................17
Section 3.1. CONDITIONS TO FIRST REVOLVING CREDIT ADVANCE.............17
Section 3.2. CONDITIONS TO ALL REVOLVING CREDIT ADVANCES..............18
ARTICLE 4. PAYMENT AND REPAYMENT........................................19
Section 4.1. MANDATORY PREPAYMENT.....................................19
Section 4.2. VOLUNTARY PREPAYMENTS....................................19
Section 4.3. PAYMENT AND INTEREST CUTOFF..............................19
Section 4.4. PAYMENT OR OTHER ACTIONS ON NON-BUSINESS DAYS............20
Section 4.5. METHOD AND TIMING OF PAYMENTS............................20
Section 4.6. PAYMENTS NOT AT END OF INTEREST PERIOD...................20
Section 4.7. CURRENCY.................................................21
ARTICLE 5. REPRESENTATIONS AND WARRANTIES...............................21
Section 5.1. PARTNERSHIP EXISTENCE, CHARTER DOCUMENTS, ETC............21
Section 5.2. PRINCIPAL PLACE OF BUSINESS; LOCATION OF RECORDS.........21
Section 5.3. QUALIFICATION............................................21
Section 5.4. SUBSIDIARIES.............................................22
Section 5.5. POWER....................................................22
Section 5.6. VALID AND BINDING OBLIGATIONS............................22
Section 5.7. OTHER AGREEMENTS.........................................23
Section 5.8. PAYMENT OF TAXES.........................................23
Section 5.9. FINANCIAL STATEMENTS.....................................23
Credit Agreement
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Page
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Section 5.10. OTHER MATERIALS FURNISHED................................23
Section 5.11. EQUITY INTERESTS.........................................23
Section 5.12. CHANGES IN CONDITION.....................................23
Section 5.13. ASSETS, LICENSES, PATENTS, TRADEMARKS, ETC...............24
Section 5.14. LITIGATION...............................................24
Section 5.15. PENSION PLANS............................................24
Section 5.16. OUTSTANDING INDEBTEDNESS.................................25
Section 5.17. ENVIRONMENTAL MATTERS....................................25
Section 5.18. GOVERNMENTAL REGULATIONS.................................26
Section 5.19. MARGIN STOCK.............................................26
ARTICLE 6. REPORTS AND INFORMATION......................................26
Section 6.1. QUARTERLY FINANCIAL STATEMENTS AND REPORTS...............26
Section 6.2. ANNUAL FINANCIAL STATEMENTS..............................26
Section 6.3. NOTICE OF DEFAULTS.......................................27
Section 6.4. NOTICE OF LITIGATION.....................................27
Section 6.5. COMMUNICATIONS WITH OTHERS...............................27
Section 6.6. REPORTABLE EVENTS........................................27
Section 6.7. REPORTS TO OTHER CREDITORS...............................28
Section 6.8. COMMUNICATIONS WITH INDEPENDENT PUBLIC ACCOUNTANTS.......28
Section 6.9. ENVIRONMENTAL REPORTS....................................28
Section 6.10. CHANGES IN FASB RULES RELATING TO PARTICIPATIONS.........28
Section 6.11. MISCELLANEOUS............................................28
ARTICLE 7. FINANCIAL COVENANTS..........................................29
Section 7.1. DEBT SERVICE COVERAGE....................................29
ARTICLE 8. AFFIRMATIVE COVENANTS........................................29
Section 8.1. EXISTENCE AND BUSINESS...................................29
Section 8.2. TAXES AND OTHER OBLIGATIONS..............................30
Section 8.3. MAINTENANCE OF PROPERTIES AND LEASES.....................30
Section 8.4. INSURANCE................................................30
Section 8.5. RECORDS, ACCOUNTS AND PLACES OF BUSINESS.................30
Section 8.6. INSPECTION...............................................30
Section 8.7. MAINTENANCE OF ACCOUNTS..................................31
ARTICLE 9. NEGATIVE COVENANTS...........................................31
Section 9.1. RESTRICTIONS ON INDEBTEDNESS.............................31
Section 9.2. RESTRICTION ON LIENS.....................................32
Section 9.3. INVESTMENTS..............................................33
Section 9.4. DISPOSITIONS OF ASSETS...................................33
Section 9.5. ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS..................................................33
Section 9.6. MERGERS, ETC.............................................34
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Page
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Section 9.7. ERISA....................................................34
Section 9.8. DISTRIBUTIONS............................................34
Section 9.9. SALE AND LEASEBACK.......................................34
Section 9.10. TRANSACTIONS WITH AFFILIATES.............................34
ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES...............................34
Section 10.1. EVENTS OF DEFAULT........................................34
Section 10.2. REMEDIES.................................................36
Section 10.3. DISTRIBUTION OF PROCEEDS.................................37
ARTICLE 11. CONSENTS; AMENDMENTS; WAIVERS; REMEDIES......................37
Section 11.1. ACTIONS BY LENDERS.......................................37
Section 11.2. ACTIONS BY BORROWER......................................38
ARTICLE 12. SUCCESSORS AND ASSIGNS.......................................39
Section 12.1. GENERAL..................................................39
Section 12.2. ASSIGNMENTS..............................................39
Section 12.3. PARTICIPATIONS...........................................40
ARTICLE 13. THE AGENT....................................................41
Section 13.1. AUTHORIZATION AND ACTION.................................41
Section 13.2. AGENT'S RELIANCE, ETC....................................41
Section 13.3. AGENT AS A LENDER........................................42
Section 13.4. LENDER CREDIT DECISION...................................42
Section 13.5. INDEMNIFICATION OF AGENT.................................42
Section 13.6. SUCCESSOR AGENT..........................................43
Section 13.7. AMENDMENT OF ARTICLE 13..................................43
ARTICLE 14. MISCELLANEOUS................................................43
Section 14.1. NOTICES..................................................43
Section 14.2. MERGER...................................................44
Section 14.3. GOVERNING LAW; CONSENT TO JURISDICTION...................44
Section 14.4. COUNTERPARTS.............................................44
Section 14.5. EXPENSES AND INDEMNIFICATION.............................45
Section 14.6. CONFIDENTIALITY..........................................46
Section 14.8. TERMINATION..............................................47
Credit Agreement
(iii)
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LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Notice of Revolving Credit Borrowing
Exhibit C Form of Compliance Certificate
Exhibit D Form of Pricing Notice
Exhibit E Form of CCC Pledge Agreement
Exhibit F Form of Credit Support Agreement
Exhibit G Form of Opinion of Borrower's Counsel
Exhibit H Form of Assignment and Acceptance Agreement
Schedule 1 Schedule of Commitment Percentages
Schedule 2 Pricing Schedule
Schedule 5.4 Schedule of Subsidiaries
Schedule 5.9 Schedule of Financial Statements
Schedule 5.11 Schedule of Partnership Interests
Schedule 5.13 Schedule of Licenses, Patents, Copyrights
and Trademarks
Schedule 5.15 Schedule of Pension Plans
Schedule 5.16 Schedule of Indebtedness, Liens, Charges
and Encumbrances
Schedule 5.17 Environmental Matters
Schedule 8.4 Schedule of Insurance
Credit Agreement
(iv)
<PAGE> 6
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of May 20, 1998 by and among
BOSTON CELTICS LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Borrower"), the lenders from time to time party hereto, and CITIZENS BANK OF
MASSACHUSETTS, a Massachusetts savings bank, as agent for the lenders from time
to time party hereto.
RECITALS
The Borrower desires to establish credit facilities to provide for general
working capital, to facilitate certain planned corporate reorganizations and to
provide liquidity to repay obligations to a former partner of the Borrower. The
Lenders are willing to provide such credit facilities on the terms and
conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. DEFINITIONS. In addition to the terms defined elsewhere in
this Agreement, unless otherwise specifically provided herein, the following
terms shall have the following meanings for all purposes when used in this
Agreement, and in any note, agreement, certificate, report or other document
made or delivered in connection with this Agreement:
"ADJUSTED CASH FLOW" shall mean, for any period, the sum of (a) the
Borrower's unconsolidated "Net Cash Flows from Operating Activities"
calculated in accordance with paragraphs 21 through 24 of Financial
Accounting Standards Board Statement 95 -- Statement of Cash Flows, as from
time to time amended, PLUS (b) Interest Expense (including interest paid on
Subordinated Indebtedness), plus (c) Distributions received by the Borrower
in cash from its Subsidiaries, MINUS (d) Distributions paid by the Borrower
in cash, MINUS (e) Capital Expenditures made by the Borrower, MINUS (f)
cash taxes paid.
"AFFILIATE" shall mean (a) any partner, director or officer of the
Borrower and (b) any Person that controls, is controlled by or is under
common control with the Borrower. For purposes of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of its management or policies,
whether through the ownership of voting securities, by contract or
otherwise.
"AGENT" shall mean Citizens Bank of Massachusetts, in its capacity as
agent for the Lenders, and its successors in that capacity.
Credit Agreement
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"AGREEMENT" shall mean this Credit Agreement, as amended or
supplemented from time to time. References to Articles, Sections, Exhibits,
Schedules and the like refer to the Articles, Sections, Exhibits, Schedules
and the like of this Agreement unless otherwise indicated, as amended and
supplemented from time to time.
"APPLICABLE LIBOR RATE" shall mean the sum of (a) the LIBOR Rate PLUS
(b) the LIBOR Rate Margin, as each is in effect from time to time.
"ASSIGNMENT AND ACCEPTANCE AGREEMENT" shall have the meaning set forth
in Section 12.2(a) hereof.
"BCCLP" shall mean BCCLP Holding Corporation, a Delaware corporation.
"BASE RATE" shall mean the greater of (a) the rate of interest
announced from time to time by the Agent at its head office located at 28
State Street, Boston, Massachusetts 02109 as its "Base Rate" and (b) the
Federal Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if
necessary, to the next 1/8 of 1%).
"BASE RATE LOAN" shall mean any Revolving Credit Advance bearing
interest at a fluctuating rate determined by reference to the Base Rate.
"BCCLP CREDIT SUPPORT AGREEMENT" shall mean the BCCLP Credit Support
Agreement of even date herewith substantially in the form of Exhibit F from
BCCLP to the Agent.
"BORROWER" -- See Preamble.
"BORROWER REORGANIZATION" shall mean the reorganization of the
Borrower as described in the letter of even date herewith from the Agent
and Lenders to the Borrower.
"BORROWING BASE" shall mean an amount equal to 90% of Eligible Pledged
Collateral.
"BUSINESS DAY" shall mean (a) for all purposes other than as covered
by clause (b) below, any day other than a Saturday, Sunday or legal holiday
on which banks in Boston, Massachusetts and New York, New York are open for
the conduct of a substantial part of their commercial banking business, and
(b) with respect to all notices and determinations in connection with, and
payments of principal and interest on, LIBOR Rate Loans any day that is a
Business Day described in clause (a) and that is also a day for trading by
and between banks in U.S. Dollar deposits in the London interbank
Eurodollar market.
"CCC" shall mean Celtics Capital Corporation, a Delaware corporation.
"CCC PLEDGE AGREEMENT" shall mean the CCC Pledge and Security
Agreement of even date herewith substantially in the form of Exhibit E from
CCC to the Agent. Credit Agreement
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<PAGE> 8
"CCC PLEDGED COLLATERAL" shall mean the Pledged Collateral as defined
in the CCC Pledge Agreement.
"CAPITAL ASSETS" shall mean fixed assets, both tangible (such as land,
buildings, fixtures, machinery and equipment) and intangible (such as
patents, copyrights, trademarks, franchises and goodwill); provided,
however, that Capital Assets shall not include any item customarily charged
directly as an expense or depreciated over a useful life of twelve (12)
months or less in accordance with generally accepted accounting principles.
"CAPITAL EXPENDITURES" shall mean amounts paid or incurred, including
indebtedness incurred, by Borrower in connection with the purchase or lease
by Borrower of Capital Assets that would be required to be capitalized and
shown on the balance sheet of Borrower in accordance with generally
accepted accounting principles.
"CAPITALIZED LEASE" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with generally
accepted accounting principles and Statement of Financial Accounting
Standards No. 13.
"CAPITALIZED LEASE OBLIGATIONS" shall mean the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with generally accepted
accounting principles and Statement of Financial Accounting Standards No.
13.
"CELTICS CREDIT AGREEMENT" shall mean the Credit Agreement dated as of
December 15, 1997 by and between Celtics Limited Partnership, a Delaware
limited partnership and Citizens Bank of Massachusetts, as the same may be
amended, modified, supplemented, replaced, extended or refinanced.
"CHANGE OF CONTROL" shall mean any event, circumstance, action,
omission or other set of facts as a result of which (a) the Borrower shall
cease to own of record and beneficially all of the issued and outstanding
capital stock of BCCLP, except with the prior written consent of the Agent,
which will not be unreasonably withheld, and delivery of such related
instruments, certificates and opinions as the Agent may reasonably request,
(b) BCCLP shall cease to own of record and beneficially all of the issued
and outstanding capital stock of CCC, or (c) Paul E. Gaston and his family,
as determined with reference to Section 544(a)(2) of the Code including
attributions from any partnership, estate, trust or corporation, cease to
own directly or indirectly less than 75% of the equity interests and voting
interests in the general partner of the Borrower.
"CLOSING DATE" shall mean the date on which all of the conditions set
forth in Section 3.1 have been satisfied.
"COHEN NOTES" shall mean the Borrower's two Promissory Notes, each
having a stated maturity of June 30, 2000 and payable to the order of Alan
N. Cohen, or his
Credit Agreement
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successors and assigns, in the original principal amounts of (i) Thirteen
Million Three Hundred Sixty Five Thousand and Eighty-Eight Dollars
($13,365,088.00) and (ii) One Million and Eight Dollars ($1,000,008.00),
respectively.
"COHEN RESERVE" -- See Section 2.1(a)
"COMMITMENT PERCENTAGE" shall mean as to each Lender its percentage
interest in the Maximum Revolving Credit Amount as set forth on SCHEDULE 1
hereto.
"COMPLIANCE CERTIFICATE" shall mean a certificate in the form of
EXHIBIT C hereto and executed by the chief executive officer or chief
financial officer of the Borrower.
"CONSOLIDATED" and "CONSOLIDATING," and "CONSOLIDATED" and
"CONSOLIDATING" when used with reference to any term, mean that term (or
the terms "combined" and "combining", as the case may be, in the case of
partnerships, joint ventures and Affiliates that are not Subsidiaries) as
applied to the accounts of the Borrower (or other specified Person) and all
of its Subsidiaries (or other specified Persons), or such of its
Subsidiaries as may be specified, consolidated (or combined) in accordance
with generally accepted accounting principles and with appropriate
deductions for minority interests in Subsidiaries, as required by generally
accepted accounting principles.
"CONSOLIDATED CURRENT LIABILITIES" shall mean, at any date as of which
the amount thereof shall be determined, all liabilities of the Borrower and
its Subsidiaries which should properly be classified as current in
accordance with generally accepted accounting principles consistently
applied, including, without limitation, all fixed prepayments of, and
sinking fund payments with respect to, Indebtedness and all estimated taxes
of the Borrower and its Subsidiaries required to be made within one year
from the date of determination, including all Indebtedness of the Borrower
hereunder.
"CONSOLIDATED NET INCOME" shall mean the net income (or deficit) from
operations of the Borrower and its Subsidiaries, after taxes, determined in
accordance with generally accepted accounting principles consistently
applied.
"CREDIT PARTICIPANTS" shall have the meaning set forth in Section 12.3
hereof.
"DEFAULT" shall mean an Event of Default or an event or condition
which with the passage of time or giving of notice, or both, would become
such an Event of Default.
"DISTRIBUTION" shall mean as to any Person: (a) the payment of any
dividend on or in respect of any shares of any class of capital stock or
partnership interests of such Person, other than dividends payable solely
in shares of common stock or partnership interests of such Person, (b) the
purchase, redemption, or other acquisition or retirement of any shares of
any class of capital stock or partnership interests of such Person directly
or indirectly, (c) any other distribution on or in respect of any shares of
any class of capital stock or partnership interests of such Person, and (d)
any setting apart or allocating
Credit Agreement
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<PAGE> 10
any sum for the payment of any dividend or distribution, or for the
purchase, redemption or retirement of any shares of capital stock of such
Person.
"ELIGIBLE PLEDGED COLLATERAL" shall mean the sum of (a) the principal
amount of the outstanding Loan Participations (as defined in the CCC Pledge
Agreement) as to which the Agent holds a first perfected security interest
subject to no other liens or encumbrances, (b) amounts on deposit in the
Collection Account (as defined in the CCC Pledge Agreement) which have been
pledged to the Agent and (c) the fair market value of any other investments
pledged to the Agent as approved by the Agent and the Lenders in their
discretion.
"ENVIRONMENTAL LAW" means any judgment, decree, order, law, license,
rule or regulation pertaining to environmental matters, or any federal,
state, county or local statute, regulation, ordinance, order or decree
relating to public health, welfare, the environment, or to the storage,
handling, use or generation of hazardous substances in or at the workplace,
worker health or safety, whether now existing or hereafter enacted.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 10.1
hereof.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean generally
accepted accounting principles as defined by controlling pronouncements of
the Financial Accounting Standards Board, as from time to time supplemented
and amended.
"GUARANTY" or "GUARANTEE" or "GUARANTIES" shall include any
arrangement whereby a Person is or becomes liable in respect of any
Indebtedness or other obligation of another and any other arrangement
whereby credit is extended to another obligor on the basis of any promise
of a guarantor, whether that promise is expressed in terms of an obligation
to pay the Indebtedness of such obligor, or to purchase or lease assets
under circumstances that would enable such obligor to discharge one or more
of its obligations, or to maintain the capital, the working capital,
solvency or general financial condition of such obligor, whether or not
such arrangement is listed in the balance sheet of the guarantor or
referred to in a footnote thereto.
"INDEBTEDNESS" shall mean, as to any Person, all obligations,
contingent and otherwise, which in accordance with generally accepted
accounting principles consistently applied should be classified upon such
Person's balance sheet as liabilities, but in any event including
liabilities secured by any mortgage, pledge, security interest, lien,
charge or other encumbrance existing on property owned or acquired by such
Person whether or not the liability secured thereby shall have been
assumed, letters of credit open for account, obligations under acceptance
facilities, Capitalized Lease Obligations and all obligations on account of
Guaranties, endorsements and any other contingent obligations
Credit Agreement
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<PAGE> 11
in respect of the Indebtedness of others whether or not reflected on such
balance sheet or in a footnote thereto.
"INTEREST EXPENSE" shall mean for any period, the aggregate amount
(determined in accordance with generally accepted accounting principles) of
interest charged to earnings during such period by the Borrower in respect
of all Indebtedness for borrowed money, Capitalized Lease Obligations and
the deferred purchase price of property.
"INTEREST PERIOD" shall mean with respect to each LIBOR Rate Loan, the
period commencing on the date of such LIBOR Rate Loan and ending one, two,
three, six or twelve months thereafter, as the Borrower may request as
provided in Sections 2.1(a) or 2.4 hereof, PROVIDED, THAT:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (c) below) that would otherwise end on a day that is not
a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in the next calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Business Day of a calendar
month;
(c) any Interest Period that would otherwise end after the
Revolving Credit Termination Date shall end on the Revolving Credit
Termination Date; and
(d) notwithstanding clause (c) above, no Interest Period shall
have a duration of less than one month, and if any Interest Period
applicable to any LIBOR Rate Loan would be for a shorter period, such
Interest Period shall not be available hereunder.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
"INVESTMENT" shall mean (a) any stock, evidence of Indebtedness or
other security of another Person, (b) any loan, advance, contribution to
capital, extension of credit (except for current trade and customer
accounts receivable for inventory sold or services rendered in the ordinary
course of business and payable in accordance with customary trade terms) to
another Person, and (c) any purchase of (i) stock or other securities of
another Person or (ii) any business or undertaking of another Person
(whether by purchase of assets or securities), any commitment or option to
make any such purchase if, in the case of an option, the aggregate
consideration paid for such option was in excess of $100, or (d) any other
investment, in all cases whether existing on the date of this Agreement or
thereafter made.
Credit Agreement
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"LENDER AGREEMENTS" shall mean this Agreement, the Revolving Credit
Notes, the CCC Pledge Agreement, the BCCLP Credit Support Agreement, the
Consent Acknowledgment and Agreement of even date herewith by and among the
Agent, CCC and Morgan Guaranty Trust Company of New York and any other
present or future agreement from time to time entered into between the
Borrower or any Subsidiary and the Agent or the Lenders, each as from time
to time amended or supplemented, and all statements, reports and
certificates delivered by the Borrower to the Agent or the Lenders in
connection therewith.
"LENDER OBLIGATIONS" shall mean all present and future obligations and
Indebtedness of the Borrower or any Subsidiary owing to the Agent or the
Lenders under this Agreement or any other Lender Agreement, including,
without limitation, the obligations to pay the Indebtedness from time to
time evidenced by the Revolving Credit Notes, and obligations to pay
interest, commitment fees, balance deficiency fees, charges, expenses and
indemnification from time to time owed under any Lender Agreement.
"LENDERS" shall mean (a) initially, each Lender listed on the
signature pages hereof, (b) any other Person who becomes a Successor Lender
hereunder in accordance with the terms of Section 12.2 hereof, and (c)
their respective successors.
"LIBOR PRICING OPTION" shall mean the option granted to the Borrower
pursuant to Section 2.5 hereof to have interest on all or a portion of the
Loans computed on the basis of the Applicable LIBOR Rate for an applicable
Interest Period.
"LIBOR RATE" shall mean for any Interest Period for any LIBOR Rate
Loan, the quotient of (a) the rate of interest determined by the Agent, at
about 10:00 a.m. (Boston time) on the LIBOR Rate Fixing Day as being the
rate at which deposits in U.S. dollars are offered to it by first-class
banks in the London interbank market for deposit for such Interest Period
in amounts comparable to the aggregate principal amount of LIBOR Rate Loans
to which such Interest Period relates, divided by (b) one (1) minus the
Reserve Requirement (expressed as a decimal) applicable to that Interest
Period. The LIBOR Rate shall be adjusted automatically as of the effective
date of any change in the Reserve Requirement.
"LIBOR RATE FIXING DAY" shall mean, in the case of any LIBOR Rate
Loan, the second Business Day preceding the Business Day on which an
Interest Period begins.
"LIBOR RATE LOAN" shall mean any Loan hereunder upon which interest
will accrue on the basis of a formula including as a component thereof the
LIBOR Rate. The expiration date of any LIBOR Rate Loan shall be the last
day of the Interest Period applicable to such LIBOR Rate Loan.
"LIBOR RATE MARGIN" shall mean a rate per annum equal to 0.70%.
Credit Agreement
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<PAGE> 13
"LOAN" shall mean any Revolving Credit Advance outstanding hereunder
or made to the Borrower by the Lenders pursuant to Article 2 of this
Agreement, and "Loans" means all of such loans, collectively.
"MAJORITY LENDERS" shall mean, at any time, the Lenders having made
not less than 51% of the outstanding principal amount of the Loans
hereunder, or, if no Loans are outstanding, the Lenders having aggregate
Commitment Percentages of not less than 51%.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, properties, assets or condition, financial or otherwise, of the
Borrower or any of its Subsidiaries.
"MAXIMUM REVOLVING CREDIT AMOUNT" shall mean as of any date of
determination, the lesser of (a) (i) $60,000,000 from the Closing Date
through December 31, 2001, (ii) $50,000,000 from January 1, 2002 through
December 31, 2002, and (iii) $40,000,000 from January 1, 2003 through the
Revolving Credit Termination Date LESS, in each case, from and after the
date the Cohen Notes have been paid in full and canceled, the amount equal
to the amount applied to the repayment in full of the Cohen Notes from a
source other than the Revolving Credit Advances; or (b) the amount to which
the Maximum Revolving Credit Amount may have been reduced pursuant to
Section 2.10 hereof; PROVIDED that if the obligation of the Lenders to make
further Revolving Credit Advances is terminated upon the occurrence of an
Event of Default, the Maximum Revolving Credit Amount as of any date of
determination thereafter shall be deemed to be $0.
"1997 FINANCIAL STATEMENTS" shall mean the Consolidated Balance Sheet
of the Borrower and its Subsidiaries as of June 30, 1997 and the related
Consolidated Statements of Income, Shareholders' Equity and Cash Flow for
the year then ended and notes to such financial statements.
"NOTICE OF REVOLVING CREDIT BORROWING" -- See Section 2.2(a)
"PARTICIPATION AGREEMENTS" shall mean agreements by and between the
Borrower and financial institutions, on terms and conditions acceptable to
the Bank, providing for the Borrower's participation in loans made by such
financial institutions.
"PENSION PLAN" shall mean an employee benefit plan or other plan
maintained for the employees of the Borrower or any Subsidiary as described
in Section 4021(a) of ERISA.
"PERSON" shall mean an individual, corporation, partnership, joint
venture, association, estate, joint stock company, trust, organization,
business, or a government or agency or political subdivision thereof.
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<PAGE> 14
"PRICING NOTICE" shall have the meaning set forth in Section 2.4
hereof.
"REPORTABLE EVENT" shall mean an event reportable to the Pension
Benefit Guaranty Corporation under Section 4043 of Title IV of ERISA.
"RESERVE REQUIREMENT" shall mean the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other
reserves) which is imposed under Regulation D on the Lenders against
"Euro-currency Liabilities" as defined in said Regulation D.
"REVOLVING CREDIT ADVANCE" shall mean any loan or advance from any
Lender to the Borrower pursuant to Section 2.1 this Agreement.
"REVOLVING CREDIT NOTES" shall mean the Revolving Credit Notes
substantially in the form of EXHIBIT A hereto executed by the Borrower in
favor of each Lender to evidence the Revolving Credit Advances to be made
by the Lenders from time to time hereunder.
"REVOLVING CREDIT TERMINATION DATE" shall mean June 30, 2003.
"SUBORDINATED INDEBTEDNESS" shall mean Indebtedness of the Borrower
which is subordinated to the Indebtedness of the Borrower hereunder and
under the Revolving Credit Notes and to all other Lender Obligations, on
terms and conditions approved in writing by the Agent.
"SUBSIDIARY" shall mean any Person of which the Borrower or other
specified parent shall now or hereafter at the time own, directly or
indirectly through one or more Subsidiaries or otherwise, sufficient voting
stock (or other beneficial interest) to entitle it to elect at least a
majority of the board of directors or trustees or similar managing body.
"UCC" shall mean the Massachusetts Uniform Commercial Code,
Massachusetts General Laws c. 106, as amended from time to time.
Section 1.2. ACCOUNTING TERMS. All accounting terms used and not defined in
this Agreement shall be construed in accordance with generally accepted
accounting principles consistently applied, and all financial data required to
be delivered hereunder shall be prepared in accordance with such principles.
ARTICLE 2. THE REVOLVING CREDIT
Section 2.1. THE REVOLVING CREDIT.
(a) Subject to the terms and conditions of this Agreement and so long
as there exists no Default, at any time prior to the Revolving Credit
Termination Date, each Lender,
Credit Agreement
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severally and not jointly, shall make such Revolving Credit Advances to the
Borrower as the Borrower may from time to time request, by notice to the Agent
in accordance with Section 2.2, in an aggregate amount (i) as to each Lender,
not to exceed at any time such Lender's Commitment Percentage of the Maximum
Revolving Credit Amount, and (ii) as to all Lenders, not to exceed (A) the
lesser of (I) the Borrowing Base or (II) the Maximum Revolving Credit Amount
LESS (B) at all times prior to the date the Cohen Notes have been paid in full
and canceled, $20,000,000, and from and after the date the Cohen Notes have been
paid in full and canceled, $0 (the amount referred to in this clause (ii)(B) is
the "Cohen Reserve"). The outstanding principal amount of the Revolving Credit
Advances, together with all accrued interest and other fees and charges related
thereto, shall be repaid in full on the Revolving Credit Termination Date. On
the Closing Date the Borrower shall execute and deliver to each Lender a
Revolving Credit Note to evidence the Revolving Credit Advances from time to
time made by such Lender to the Borrower hereunder. Notwithstanding anything to
the contrary, in the event that the Borrower Reorganization is not completed by
December 31, 1998, (i) all Loans outstanding as of that date shall be canceled,
(ii) the outstanding principal amount of the Revolving Credit Advances, together
with all accrued interest and other fees and charges related thereto and all
other Lender Obligations, shall be repaid in full and (iii) the Lenders shall
have no further obligation to make additional Revolving Credit Advances to the
Borrower.
(b) Subject to the foregoing limitations and the provisions of Section
4.2, the Borrower shall have the right to make prepayments reducing the
outstanding balance of Revolving Credit Advances and to request further
Revolving Credit Advances, all in accordance with Section 2.2, without other
restrictions hereunder; provided that the Lenders shall have the absolute right
to refuse to make any Revolving Credit Advances for so long as there exists any
Default or any other condition which would constitute a Default upon the making
of such a Revolving Credit Advance.
Section 2.2. MAKING OF REVOLVING CREDIT ADVANCES.
(a) Each Revolving Credit Advance shall be made on notice given by the
Borrower to the Agent not later than 11:00 a.m. (Boston time) on the date of the
proposed Borrowing (a "Notice of Revolving Credit Borrowing"); PROVIDED, HOWEVER
that if the Borrower elects a LIBOR Rate Pricing Option with respect to any
Revolving Credit Advance in accordance with Section 2.4 hereof, such Notice of
Revolving Credit Borrowing shall be given by the Borrower contemporaneously with
a Pricing Notice in the manner and within the time specified in Section 2.4. The
Agent shall give the Lenders notice of each Notice of Revolving Credit Borrowing
in accordance with the Agent's customary practice. Each such Notice of Revolving
Credit Borrowing shall be by telephone or telecopy, in each case confirmed
immediately in writing by the Borrower in substantially the form of EXHIBIT B
hereto, specifying therein (i) the requested date of such Revolving Credit
Advance, and (ii) the amount of such Revolving Credit Advance (which must be a
minimum of $100,000). The Borrower agrees to indemnify and hold the Lenders
harmless for any action, including the making of any Revolving Credit Advances
hereunder, or loss or expense, taken or incurred by the Agent and the Lenders in
good faith reliance upon such telephone request. At the time of the initial
request for a Revolving Credit Advance made under this Section 2.2, the Borrower
shall have provided the Agent with a
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Compliance Certificate. The Borrower hereby agrees (i) that the Lenders shall be
entitled to rely upon the Compliance Certificate most recently delivered to the
Agent until it is superseded by a more recent Compliance Certificate, and (ii)
that each request for a Revolving Credit Advance, whether by telephone or in
writing or otherwise, shall constitute a confirmation of the representations and
warranties contained in the most recent Compliance Certificate then in the
Agent's possession.
(b) Subject to the terms and conditions of this Agreement, each Lender
shall make available on or before 2:00 p.m. on the date of each proposed
Revolving Credit Advance, to the Agent at the Agent's address and in immediately
available funds, such Lender's Commitment Percentage of such Revolving Credit
Advance. After the Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article 3, the Agent will credit such funds
to the Borrower's account on the date of the proposed Revolving Credit Advance.
(c) Unless the Agent shall have received notice from a Lender prior to
the date of any Revolving Credit Advance that such Lender will not make
available to the Agent such Lender's Commitment Percentage of such Revolving
Credit Advance, the Agent may assume that such Lender has made such amount
available to the Agent on the date of such Revolving Credit Advance in
accordance with and as provided in this Section 2.2 and the Agent may, in
reliance upon such assumption, make available on such date a corresponding
amount to the Borrower. If and to the extent such Lender shall not have so made
its Commitment Percentage of such Revolving Credit Advance available to the
Agent and the Agent shall have made available such corresponding amount to the
Borrower, such Lender agrees to pay to the Agent forthwith on demand, and the
Borrower agrees to repay to the Agent within two Business Days after demand (but
only after demand for payment has first been made to such Lender and such Lender
has failed to make such payment), an amount equal to such corresponding amount
together with interest thereon for each day from the date the Agent shall make
such amount available to the Borrower until the date such amount is paid or
repaid to the Agent, at an interest rate equal to the interest rate applicable
at the time to such Revolving Credit Advances. If such Lender shall pay to the
Agent such corresponding amount, such amount so paid shall constitute such
Lender's Revolving Credit Advance for purposes of this Agreement. If the
Borrower makes a repayment required by the foregoing provisions of this Section
2.2(c) and thereafter the applicable Lender or Lenders make the payments to the
Agent required by this Section 2.2(c), the Agent shall promptly refund the
amount of the Borrower's payment.
(d) The failure of any Lender to make the Revolving Credit Advance to
be made by it on any date shall not relieve any other Lender of its obligation,
if any, hereunder to make its Revolving Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Revolving Credit Advance to be made by such other Lender.
Section 2.3. INTEREST ON REVOLVING CREDIT ADVANCES. Subject to the terms of
Section 2.4 relating to LIBOR Pricing Options, the Borrower shall pay interest
on the unpaid balance of the Revolving Credit Advances which are Base Rate Loans
from time to time
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outstanding at a per annum rate equal to the Base Rate. Interest on the
Revolving Credit Advances which are Base Rate Loans shall be payable quarterly
in arrears on the last day of each March, June, September and December,
commencing June 30, 1998 and continuing until all of the Indebtedness of the
Borrower to the Lenders under the Revolving Credit Notes shall have been paid in
full.
Section 2.4. ELECTION OF LIBOR PRICING OPTIONS.
(a) Subject to all the terms and conditions hereof and so long as
there exists no Default, the Borrower may, by delivering a Pricing Notice to the
Agent received at or before 10:00 a.m. Boston time on the date two Business Days
prior to the commencement of the Interest Period selected in such Pricing
Notice, elect to have all or a portion of the outstanding Revolving Credit
Advances, as the Borrower may specify in such Pricing Notice, accrue and bear
daily interest during the Interest Period so selected at a per annum rate equal
to the Applicable LIBOR Rate for such Interest Period; PROVIDED, HOWEVER, that
any such election made with respect to the Revolving Credit Advances shall be in
an amount not less than $1,000,000 and in increments of $100,000; and PROVIDED
FURTHER that no such election will be made if it would result in there being
more than four (4) LIBOR Pricing Options in the aggregate outstanding at any one
time. Interest on Loans bearing interest at the Applicable LIBOR Rate shall be
paid for the applicable Interest Period on the last day thereof and when such
Loan is due (whether at maturity, by reason of acceleration or otherwise) but at
least semi-annually.
(b) Each Pricing Notice shall be substantially in the form of EXHIBIT
D attached hereto and shall specify: (i) the selection of a LIBOR Pricing
Option; (ii) the effective date and amount of Revolving Credit Advances subject
to such LIBOR Pricing Option, subject to the limitations set forth herein; and
(iii) the duration of the applicable Interest Period. Each Pricing Notice shall
be irrevocable.
(c) The Agent will promptly inform each Lender of a Pricing Notice and
the Interest Period specified by the Borrower therein. Upon determination by the
Agent of the Applicable LIBOR Rate for any Interest Period selected by the
Borrower, the Agent will promptly inform the Borrower and each Lender of such
Applicable LIBOR Rate so determined or, if applicable, the reason why the
Borrower's election will not become effective.
Section 2.5. ADDITIONAL PAYMENTS. During the continuance of any Event of
Default, the Borrower shall, on demand, pay to the Agent for the account of the
Lenders interest on the unpaid principal balance of the Revolving Credit
Advances and, to the extent permitted by law, on any overdue installments of
interest, at a rate per annum equal to the lesser of (i) the stated interest
rates applicable thereto plus 2% per annum, and (ii) the maximum rate of
interest permitted to be charged under applicable law.
Section 2.6. COMPUTATION OF INTEREST, ETC. Interest hereunder and under the
Revolving Credit Advances shall be computed on the basis of a 360-day year for
the number of days actually elapsed. Any increase or decrease in the interest
rate on the Revolving Credit Advances resulting from a change in the Base Rate
shall be effective immediately from the date of such
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change. No interest payment or interest rate charged hereunder shall exceed the
maximum rate authorized from time to time by applicable law. The outstanding
balance of the Revolving Credit Notes as reflected on the Agent's records from
time to time shall be considered correct and binding on the Borrower and the
Lenders (absent manifest error) unless within thirty (30) days after receipt of
any notice by the Agent or any Lender of such outstanding amount, the Borrower
or a Lender notifies the Agent to the contrary.
Section 2.7. FEES. The Borrower shall pay to the Agent, for the accounts of
the Lenders in accordance with their respective Commitment Percentages, a
commitment fee (the "Revolving Commitment Fee") computed at a rate of (a) 0.20%
per annum on the average daily unused amount of the Maximum Revolving Credit
Amount from time to time in effect from the date hereof to and including the
date that the Cohen Notes have been paid in full and (b) thereafter 0.25% per
annum on such average daily unused amount through the Revolving Credit
Termination Date. The Revolving Commitment Fee shall be payable quarterly in
arrears on the last day of each March, June, September and December, commencing
June 30, 1998, for the quarter then ended, and on the termination hereof.
Section 2.8. SET-OFF. To the extent not prohibited by applicable law, the
Borrower hereby authorizes the Agent and each Lender, without notice to the
Borrower, if and to the extent payment is not promptly made when due pursuant to
the Revolving Credit Notes or pursuant to any provision hereof or of any other
Lender Agreement, to charge against any account of the Borrower with the Agent
or such Lender, an amount equal to the accrued interest and principal and other
amounts from time to time then due and payable to the Agent and the Lenders
hereunder and under all other Lender Agreements.
Section 2.9. SHARING OF PAYMENTS. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Loans made by it in excess of its ratable share
(according to the then outstanding principal amount of the Loans) of payments on
account of the Loans obtained by all the Lenders, such Lender shall purchase
from the other Lenders such participations in the Loans held by such other
Lenders as shall cause such purchasing Lender to share such payment ratably
according to the then outstanding principal amount of the Loans with each of
such other Lenders; PROVIDED, HOWEVER, that if all or any portion of such
payment is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery,
with interest at an interest rate per annum equal to the Applicable Base Rate.
The Borrower agrees that any Lender so purchasing a participation in the Loans
from another Lender pursuant to this Section 2.9 may, to the fullest extent
permitted by law, exercise all its rights of payment with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
Section 2.10. REDUCTION OF COMMITMENT BY THE BORROWER. The Borrower at
its option may, at any time and from time to time, irrevocably reduce in part
(in integral multiples of $5,000,000) the unused portion of the Maximum
Revolving Credit Amount on not less than five (5) Business Days' prior written
notice to the Agent. No such reduction, may be reinstated by the Borrower.
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Section 2.11. INCREASED COSTS, ETC.
(a) Anything herein to the contrary notwithstanding, if any changes in
present or future applicable law (which term "applicable law", as used in this
Agreement, includes statutes and rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time heretofore or hereafter made upon or otherwise issued
to any Lender by any central bank or other fiscal, monetary or other authority,
whether or not having the force of law), including without limitation any change
according to a prescribed schedule of increasing requirements, whether or not
known or in effect as of the date hereof, shall (i) subject such Lender to any
tax, levy, impost, duty, charge, fee, deduction or withholding of any nature
with respect to this Agreement or the payment to such Lender of any amounts due
to it hereunder, or (ii) materially change the basis of taxation of payments to
such Lender of the principal of or the interest on the Revolving Credit Advances
or any other amounts payable to such Lender hereunder, or (iii) impose or
increase or render applicable any special or supplemental deposit or reserve or
similar requirements or assessment against assets held by, or deposits in or for
the account of, or any liabilities of, or loans by an office of such Lender in
respect of the transactions contemplated herein, or (iv) impose on such Lender
any other condition or requirement with respect to this Agreement or any
Revolving Credit Advance, and the result of any of the foregoing is (A) to
increase the cost to such Lender of making, funding or maintaining all or any
part of the Revolving Credit Advances or its commitment hereunder, or (B) to
reduce the amount of principal, interest or other amount payable to such Lender
hereunder, or (C) to require such Lender to make any payment or to forego any
interest or other sum payable hereunder, the amount of which payment or foregone
interest or other sum is calculated by reference to the gross amount of any sum
receivable or deemed received by such Lender from the Borrower hereunder, then,
and in each such case not otherwise provided for hereunder, the Borrower will
upon demand made by such Lender promptly following such Lender's receipt of
notice pertaining to such matters accompanied by calculations thereof in
reasonable detail, pay to such Lender such additional amounts as will be
sufficient to compensate such Lender for such additional cost, reduction,
payment or foregone interest or other sum; provided that the foregoing
provisions of this sentence shall not apply in the case of any additional cost,
reduction, payment or foregone interest or other sum resulting from any taxes
charged upon or by reference to the overall net income, profits or gains of any
Lender. In determining the additional amounts payable hereunder, the Lenders may
use any reasonable method of averaging, allocating or attributing such
additional costs, reductions, payments, foregone interest or other sums among
their respective customers.
(b) Anything herein to the contrary notwithstanding, if, after the
date hereof, any Lender shall have determined that any present or future
applicable law, rule, regulation, guideline, directive or request (whether or
not having force of law), including without limitation any change according to a
prescribed schedule of increasing requirements, whether or not known or in
effect as of the date hereof, regarding capital requirements for banks or bank
holding companies generally, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or
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administration thereof, or compliance by such Lender with any of the
foregoing, either imposes a requirement upon such Lender to allocate additional
capital resources or increases such Lender's requirement to allocate capital
resources or such Lender's commitment to make, or to such Lender's maintenance
of, the Revolving Credit Advances hereunder, which has or would have the effect
of reducing the return on such Lender's capital to a level below that which such
Lender could have achieved (taking into consideration such Lender's then
existing policies with respect to capital adequacy and assuming full utilization
of such Lender's capital) but for such applicability, change, interpretation,
administration or compliance, by any amount deemed by such Lender to be
material, such Lender shall promptly after its determination of such occurrence
give notice thereof to the Borrower. The Borrower and such Lender shall
thereafter attempt to negotiate in good faith an adjustment to the compensation
payable hereunder which will adequately compensate such Lender for such
reduction. If the Borrower and such Lender are unable to agree to such
adjustment within thirty (30) days of the day on which the Borrower receives
such notice, then commencing on the date of such notice (but not earlier than
the effective date of any such applicability, change, interpretation,
administration or compliance), the fees payable hereunder shall increase by an
amount which will, in such Lender's reasonable determination, evidenced by
calculations in reasonable detail furnished to the Borrower, compensate such
Lender for such reduction, such Lender's determination of such amount to be
conclusive and binding upon the Borrower, absent manifest error. In determining
such amount, such Lender may use any reasonable methods of averaging, allocating
or attributing such reduction among its customers.
Section 2.12 CHANGED CIRCUMSTANCES. In the event that:
(a) on any date on which the Applicable LIBOR Rate would otherwise be
set the Agent shall have determined in good faith (which determination shall be
final and conclusive) that adequate and fair means do not exist for ascertaining
the LIBOR Rate, as applicable; or
(b) at any time the Agent shall have determined in good faith (which
determination shall be final and conclusive) that
(i) the implementation of LIBOR Pricing Option has been made
impracticable or unlawful by (A) the occurrence of a contingency that
materially and adversely affects the London interbank market, or (B)
compliance by any Lender in good faith with any applicable law or
governmental regulation, guideline or order or interpretation or change
thereof by any governmental authority charged with the interpretation or
administration thereof or with any request or directive of any such
governmental authority (whether or not having the force of law); or
(ii) the LIBOR Rate shall no longer represent the effective cost
to the Lenders for U.S. dollar deposits in the London interbank market, as
applicable for deposits in which they regularly participate;
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then, and in such event, the Agent shall forthwith so notify the Borrower
thereof. Until the Agent notifies the Borrower that the circumstances giving
rise to such notice no longer apply, the obligation of the Lenders and the Agent
to allow election by the Borrower of a LIBOR Pricing Option shall be suspended.
If at the time the Agent so notifies the Borrower, the Borrower has previously
given the Agent a Pricing Notice with respect to a LIBOR Pricing Option, but the
LIBOR Pricing Option requested therein has not yet gone into effect, such
Pricing Notice shall automatically be deemed to be withdrawn and be of no force
or effect. Upon such date as shall be specified in such notice (which shall not
be earlier than the date such notice is given), the LIBOR Pricing Option with
respect to all LIBOR Rate Loans shall be terminated and the Borrower shall pay
all interest due on such LIBOR Rate Loans and any amounts required to be paid
pursuant to Section 4.3.
Section 2.13. USE OF PROCEEDS. The proceeds of all Revolving Credit
Advances shall be used by the Borrower to facilitate payments required in
connection with the Borrower Reorganization and for general working capital
purposes not to exceed $10,000,000; PROVIDED, HOWEVER, that $20,000,000 of the
Revolving Credit Advances shall be reserved and used for the payment in full of
the Cohen Notes on or before their stated maturity on June 30, 2000. The
Borrower will not, directly or indirectly, use any part of such proceeds for the
purpose of purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System or to
extend credit to any Person for the purpose of purchasing or carrying any such
margin stock.
ARTICLE 3. CONDITIONS TO LOANS AND ADVANCES
Section 3.1. CONDITIONS TO FIRST REVOLVING CREDIT ADVANCE. The Lenders'
obligations to make the first Revolving Credit Advance shall be subject to
compliance by the Borrower with their agreements contained in this Agreement,
and to the condition precedent that the Lenders shall have received each of the
following, in form and substance satisfactory to the Agent and its counsel or in
the form attached hereto as an Exhibit, as the case may be:
(a) The Revolving Credit Notes duly executed by the Borrower.
(b) Copies of the resolutions of the general partner of the Borrower
authorizing the execution, delivery and performance of this Agreement, the
Revolving Credit Notes and the other Lender Agreements to which the Borrower is
a party, certified by the Secretary or an Assistant Secretary (or Clerk or
Assistant Clerk) of the Borrower (which certificate shall state that such
resolutions are in full force and effect).
(c) A certificate of the Secretary or an Assistant Secretary (or Clerk
or Assistant Clerk) of the Borrower certifying the name and signatures of the
officers of the Borrower authorized to sign this Agreement, the Revolving Credit
Notes, the other Lender Agreements to which the Borrower is a party and the
other documents to be delivered by the Borrower hereunder.
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(d) Copies of the resolutions of the Board of Directors of CCC and
BCCLP authorizing the execution, delivery and performance of the Lender
Agreements to which CCC or BCCLP is a party, certified by the Secretary or an
Assistant Secretary (or Clerk or Assistant Clerk) of CCC or BCCLP (which
certificate shall state that such resolutions are in full force and effect).
(e) A certificate of the Secretary or an Assistant Secretary (or Clerk
or Assistant Clerk) of CCC and BCCLP certifying the name and signatures of the
officers of CCC and BCCLP authorized to sign the Lender Agreements to which CCC
or BCCLP is a party and the other documents to be delivered by CCC or BCCLP
hereunder.
(f) Certificates of legal existence and corporate good standing for
the Borrower, BCCLP and CCC of recent date issued by the appropriate Delaware
governmental authorities.
(g) Certificate of tax good standing for the Borrower, BCCLP and CCC
of recent date issued by the appropriate Delaware governmental authorities.
(h) The opinion of Choate Hall & Stewart, counsel to the Borrower,
BCCLP and CCC, dated the date of execution of this Agreement, in substantially
the form of EXHIBIT G attached hereto.
(i) A certificate of a duly authorized officer of the Borrower, dated
the date of the first Revolving Credit Advances, to the effect that all
conditions precedent on the part of the Borrower to the execution and delivery
hereof and the making of the first Revolving Credit Advances have been
satisfied.
(j) A Compliance Certificate dated the date of the first Revolving
Credit Advances.
(k) The CCC Pledge Agreement duly executed by CCC and the BCCLP Credit
Support Agreement duly executed by BCCLP.
(l) Evidence of solvency of the Borrower.
(m) Evidence of the Agent's perfection of the security interest in the
CCC Pledged Collateral (as defined in the CCC Pledge Agreement) satisfactory in
all respects to the Agent.
(n) Payment of the Lender's one-time facility fee of $150,000 which
shall be earned in full by the Lender on the Closing Date.
(o) Such other documents, certificates and opinions as the Agent or
the Lenders may reasonably request.
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Section 3.2. CONDITIONS TO ALL REVOLVING CREDIT ADVANCES. The Lenders'
obligations to make any Revolving Credit Advances pursuant to this Agreement
shall be subject to compliance by the Borrower with its agreements contained in
this Agreement and each other Lender Agreement, and to the satisfaction, at or
before the making of each Revolving Credit Advance, of all of the following
conditions precedent:
(a) The representations and warranties herein and those made by or on
behalf of the Borrower in any other Lender Agreement shall be correct as of the
date on which any Revolving Credit Advance is made, with the same effect as if
made at and as of such time (except as to transactions permitted hereunder and
described in a Compliance Certificate previously delivered to the Agent and
except that the references in Article 5 to the 1997 Financial Statements shall
be deemed to refer to the most recent annual audited consolidated financial
statements of the Borrower and its Subsidiaries furnished to the Agent.)
(b) On the date of any Revolving Credit Advances hereunder, there
shall exist no Default.
(c) The making of the requested Revolving Credit Advances shall not be
prohibited by any law or governmental order or regulation applicable to the
Lenders or to the Borrower, and all necessary consents, approvals and
authorizations of any Person for any such Revolving Credit Advances shall have
been obtained.
ARTICLE 4. PAYMENT AND REPAYMENT
Section 4.1. MANDATORY PREPAYMENT. If at any time the aggregate outstanding
principal balance of all Revolving Credit Advances made hereunder exceeds (a)
the lesser of (i) the Borrowing Base or (ii) the Maximum Revolving Credit Amount
less (b) the Cohen Reserve, the Borrower shall immediately repay to the Agent
for the ratable accounts of the Lenders an amount equal to such excess.
Section 4.2. VOLUNTARY PREPAYMENTS.
(a) The Borrower may make prepayments to the Agent for the ratable
accounts of the Lenders of any outstanding principal amount of the Revolving
Credit Advances equal to $100,000 or an integral multiple thereof which are Base
Rate Loans in accordance with Section 4.3 at any time prior to 11:00 a.m.
(Boston time) on any Business Day without premium or penalty.
(b) The Borrower may make prepayments to the Agent for the ratable
accounts of the Lenders of any Revolving Credit Advances equal to $1,000,000 or
an integral multiple of $100,000 in excess thereof which are LIBOR Rate Loans in
accordance with Section 4.3 at any time prior to 11:00 a.m. (Boston time) on any
Business Day subject, however, to the premiums and penalties set forth in
Section 4.6.
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Section 4.3. PAYMENT AND INTEREST CUTOFF. Notice of each prepayment
pursuant to Section 4.2 shall be given to the Agent (a) in the case of
prepayment of Base Rate Loans, not later than 11:00 a.m. (Boston time) on the
date of payment, and (b) in the case of prepayment of or LIBOR Rate Loans on any
day other than the last day of the Interest Period applicable thereto, not later
than 11:00 a.m. (Boston time) two (2) Business Days prior to the proposed date
of payment, and, in each case, shall specify the total principal amount of the
Revolving Credit Advances to be paid on such date. Notice of prepayment having
been given in compliance with this Section 4.3, the amount specified to be
prepaid shall become due and payable on the date specified for prepayment and
from and after said date (unless the Borrower shall default in the payment
thereof) interest thereon shall cease to accrue. Unpaid interest on the
principal amount of any Revolving Credit Advances so prepaid accrued to the date
of prepayment shall be due on the date of prepayment.
Section 4.4. PAYMENT OR OTHER ACTIONS ON NON-BUSINESS DAYS. Whenever any
payment to be made hereunder shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest or fees, as the case may be. In the case of any other action
the last day for performance of which shall be a day other than a Business Day,
the date for performance shall be extended to the next succeeding Business Day.
Section 4.5. METHOD AND TIMING OF PAYMENTS.
(a) All payments required to be made pursuant to the provisions of
this Agreement and any other Lender Agreement, and all prepayments pursuant to
Section 4.1, may be charged by the Agent against the Borrower's accounts with
the Agent. The Borrower hereby authorizes the Agent and the Lenders, without
notice to the Borrower, to charge against any account of the Borrower with the
Agent or such Lender an amount equal to the accrued interest, principal and
other amounts from time to time due and payable to the Agent and the Lenders
hereunder and under all other Lender Agreements.
(b) The Borrower shall make each payment to be made by it hereunder
not later than 11:00 a.m. (Boston time) on the day when due in lawful money of
the United States to the Agent at its address set forth in Section 14.2 in
immediately available funds. The Agent will, after its receipt thereof,
distribute like funds relating to the payment of principal, interest or any
other amounts payable hereunder ratably to the Lenders in accordance with their
respective Commitment Percentages. Any payment made by the Borrower to the Agent
under this Agreement or under the Notes in the manner provided in this Agreement
shall be deemed to be a payment to each of the respective Lenders, unless the
provisions of this Agreement expressly provide that any such payment shall be
solely for the account of the Agent or any specific Lender.
Section 4.6. PAYMENTS NOT AT END OF INTEREST PERIOD. If the Borrower for
any reason makes any payment of principal with respect to any LIBOR Rate Loan on
any day other than the last day of the Interest Period applicable to such LIBOR
Rate Loan, including without limitation by reason of acceleration, or fails to
borrow a LIBOR Rate Loan after electing a LIBOR Pricing Option with respect
thereto pursuant to Section 2.1(a) or 2.4, the Borrower shall pay to the
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Agent, for the ratable account of the Lenders, any amounts required to
compensate the Lenders for any additional losses, costs or expenses which they
may reasonably incur as a result of such payment or failure to borrow, including
without limitation, any loss, including lost profits, costs or expenses incurred
by reason of the liquidation, reutilization or reemployment of deposits or other
funds acquired by the Lenders to fund or maintain such Revolving Credit
Advances. Such compensation may include, without limitation, an amount equal to
(a) the amount of interest which would have accrued on the amount so paid or not
borrowed, for the period from the date of such payment or failure to borrow, to
the last day of the then current Interest Period for such Revolving Credit
Advance (or, in the case of a failure to borrow, to the last day of the Interest
Period for the Revolving Credit Advance which would have commenced on the date
of such failure to borrow), at the applicable rate of interest for such
Revolving Credit Advance provided for herein MINUS (b) the amount of interest
(as reasonably determined by the Agent), which would accrue and become payable
to the Lenders during such period on the principal repaid or not borrowed if the
Lenders, following such repayment or failure to borrow, were to reinvest such
principal in U.S. Treasury securities selected by the Agent in an amount equal
(as nearly as may be) to the principal so repaid or not borrowed and having a
term equal (as near as may be) to such period. The Borrower shall pay such
amount upon presentation by the Agent of a statement setting forth the amount
and the Agent's calculation thereof pursuant hereto, which statement shall be
deemed true and correct absent manifest error.
Section 4.7. CURRENCY. All payments and prepayments provided for under this
Agreement shall be made in lawful currency of the United States of America in
immediately available funds.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this Agreement
and to induce the Lenders to make the Revolving Credit Advances as contemplated
hereby, the Borrower hereby makes the following representations and warranties:
Section 5.1. PARTNERSHIP EXISTENCE, CHARTER DOCUMENTS, ETC. The Borrower is
a limited partnership validly formed, legally existing and in good standing
under the laws of Delaware and has partnership power to own its properties and
conduct its business as now conducted and as proposed to be conducted by it.
Certified copies of the Partnership Agreement of the Borrower have been
delivered to the Lenders and are true, accurate and complete as of the date
hereof.
Section 5.2. PRINCIPAL PLACE OF BUSINESS; LOCATION OF RECORDS. Borrower's
principal place of business is located at 151 Merrimac Street, Boston,
Massachusetts 02114, and Borrower has not had any other principal place of
business during the last six months. All of the books and records or true and
complete copies thereof relating to the accounts and contracts of Borrower are
and will be kept at such location.
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Section 5.3. QUALIFICATION. Borrower is duly qualified, licensed and
authorized to do business and is in good standing as a foreign limited
partnership corporation in each jurisdiction where its failure to be so
qualified would have a Material Adverse Effect.
Section 5.4. SUBSIDIARIES. The Borrower has the Subsidiaries listed in
SCHEDULE 5.4. All of the issued and outstanding capital stock of each Subsidiary
listed on SCHEDULE 5.4 is owned of record and beneficially as described therein.
Section 5.5. POWER. The execution, delivery and performance of this
Agreement, the Revolving Credit Notes and all other Lender Agreements and other
documents delivered or to be delivered by the Borrower to the Agent or the
Lenders, and the incurrence of Indebtedness to the Lenders hereunder or
thereunder, now or hereafter owing:
(a) are within the corporate or partnership powers of the Borrower,
having been duly authorized by the Board of Directors of its general partner or
other similar governing body, and, if required by law, by their charter
documents or by their By-Laws, by their partners or stockholders;
(b) do not require any approval or consent of, or filing with, any
governmental agency or other Person (or such approvals and consents have been
obtained and delivered to the Lenders) and are not in contravention of law or
the terms of the Partnership Agreement of the Borrower or any amendment thereof;
(c) do not and will not
(i) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which any of the Borrower is a party or by which the Borrower
or any of its properties is bound or affected,
(ii) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature on any property now owned or hereafter acquired
by the Borrower, except as provided in the Lender Agreements, or
(iii) result in a violation of or default under any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award having applicability to the Borrower or any Subsidiary, or to any of
their respective properties.
Section 5.6. VALID AND BINDING OBLIGATIONS. This Agreement, the Revolving
Credit Notes, and all the other Lender Agreements executed in connection
herewith and therewith constitute, or will constitute when delivered, the valid
and binding obligations of the Borrower, enforceable in accordance with their
respective terms, except as the enforceability thereof may be subject to
bankruptcy, insolvency, moratorium and other laws affecting the rights and
remedies of creditors and secured parties and to the exercise of judicial
discretion in accordance with general equitable principles.
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Section 5.7. OTHER AGREEMENTS. Borrower is not a party to any indenture,
loan or credit agreement, or any lease or other agreement or instrument, or
subject to any partnership restriction, which is likely to have a Material
Adverse Effect, or which restricts the ability of Borrower to carry out any of
the provisions of this Agreement, the Revolving Credit Notes or any of the
Lender Agreements executed in connection herewith and therewith. The Lenders
acknowledge that Borrower is a party to the Celtics Credit Agreement and the
Cohen Notes.
Section 5.8. PAYMENT OF TAXES. The Borrower has filed all tax returns which
are required to be filed by it and has paid, or made adequate provision for the
payment of, all taxes which have or may become due pursuant to said returns or
to assessments received. The Borrower is and always has been a partnership for
federal and state income tax purposes. The Borrower knows of no material
additional assessments since such date for which adequate reserves appearing in
the balance sheet contained in the 1997 Financial Statements have not been
established. The Borrower has made adequate provision for all current taxes, and
to the best knowledge of the Borrower there will not be any additional
assessments for any fiscal periods prior to and including that which ended on
the date of said balance sheet in excess of the amounts reserved therefor.
Section 5.9. FINANCIAL STATEMENTS. All balance sheets, statements and other
financial information furnished to the Lenders in connection with this Agreement
and the transactions contemplated hereby (each of which is listed on SCHEDULE
5.9), including, without limitation, the 1997 Financial Statements, have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except for normal year-end
adjustments and for the absence of footnotes with interim statements) and
present fairly the consolidated financial condition of the Borrower and all such
information so furnished was true, correct and complete as of the date thereof.
Section 5.10. OTHER MATERIALS FURNISHED. No written information, exhibits,
memoranda or reports furnished to the Lenders by or on behalf of the Borrower in
connection with the negotiation of this Agreement contains any material
misstatement of fact or omits to state a material fact necessary to make the
statements contained therein not misleading.
Section 5.11. EQUITY INTERESTS. There are presently issued by the Borrower
and outstanding the partnership interests indicated on SCHEDULE 5.11. The
Borrower has received the consideration for which such partnership interests
were authorized to be issued and has otherwise complied with all legal
requirements relating to the authorization and issuance of such partnership
interests and all such partnership interests are validly issued, fully paid and
non-assessable. The Borrower has no other equity interests outstanding.
Section 5.12. CHANGES IN CONDITION. Since the date of the balance sheet
contained in the 1997 Financial Statements, there has been no material adverse
change in the business or assets or in the condition, financial or otherwise, of
Borrower, and other than the proposed Borrower Reorganization, Borrower has not
entered into any transaction outside of the ordinary course of business which is
material to Borrower. Borrower has no contingent liabilities of any material
amount which are not referred to in the 1997 Financial Statements.
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Section 5.13. ASSETS, LICENSES, PATENTS, TRADEMARKS, ETC.
(a) The Borrower has good and marketable title to, or valid leasehold
interests in, all of its assets, real and personal, including the assets carried
on its books and reflected in the 1997 Financial Statements, subject to no
liens, charges or encumbrances, except for (i) liens, charges and encumbrances
described in SCHEDULE 5.13 and permitted by Section 9.2 hereof, and (ii) assets
sold, abandoned or otherwise disposed of in the ordinary course of business.
(b) The Borrower owns all material licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications, and
trade names necessary to continue to conduct its business as heretofore
conducted by it, now conducted by it and proposed to be conducted by it, each of
which is listed, together with Patent and Trademark Office application or
registration numbers, where applicable, on SCHEDULE 5.13 hereto. The Borrower
conducts its business without infringement or claim of infringement of any
license, patent, copyright, service mark, trademark, trade name, trade secret or
other intellectual property right of others. To the best knowledge of the
Borrower, there is no infringement or claim of infringement by others of any
material license, patent, copyright, service mark, trademark, trade name, trade
secret or other intellectual property right of the Borrower.
Section 5.14. LITIGATION. There is no litigation, at law or in equity, or
any proceeding before any federal, state, provincial or municipal board or other
governmental or administrative agency pending or, to the knowledge of Borrower,
threatened, or any basis therefor, which involves a material risk of any
judgment or liability which could result in any material adverse change in the
business or assets or in the condition, financial or otherwise, of the Borrower,
and no judgment, decree, or order of any federal, state, provincial or municipal
court, board or other governmental or administrative agency has been issued
against the Borrower which has or may have a Material Adverse Effect.
Section 5.15. PENSION PLANS. No employee benefit plan established or
maintained by the Borrower or any other Person a member of the same "control
group," as the Borrower (a "Pension Affiliate"), within the meaning of Section
302(f)(6)(b) of ERISA, (including any multi-employer plan to which the Borrower
contributes) which is subject to Part 3 of Subtitle B of Title I of the ERISA,
had a material accumulated funding deficiency (as such term is defined in
Section 302 of ERISA) as of the last day of the most recent fiscal year of such
plan ended prior to the date hereof, or would have had an accumulated funding
deficiency (as so defined) on such day if such year were the first year of such
plan to which Part 3 of Subtitle B of Title I of ERISA applied, and no material
liability under Title IV of ERISA has been, or is expected by the Borrower to
be, incurred with respect to any such plan by the Borrower or any Pension
Affiliate. The execution, delivery and performance by the Borrower of this
Agreement and the other Lender Agreements executed on the date hereof will not
involve any prohibited transaction within the meaning of ERISA or Section 4975
of the Internal Revenue Code. The Borrower has no Pension Plan other than those
described on SCHEDULE 5.15.
Section 5.16. OUTSTANDING INDEBTEDNESS. The outstanding amount of
Indebtedness for borrowed money, including Capitalized Lease Obligations and
Guaranties of borrowed money, of
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the Borrower as of the date hereof, is correctly set forth in SCHEDULE 5.16
hereto, and said Schedule correctly describes the credit agreements, guaranties,
leases and other instruments pursuant to which such Indebtedness has been
incurred and all liens, charges and encumbrances securing such Indebtedness.
Said schedule also describes all agreements and other arrangements pursuant to
which the Borrower may borrow any money.
Section 5.17. ENVIRONMENTAL MATTERS. Except as set forth in Schedule 5.17:
(a) Neither the Borrower nor any operator of any of its owned
properties is in violation, or to the knowledge of the Borrower is in alleged
violation, of any Environmental Law, which violation would have a Material
Adverse Effect.
(b) Neither the Borrower nor any operator of any of its owned
properties has received notice from any third party, including without
limitation any federal, state, county, or local governmental authority, (i) that
it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 as
amended ("CERCLA") or any equivalent state law, with respect to any site or
location; (ii) that any hazardous waste, as defined in 42 U.S.C. ss. 6903(5),
any hazardous substances, as defined in 42 U.S.C. ss. 9601(14), any pollutant or
contaminant, as defined in 42 U.S.C. ss. 9601(33), or any toxic substance, oil
or hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which it has generated, transported
or disposed of, has been found at any site at which a federal, state, county, or
local agency or other third party has conducted or has ordered the Borrower or
another third party or parties (E.G. a committee of potentially responsible
parties) to conduct a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that it is or shall be a named party
to any claim, action, cause of action, complaint (contingent or otherwise) or
legal or administrative proceeding arising out of any actual or alleged release
or threatened release of Hazardous Substances. For purposes of this Agreement,
"release" means any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping of Hazardous Substances into the environment.
(c) (i) The Borrower and each operator of any real property owned or
operated by the Borrower is in compliance, in all material respects, with all
provisions of the Environmental Laws relating to the handling, manufacturing,
processing, generation, storage or disposal of any Hazardous Substances; (ii) to
the best knowledge of the Borrower, no portion of property owned, operated or
controlled by the Borrower has been used for the handling, manufacturing,
processing, generation, storage or disposal of Hazardous Substances except in
accordance with applicable Environmental Laws; (iii) to the best knowledge of
the Borrower, there have been no releases or threatened releases of Hazardous
Substances on, upon, into or from any property owned, operated or controlled by
the Borrower, which releases could have a Material Adverse Effect; (iv) to the
best knowledge of the Borrower, there have been no releases of Hazardous
Substances on, upon, from or into any real property in the vicinity of the real
properties owned, operated or controlled by the Borrower which, through soil or
groundwater contamination, may have come to be located on the properties of the
Borrower; (v) to the best
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knowledge of the Borrower, there have been no releases of Hazardous Substances
on, upon, from or into any real property formerly but no longer owned, operated
or controlled by the Borrower.
(d) None of the properties of the Borrower is or shall be subject to
any applicable environmental cleanup responsibility law or environmental
restrictive transfer law or regulation by virtue of the transactions set forth
herein and contemplated hereby.
Section 5.18. GOVERNMENTAL REGULATIONS. Neither Borrower nor any Affiliate
of the Borrower is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Investment Company Act of 1940,
or is a common carrier under the Interstate Commerce Act, or is engaged in a
business or activity subject to any statute or regulation which regulates the
incurring by the Borrower of Indebtedness for borrowed money, including statutes
or regulations relating to common or contract carriers or to the sale of
electricity, gas, steam, water, telephone or telegraph or other public utility
services.
Section 5.19. MARGIN STOCK. Neither the Borrower nor any Subsidiary owns
any "margin stock" within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System, or any regulations, interpretations or rulings
thereunder, nor is the Borrower engaged principally or as one of its important
activities in extending credit which is used for the purpose of purchasing or
carrying margin stock.
ARTICLE 6. REPORTS AND INFORMATION
Section 6.1. QUARTERLY FINANCIAL STATEMENTS AND REPORTS. As soon as
available, and in any event within seventy-five (75) days after the end of each
of the first three quarters of each fiscal year of the Borrower, the Borrower
shall furnish to the Agent and each Lender: (i) consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as of the end of such
quarter and consolidated and consolidating statements of income, shareholders'
equity and cash flow of the Borrower and its Subsidiaries for such quarter and
for the period commencing at the end of the previous fiscal year and ending with
the end of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
all in reasonable detail; and (ii) a Compliance Certificate.
Section 6.2. ANNUAL FINANCIAL STATEMENTS. As soon as available, but in any
event within one-hundred ten (110) days after the end of each fiscal year of the
Borrower, the Borrower shall furnish to the Agent and each Lender: (a)
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year and consolidated and
consolidating statements of income, changes in partners' capital and changes in
cash flows of the Borrower and its Subsidiaries for such fiscal year, in each
case (other than the consolidating statements) reported on by Ernst & Young, or
other independent certified public accountants of recognized national standing
acceptable to the Lenders, which report shall express, without reliance upon
others, a positive opinion regarding the fairness of the presentation of such
financial statements in accordance with generally accepted accounting principles
consistently applied, said report to be without qualification, except in cases
of unresolved litigation and
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accounting changes with which such accountants concur, together with the
statement of such accountants that they have caused the provisions of this
Agreement to be reviewed and that nothing has come to their attention to lead
them to believe that any Default exists hereunder or specifying any Default and
the nature thereof; and (b) a Compliance Certificate.
Section 6.3. NOTICE OF DEFAULTS. As soon as possible, and in any event
within five (5) days after the occurrence of each Default, the Borrower shall
furnish to the Agent and each Lender the statement of its chief executive
officer or chief financial officer setting forth details of such Default and the
action which the Borrower has taken or proposes to take with respect thereto.
Section 6.4. NOTICE OF LITIGATION. Promptly after the commencement thereof,
the Borrower shall furnish to the Agent and each Lender written notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Borrower, which, if adversely determined, would have a Material
Adverse Effect.
Section 6.5. COMMUNICATIONS WITH OTHERS. The Borrower shall furnish to the
Agent and each Lender promptly (and in any event within five (5) days) after the
filing thereof (a) copies of all regular, periodic and special reports and all
registration statements which the Borrower files and (b) any Schedules 13D or
13G which beneficial owners of the Borrower's equity securities file with the
Securities and Exchange Commission or any governmental authority which may be
substituted therefor, or with any national or regional securities exchange.
Section 6.6. REPORTABLE EVENTS. At any time that the Borrower has a Pension
Plan, the Borrower shall furnish to the Agent and each Lender, as soon as
possible, but in any event within thirty (30) days after the Borrower knows or
has reason to know that any Reportable Event with respect to any Pension Plan
has occurred, the statement of its chief executive officer or chief financial
officer setting forth the details of such Reportable Event and the action which
the Borrower has taken or proposes to take with respect thereto, together with a
copy of the notice of such Reportable Event to the Pension Benefit Guaranty
Corporation.
Section 6.7. REPORTS TO OTHER CREDITORS. Promptly after filing the same,
the Borrower shall furnish to the Agent and each Lender copies of any compliance
certificate and other information furnished to any other holder of the
securities (including debt obligations) of the Borrower pursuant to the terms of
any indenture, loan or credit or similar agreement and not otherwise required to
be furnished to the Agent or the Lenders pursuant to any other provision of this
Agreement.
Section 6.8. COMMUNICATIONS WITH INDEPENDENT PUBLIC ACCOUNTANTS. At any
reasonable time and from time to time, the Borrower shall provide the Agent and
the Lenders and any agents or representatives of the Lenders access to the
independent public accountants of the Borrower to discuss the Borrower's
financial condition, including, without limitation any recommendations of such
independent public accountants concerning the management, finances, financial
controls or operations of the Borrower. Promptly after the receipt thereof, (and
in any event within five (5)
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days) the Borrower shall furnish to the Agent and each Lender copies of any
written recommendations concerning the management, finances, financial controls,
or operations of any Borrower received from any Borrower's independent public
accountants.
Section 6.9. ENVIRONMENTAL REPORTS. The Borrower shall furnish to the Agent
and each Lender: (a) not later than seven (7) days after notice thereof, notice
of any enforcement actions, or, to the knowledge of the Borrower, threatened
enforcement actions affecting the Borrower by any Governmental Agency related to
Environmental Laws; (b) copies, promptly after they are received, of all orders,
notices of responsibility, notices of violation, notices of enforcement actions,
and assessments, and other written communications pertaining to any such orders,
notices, claims and assessments received by the Borrower from any Governmental
Agency; (c) not later than seven (7) days after notice thereof, notice of any
civil claims or threatened civil claims affecting the Borrower by any third
party alleging any violation of Environmental Laws or harm to human health or
the environment; (d) copies of all cleanup plans, site assessment reports,
response plans, remedial proposals, or other submissions of the Borrower, other
third party (e.g., committee of potentially responsible parties at a Superfund
site), or any combination of same, submitted to a Governmental Agency in
response to any communication referenced in subsections (a) and (b) herein
simultaneously with their submission to such Governmental Agency; and (e) from
time to time, on request of the Agent, evidence satisfactory to the Agent of the
Borrower's insurance coverage, if any, for any environmental liabilities.
Section 6.10. CHANGES IN FASB RULES RELATING TO PARTICIPATIONS. Annually at
the time of delivery of its audited financial statements under Section 6.1
hereof, the Borrower shall provide the Agent and the Lenders with a letter from
its accountants stating whether there has occurred any change in Financial
Accounting Standards Board Rules, including without limitation Rule 125, which
changes the accounting rules applicable to the accounting treatment of the Loan
Participations (as defined in the CCC Pledge Agreement) by either CCC or by
Morgan Guaranty Trust Company of New York.
Section 6.11. MISCELLANEOUS. The Borrower shall provide the Agent and the
Lenders with such other information as the Agent or the Lenders may from time to
time request respecting the business, properties, prospects, condition or
operations, financial or otherwise, of the Borrower and its Subsidiaries,
including any unconsolidated Subsidiaries.
ARTICLE 7. FINANCIAL COVENANTS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitment hereunder, the
Borrower shall observe the following covenants:
Section 7.1. DEBT SERVICE COVERAGE.
(a) RATIO OF CASH FLOW TO DEBT SERVICE (EXCLUDING SUBORDINATED
INDEBTEDNESS). The Borrower shall not permit for any period of four consecutive
fiscal quarters,
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commencing with the period ending March 31, 1999, the ratio of (a) Adjusted Cash
Flow to (b) the sum of (i) Interest Expense for such period (excluding interest
paid on Subordinated Indebtedness), plus (ii) current maturities of long-term
debt (excluding current maturities and accretions of the Cohen Notes)
outstanding at the end of such period, to be less than 1.25-to-1.0.
(b) RATIO OF CASH FLOW TO DEBT SERVICE (INCLUDING SUBORDINATED
INDEBTEDNESS). The Borrower shall not permit for any period of four consecutive
fiscal quarters, commencing with the period ending March 31, 1999, the ratio of
(a) Adjusted Cash Flow to (b) the sum of (i) Interest Expense for such period
(including interest paid on Subordinated Indebtedness), plus (ii) current
maturities of long-term debt (excluding current maturities and accretions of the
Cohen Notes) outstanding at the end of such period, to be less than 1.00 to
1.00.
ARTICLE 8. AFFIRMATIVE COVENANTS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitment hereunder, the
Borrower covenants that it will comply with the following covenants and
provisions:
Section 8.1. EXISTENCE AND BUSINESS. The Borrower will (a) preserve
and maintain its corporate existence and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is
required, (b) preserve and maintain in full force and effect all material
rights, licenses, patents and franchises, (c) comply in all material respects
with all valid and applicable statutes, rules and regulations necessary for the
conduct of business, and (d) engage only in the businesses which it is
conducting on the date of this Agreement - namely, as a holding company holding
partnership interests and stock of its Subsidiaries.
Section 8.2. TAXES AND OTHER OBLIGATIONS. The Borrower (a) will duly pay
and discharge, or cause to be paid and discharged, before the same shall become
in arrears, all material taxes, assessments and other governmental charges,
imposed upon it and its properties, sales and activities, or upon the income or
profits therefrom, as well as the claims for labor, materials, or supplies which
if unpaid might by law result in a lien or charge upon any of its properties;
provided, however, that the Borrower may contest any such charges or claims in
good faith so long as (i) an adequate reserve therefor has been established and
is maintained if and as required by generally accepted accounting principles and
(ii) no action to foreclose any such lien has been commenced, and (b) will
promptly pay or cause to be paid when due, or in conformance with customary
trade terms (but not later than 60 days from the due date in the case of trade
debt), all lease obligations, trade debt and all other Indebtedness incident to
its operations. The Borrower shall cause all applicable tax returns and all
amounts due thereunder to be filed and paid, as the case may be, in order to
maintain its good standing with the Internal Revenue Service and state, local
and foreign tax authorities.
Section 8.3. MAINTENANCE OF PROPERTIES AND LEASES. The Borrower shall
maintain, keep and preserve all of its properties (tangible and intangible) in
good repair and working order, ordinary wear and tear excepted. The Borrower
shall replace and improve its properties as
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necessary for the conduct of its business. The Borrower shall comply in all
material respects with all leases naming it as lessee.
Section 8.4. INSURANCE. The Borrower (a) will keep its real and personal
property insured by financially sound and reputable insurers against loss or
damage by fire, explosion or hazards, by extended coverage in an amount
sufficient to avoid co-insurance liability, and (b) will maintain with
financially sound and reputable insurers insurance against other hazards and
risks and liability to persons and property to the extent and in a manner
satisfactory to the Lenders, and in any event as customary for companies in
similar businesses similarly situated; PROVIDED, HOWEVER, that on prior notice
to the Agent and the Lenders it may effect workmen's compensation insurance
through an insurance fund operated by such state or jurisdiction and may also be
a self-insurer with respect to workmen's compensation and with respect to group
medical benefits under any medical benefit plan. On request of the Agent from
time to time, the Borrower will render to the Agent and the Lenders a statement
in reasonable detail as to all insurance coverage required by this Section 8.4.
A description of the material elements of insurance coverage of the Borrower as
of the date hereof is set forth on SCHEDULE 8.4.
Section 8.5. RECORDS, ACCOUNTS AND PLACES OF BUSINESS. The Borrower shall
maintain comprehensive and accurate records and accounts in accordance with
generally accepted accounting principles consistently applied. The Borrower
shall maintain adequate and proper reserves. The Borrower shall promptly (and in
any event within five (5) days) notify the Agent of (a) any changes in the
places of business of the Borrower and (b) any additional places of business
which may arise hereafter.
Section 8.6. INSPECTION. At any reasonable time and from time to time, the
Borrower shall permit the Agent and the Lenders and any of the Lenders' agents
or representatives to examine and make copies of and abstracts from the records
and books of account of, and visit the properties of, the Borrower and to
discuss the affairs, finances and accounts of the Borrower with any of its
officers or directors and with their independent accountants.
Section 8.7. MAINTENANCE OF ACCOUNTS. The Borrower shall maintain all of
its depository, operating, concentration and disbursement accounts with the
Agent, except for clearing accounts maintained with financial institutions in
connection with the Participation Agreements.
ARTICLE 9. NEGATIVE COVENANTS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitments to make any
loans or advances to the Borrower hereunder, the Borrower covenants that the
Borrower will not:
Section 9.1. RESTRICTIONS ON INDEBTEDNESS. Create, incur, suffer or permit
to exist, or assume or guarantee, either directly or indirectly, or otherwise
become or remain liable with respect to, any Indebtedness, except the following:
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(a) Indebtedness outstanding at the date of this Agreement as set
forth on SCHEDULE 5.16 but no refinancings thereof.
(b) Indebtedness on account of Consolidated Current Liabilities (other
than for money borrowed) incurred in the normal and ordinary course of business.
(c) Indebtedness in respect of (i) taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the extent
that payment thereof shall not at the time be required to be made in accordance
with the provisions of Section 8.2 hereof, (ii) judgments or awards which have
been in force for less than the applicable appeal period so long as execution is
not levied thereunder or in respect of which the Borrower shall at the time in
good faith be prosecuting an appeal or proceedings for review in a manner
satisfactory to the Lenders and in respect of which a stay of execution shall
have been obtained pending such appeal or review and for which adequate reserves
have been established in accordance with generally accepted accounting
principles, and (iii) endorsements made in connection with the deposit of items
for credit or collection in the ordinary course of business.
(d) Indebtedness in an amount not to exceed $500,000 in respect of
purchase money security interests permitted under Section 9.2(b) hereof.
(e) Indebtedness to the Lenders.
(f) Subordinated Indebtedness; provided, however, that no payments of
principal or interest shall be made on any Subordinated Indebtedness, except in
accordance with the subordination terms and provisions which the Agent has
approved in writing.
Section 9.2. RESTRICTION ON LIENS. Create or incur or suffer to be created
or incurred or to exist any encumbrance, mortgage, pledge, lien, charge or other
security interest of any kind upon any of its property or assets of any
character, whether now owned or hereafter acquired, or transfer any of such
property or assets for the purposes of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors, or acquire or agree or have an option to acquire any
property or assets upon conditional sale or other title retention agreement,
device or arrangement (including Capitalized Leases) or suffer to exist for a
period of more than 30 days after the same shall have been incurred any
Indebtedness against it which if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over the claims of
its general creditors, or sell, assign, pledge or otherwise transfer for
security any of its accounts, contract rights, general intangibles, or chattel
paper (as those terms are defined in the UCC) with or without recourse;
PROVIDED, HOWEVER, that the Borrower may create or incur or suffer to be created
or incurred or to exist:
(a) Existing liens and security interests described in SCHEDULE 5.16
securing presently outstanding Indebtedness permitted by Section 9.1(a).
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(b) Purchase money security interests (which term shall include
mortgages, conditional sale contracts, Capitalized Leases and all other title
retention or deferred purchase devices) to secure the purchase price of property
acquired hereafter by the Borrower, or to secure Indebtedness incurred solely
for the purpose of financing such acquisitions; PROVIDED, HOWEVER, that no such
purchase money security interests shall extend to or cover any property other
than the property the purchase price of which is secured by it, and that the
principal amount of Indebtedness (whether or not assumed) with respect to each
item of property subject to such a security interest shall not exceed the fair
value of such item on the date of its acquisition.
(c) Deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or other
social security; liens in respect of judgments or awards to the extent such
judgments or awards are permitted as Indebtedness by the provisions of Section
9.1(c); and liens for taxes, assessments or governmental charges or levies and
liens to secure claims for labor, material or supplies to the extent that
payment thereof shall not at the time be required to be made in accordance with
Section 8.2.
(d) Encumbrances in the nature of zoning restrictions, easements, and
rights or restrictions of record on the use of real property which do not
materially detract from the value of such property or impair its use in the
business of the owner or lessee.
(e) Liens (other than judgments and awards) created by or resulting
from any litigation or legal proceeding, provided the execution or other
enforcement thereof is effectively stayed and the claims secured thereby are
being actively contested in good faith by appropriate proceedings satisfactory
to the Agent.
(f) Liens arising by operation of law to secure landlords, lessors or
renters under leases or rental agreements made in the ordinary course of
business and confined to the premises or property rented.
(g) Liens in favor of the Agent for the benefit of the Lenders.
Nothing contained in this Section 9.2 shall permit the Borrower to incur any
Indebtedness or take any other action or permit to exist any other condition
which would be in contravention of any other provision of this Agreement.
Section 9.3. INVESTMENTS. Have outstanding or hold or acquire or make or
commit itself to acquire or make any Investment except the following:
(a) Investments having a maturity of less than one year from the date
thereof by the Borrower in: (i) obligations of the Agent or any of the Lenders;
(ii) obligations of the United States of America or any agency or
instrumentality thereof; (iii) repurchase agreements involving securities
described in clauses (i) and (ii) with the Agent or any of the Lenders; and (iv)
commercial paper which is rated not less than prime-one or A-1 or their
equivalents by Moody's Investor Service, Inc. or Standard & Poor's Corporation,
respectively, or their successors.
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(b) Existing Investments of the Borrower, as described on SCHEDULE
5.4.
(c) Investments consisting of normal travel and similar advances to
employees of the Borrower and its Subsidiaries not exceeding $250,000 in the
aggregate at any one time outstanding.
(d) Investments made pursuant to the terms of the Participation
Agreements.
Section 9.4. DISPOSITIONS OF ASSETS. Sell, lease or otherwise dispose of
any assets except for the sale, lease or other disposition of inventory or other
property (not including receivables) in the ordinary course of business.
Section 9.5. ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS. Assume, guarantee, endorse or otherwise be or become directly or
contingently liable (including, without limitation, by way of agreement,
contingent or otherwise, to purchase, provide funds for payment, supply funds to
or otherwise invest in any Person or otherwise assure the creditors of any such
Person against loss) in connection with any Indebtedness of any other Person,
except for Guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
Section 9.6. MERGERS, ETC. Enter into any merger or consolidation with or
acquire all or substantially all of the assets of any Person, or sell, assign,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person.
Section 9.7. ERISA. At any time while the Borrower has a Pension Plan,
permit any accumulated funding deficiency to occur with respect to any Pension
Plan or other employee benefit plans established or maintained by the Borrower
or to which contributions are made by the Borrower (the "Plans"), and which are
subject to the "Pension Reform Act" and the rules and regulations thereunder or
to Section 412 of the Internal Revenue Code, and at all times comply in all
material respects with the provisions of the Act and Code which are applicable
to the Plans. The Borrower will not permit the Pension Benefit Guaranty
Corporation to cause the termination of any Pension Plan under circumstances
which would cause the lien provided for in Section 4068 of the Pension Reform
Act to attach to the assets of the Borrower.
Section 9.8. DISTRIBUTIONS. Make any Distribution or make any other payment
on account of the purchase, acquisition, redemption, or other retirement of any
shares of stock, whether now or hereafter outstanding if such Distribution or
payment would, on a pro forma basis after deducting such Distribution or payment
from Adjusted Cash Flow as of the end of the previous fiscal quarter, result in
a breach of Section 7.1 of this Agreement.
Section 9.9. SALE AND LEASEBACK. Sell or transfer any of its properties
with the intention of taking back a lease of the same property or leasing other
property for substantially the same use as the property being sold or
transferred.
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Section 9.10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except that the Borrower (a) may
pay salaries, fees and bonuses to its directors, officers and employees as are
usual and customary in the Borrower's or its Subsidiaries' business and (b) may
enter into other transactions with Affiliates on terms that are no less
favorable to the Borrower than those which could be obtained at the time from
Persons who are not Affiliates.
ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES
Section 10.1. EVENTS OF DEFAULT. Each of the following events shall be
deemed to be Events of Default hereunder:
(a) The Borrower shall fail to make any payment in respect of (i) the
principal of any of the Lender Obligations as the same shall become due, whether
at the stated payment dates, required prepayment or by acceleration, demand or
otherwise, or (ii) interest or commitment fees on or in respect of any of the
Lender Obligations as the same shall become due, and such failure shall continue
for a period of five (5) days.
(b) The Borrower shall fail to perform or observe any of the terms,
covenants, conditions or provisions of Sections 6.1, 6.2, 6.3, 6.5, 6.8, 7.1,
8.1, 8.5, 8.6 or Article 9 hereof.
(c) The Borrower shall fail to perform or observe any other term,
covenant, condition or provision to be performed or observed by the Borrower
under this Agreement or any other Lender Agreement, and such failure shall not
be rectified or cured to the Agent's satisfaction within thirty (30) days after
the occurrence thereof.
(d) Any representation or warranty of the Borrower herein or in any
other Lender Agreement or any amendment to any thereof shall have been
materially false or misleading at the time made or intended to be effective.
(e) The Borrower shall fail to make any payment of principal of or
interest on Indebtedness for money borrowed by the Borrower or any Guaranty of
money borrowed in either case an outstanding principal amount of not less than
$250,000 when such payment is due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) or shall fail to perform or
observe any provision of any agreement or instrument relating to such
Indebtedness, and such failure shall permit the holder thereof to accelerate
such Indebtedness.
(f) The Borrower or any Subsidiary shall be involved in financial
difficulties as evidenced:
(i) by its commencement of a voluntary case under Title 11 of the
United States Code as from time to time in effect, or by its authorizing,
by appropriate proceedings of its general partner or other governing body,
the commencement of such a voluntary case;
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(ii) by its filing an answer or other pleading admitting or
failing to deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or seeking, consenting
to or acquiescing in the relief therein provided;
(iii) by the entry of an order for relief in any involuntary case
commenced under said Title 11;
(iv) by its seeking relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the
rights of creditors, or by its consenting to or acquiescing in such relief;
(v) by the entry of an order by a court of competent jurisdiction
(1) by finding it to be bankrupt or insolvent, (2) ordering or approving
its liquidation, reorganization or any modification or alteration of the
rights of its creditors, or (3) assuming custody of, or appointing a
receiver or other custodian for all or a substantial part of its property
and such order shall not be vacated or stayed on appeal or otherwise stayed
within 30 days;
(vi) by the filing of a petition against the Borrower or any
Subsidiary under said Title 11 which shall not be vacated within 60 days;
or
(vii) by its making an assignment for the benefit of, or entering
into a composition with, its creditors, or appointing or consenting to the
appointment of a receiver or other custodian for all or a substantial part
of its property.
(g) There shall have occurred a judgment against the Borrower in any
court (i) for an amount in excess of $250,000, and from which no appeal has been
taken or with respect to which all appeal periods have expired, unless such
judgment is, to the Agent's satisfaction, insured against in full, or (ii) which
shall have a Material Adverse Effect.
(h) The occurrence of a Change of Control.
(i) Any "Event of Default" or other default under any other Lender
Agreement shall have occurred.
(j) An "Event of Default" shall have occurred under the Celtics Credit
Agreement or Citizens Bank of Massachusetts shall cease to be the "Lender"
thereunder or the Celtics Credit Agreement is terminated .
(k) The Borrower Reorganization shall not have occurred on or before
December 31, 1998.
Section 10.2. REMEDIES. Upon the occurrence of an Event of Default, in each
and every case, the Agent may, and upon the request of the Majority Lenders,
shall proceed to protect and
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enforce the rights of the Agent and the Lenders by suit in equity, action at law
and/or other appropriate proceeding either for specific performance of any
covenant or condition contained in this Agreement or any other Lender Agreement
or in any instrument delivered to the Agent or the Lenders pursuant hereto or
thereto, or in aid of the exercise of any power granted in this Agreement, any
Lender Agreement or any such instrument, and (unless there shall have occurred
an Event of Default under Section 10.1(f), in which case the unpaid balance of
Lender Obligations shall automatically become due and payable without notice or
demand) by notice in writing to the Borrower declare (a) the obligations of the
Lenders to make Revolving Credit Advances to be terminated, whereupon such
obligations shall be terminated, and (b) all or any part of the unpaid balance
of the Lender Obligations then outstanding to be forthwith due and payable,
whereupon such unpaid balance or part thereof shall become so due and payable
without presentation, protest or further demand or notice of any kind, all of
which are hereby expressly waived, and the Agent may proceed to enforce payment
of such balance or part thereof in such manner as the Agent may elect, and the
Agent and each Lender may offset and apply toward the payment of such balance or
part thereof any Indebtedness of the Agent or any Lender to the Borrower, or to
any obligor of the Lender Obligations, including any Indebtedness represented by
deposits in any general or special account maintained with the Agent or any
Lender or with any other Person controlling, controlled by or under common
control with the Agent or any Lender.
Section 10.3. DISTRIBUTION OF PROCEEDS. Notwithstanding anything to the
contrary contained herein, in the event that following the occurrence or during
the continuance of any Event of Default, the Agent or any Lender receives any
monies on account of the Lender Obligations from the Borrower or otherwise, such
monies shall be distributed for application as follows:
(a) First, to the payment of or the reimbursement of, the Agent for or
in respect of all costs, expenses, disbursements and losses which shall have
been incurred or sustained by the Agent in connection with the collection of
such monies by the Agent, or in connection with the exercise, protection or
enforcement by the Agent of all or any of the rights, remedies, powers and
privileges of the Agent or the Lenders under this Agreement or any other Lender
Agreement;
(b) Second, to the payment of all interest, including interest on
overdue amounts, and late charges, then due and payable with respect to the
Loans, allocated among the Lenders in proportion to their respective Commitment
Percentages;
(c) Third, to the payment of the outstanding principal balance of the
Loans, allocated among the Lenders in proportion to their respective Commitment
Percentages;
(d) Fourth, to any other outstanding Lender Obligations, allocated
among the Lenders in proportion to their respective Commitment Percentages; and
(e) Fifth, the excess, if any, shall be returned to the Borrower or to
such other Persons as are entitled thereto.
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ARTICLE 11. CONSENTS; AMENDMENTS; WAIVERS; REMEDIES
Section 11.1. ACTIONS BY LENDERS. Except as otherwise expressly set forth
in any particular provision of this Agreement, any consent or approval required
or permitted by this Agreement to be given by the Lenders, including without
limitation under Section 11.2, may be given, and any term of this Agreement or
of any other instrument related hereto or mentioned herein may be amended, and
the performance or observance by the Borrower of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) with, but only with, the written consent of the Borrower and
the Majority Lenders; provided, however, that without the written consent of all
Lenders:
(a) no reduction in the interest rates on or any fees relating to the
Revolving Credit Advances shall be made;
(b) no extension or postponement shall be made of the stated time of
payment of the principal amount of, interest on, or fees payable to the Lenders
relating to the Revolving Credit Advances;
(c) no increase in the Maximum Revolving Credit Amount or extension of
the Revolving Credit Termination Date shall be made;
(d) no release of all or substantially all of the collateral security
for, or any guarantor of, the Lender Obligations shall be made;
(e) no change in the definition of the term "Majority Lenders" shall
be made; and
(f) no change in the provisions of this Section 11.1 shall be made.
Section 11.2. ACTIONS BY BORROWER. No delay or omission on the Agent's or
the Lenders' part in exercising their rights and remedies against the Borrower
or any other interested party shall constitute a waiver. A breach by the
Borrower of its obligations under this Agreement may be waived only by a written
waiver executed by the Agent and the Lenders in accordance with Section 11.1.
The Agent's and the Lenders' waiver of the Borrower's breach in one or more
instances shall not constitute or otherwise be an implicit waiver of subsequent
breaches. To the extent permitted by applicable law, the Borrower hereby agrees
to waive, and does hereby absolutely and irrevocably waive (a) all presentments,
demands for performance, notices of protest and notices of dishonor in
connection with any of the Indebtedness evidenced by the Revolving Credit Notes,
(b) any requirement of diligence or promptness on the Agent's or the Lenders'
part in the enforcement of its rights under the provisions of this Agreement or
any Lender Agreement, and (c) any and all notices of every kind and description
which may be required to be given by any statute or rule of law with respect to
its liability (i) under this Agreement or in respect of the Indebtedness
evidenced by the Revolving Credit Notes or any other Lender Obligation or (ii)
under any other Lender Agreement. No course of dealing between the Borrower and
the Agent or the Lenders shall operate as a waiver of any of the
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Agent's or the Lenders' rights under this Agreement or any Lender Agreement or
with respect to any of the Lender Obligations. This Agreement shall be amended
only by a written instrument executed by the Agent and the Lenders in accordance
with Section 11.1 making explicit reference to this Agreement. The Agent's and
the Lenders' rights and remedies under this Agreement and under all subsequent
agreements between the Agent, the Lenders and the Borrower shall be cumulative
and any rights and remedies expressly set forth herein shall be in addition to,
and not in limitation of, any other rights and remedies which may be applicable
to the Agent and the Lenders in law or at equity.
ARTICLE 12. SUCCESSORS AND ASSIGNS
Section 12.1. GENERAL. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors (which
shall include in the case of the Agent or any Lender any entity resulting from a
merger or consolidation) and assigns, except that (a) the Borrower may not
assign its rights or obligations under this Agreement, and (b) each Lender may
assign its rights in this Agreement only as set forth below in this Article 12.
Section 12.2. ASSIGNMENTS.
(a) ASSIGNMENTS. In compliance with applicable laws with respect to
such assignment and with the consent of the Borrower (PROVIDED that if there
shall exist a Default, the Borrower's consent shall not be required for any such
assignment) and the Agent (which consents in all cases shall not be unreasonably
withheld), a Lender may assign to one or more financial institutions (each a
"Successor Lender") a proportionate part of its rights and obligations in
connection with this Agreement, its Revolving Credit Note and the related Lender
Agreements and each such Successor Lender shall assume such rights and
obligations pursuant to an Assignment and Acceptance Agreement ("Assignment and
Acceptance Agreement") duly executed by such Successor Lender and such assigning
Lender and acknowledged and consented to by the Borrower and the Agent,
substantially in the form of EXHIBIT G attached hereto. Any assignment under
this Section (a) shall be in a minimum amount of $5,000,000 of the Maximum
Revolving Credit Amount. In connection with any assignment under this Section
12.2(a) there shall be paid to the Agent by the assigning Lender or the
Successor Lender an administrative processing fee in the amount of $3,000.
(b) ASSIGNMENT PROCEDURES. In the event of an assignment in accordance
with Section 12.2(a), upon execution and delivery of such an assignment at least
five (5) Business Days prior to the proposed assignment date, and payment by
such Successor Lender to the assigning Lender of an amount equal to the purchase
price agreed between such assigning Lender and such Successor Lender, such
Successor Lender shall become party to this Agreement as a signatory hereto and
shall have all the rights and obligations of a Lender under this Agreement and
the other Lender Agreements with an interest therein as set forth in such
assignment, and such assignor making such assignment shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any such
assignment, the assigning Lender, the Successor Lender and the
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Borrower shall make appropriate arrangements so that, if required, a new
Revolving Credit Note is issued to the Successor Lender and a replacement
Revolving Credit Note is issued to the assigning Lender in principal amounts
reflecting their respective revised interests.
(c) REGISTER. The Agent shall maintain a register (the "Register") for
the recordation of (i) the names and addresses of all Successor Lenders that
enter into Assignment and Acceptance Agreements, (ii) the interests of each
Lender, and (iii) the amounts of the Revolving Credit Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Agent and the Lenders may
treat each Person whose name is registered therein for all purposes as a party
to this Agreement. The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) FURTHER ASSURANCES. The Borrower shall sign such documents and
take such other actions from time to time reasonably requested by the Agent or a
Lender to enable any Successor Lender to share in the benefits and rights
created by the Lender Agreements.
(e) ASSIGNMENTS TO FEDERAL RESERVE BANK. Any Lender at any time may
assign all or any portion of its rights under this Agreement and its Revolving
Credit Note to a Federal Reserve Bank. No such assignment shall release the
transferor Lender from its obligations hereunder.
Section 12.3. PARTICIPATIONS. Any Lender may, without the consent of the
Borrower or the Agent, at any time grant or offer to grant to one or more
financial institutions ("Credit Participants") participating interests in such
Lender's rights and obligations in this Agreement, its Revolving Credit Note and
the related Lender Agreements, and each such Credit Participant shall acquire
such participation subject to the terms set forth below.
(a) AMOUNT. Each such participation shall be in a minimum amount of at
least $5,000,000 of the Maximum Revolving Credit Amount.
(b) PROCEDURE. Each Lender granting such participation shall comply
with all applicable laws with respect to such transfer and shall remain
responsible for the performance of its obligations hereunder and under the other
Lender Agreements and shall retain the sole right and responsibility to exercise
its rights and to enforce the obligations of the Borrower hereunder and under
the other Lender Agreements, including the right to consent to any amendment,
modification or waiver of any provision of any Lender Agreement, except for
those matters referred to in Section 11.1 which require the consent of all
Lenders and which may also require the consent of each Credit Participant.
(c) DEALING WITH LENDERS. The Borrower shall continue to deal solely
and directly with the Lenders in connection with their rights and obligations
under this Agreement and the other Lender Agreements.
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(d) RIGHTS OF CREDIT PARTICIPANTS. The Borrower agrees that each
Credit Participant shall, to the extent provided in its participation
instrument, be entitled to the benefits of Sections 2.7, 2.8, 2.9, 2.11, 2.12
and 14.5, and the set off rights in Section 10.2 with respect to its
participating interest; PROVIDED, HOWEVER, that no Credit Participant shall be
entitled to receive any greater payment under such Sections than the Lender
granting such participation would have been entitled to receive with respect to
the interests transferred.
(e) NOTICE. At the time of granting any participation, the Lender
granting such participation shall notify the Agent and the Borrower.
ARTICLE 13. THE AGENT
Section 13.1. AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes the Agent to take such action on its behalf and to exercise such
powers under this Agreement and the other Lender Agreements as are delegated to
the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement and the other Lender Agreements (including, without limitation,
enforcement or collection of the Revolving Credit Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders; PROVIDED, HOWEVER, that the
Agent shall not be required to take any action which exposes the Agent to
liability or which is contrary to this Agreement or the other Lender Agreements
or applicable law. Subject to the foregoing provisions and to the other
provisions of this Article 13, the Agent shall, on behalf of the Lenders: (a)
execute any documents on behalf of the Lenders providing collateral for or
guarantees of the Lender Obligations; (b) hold and apply any collateral for the
Lender Obligations, and the proceeds thereof, at any time received by it, in
accordance with the provisions of this Agreement and the other Lender
Agreements; (c) exercise any and all rights, powers and remedies of the Lenders
under this Agreement or any of the other Lender Agreements, including the giving
of any consent or waiver or the entering into of any amendment, subject to the
provisions of Section 11.1; (d) at the direction of the Lenders, execute,
deliver and file UCC financing statements, mortgages, deeds of trust, lease
assignments and such other agreements in respect of any collateral for the
Lender Obligations, and possess instruments included in the collateral on behalf
of the Lenders; and (e) in the event of acceleration of the Borrower's
Indebtedness hereunder, act at the direction of the Majority Lenders to exercise
the rights of the Lenders hereunder and under the other Lender Agreements.
Section 13.2. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Lenders for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the other Lender Agreements, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Agent: (a) may treat the payee of any Revolving Credit Note as
the holder thereof until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form required under Article 12
hereof; (b) may consult with legal counsel,
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independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representations to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in or in
connection with this Agreement or the other Lender Agreements; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement or the other Lender
Agreements on the part of the Borrower or any other Person or to inspect the
property (including the books and records) of the Borrower or any other Person;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Lender Agreements or any other instrument or document furnished
pursuant hereto or thereto; and (f) shall incur no liability under or in respect
of this Agreement or the other Lender Agreements by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopy or
telegram) believed by the Agent to be genuine and signed or sent by the proper
party or parties.
Section 13.3. AGENT AS A LENDER. With respect to its Revolving Credit
Commitment Percentage of the Revolving Credit Advances hereunder, Citizens Bank
of Massachusetts shall have the same rights and powers under this Agreement and
the other Lender Agreements as any other Lender and may exercise the same as
though it were not the Agent; and the term "Lender" or "Lender(s)" shall, unless
otherwise expressly indicated, include Citizens Bank of Massachusetts in its
individual capacity. Citizens Bank of Massachusetts and its affiliates may lend
money to, and generally engage in any kind of business with, the Borrower, any
of its Affiliates and any Person who may do business with or own securities of
the Borrower or any such Affiliate, all as if Citizens Bank of Massachusetts
were not the Agent and without any duty to account therefor to the Lenders.
Section 13.4. LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements referred to in Section 5.9 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
Section 13.5. INDEMNIFICATION OF AGENT. Each Lender agrees to indemnify the
Agent and its directors, officers, employees and agents (to the extent that the
Agent is not reimbursed by the Borrower), ratably according to each Lender's
Commitment Percentage, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Agent or its directors, officers, employees or
agents in any way relating to or arising out of this Agreement or any other
Lender Agreement or any action taken or omitted by the Agent in such capacity
under this Agreement; PROVIDED that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions,
Credit Agreement
40
<PAGE> 46
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or wilful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Lender Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrower.
Section 13.6. SUCCESSOR AGENT. Except as provided below, the Agent may
resign at any time by giving written notice thereof to the Lenders and the
Borrower. Upon any such resignation, the Lenders shall have the right to appoint
a successor Agent which shall be reasonably acceptable to the Borrower. If no
successor Agent shall have been so appointed by the Lenders (other than the
resigning Agent), and shall have accepted such appointment, within thirty (30)
days after the retiring Agent's giving notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a
commercial bank or financial institution organized under the laws of the United
States of America or of any state thereof and having a combined capital and
surplus of at least $50,000,000 and which shall be reasonably acceptable to the
Borrower. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement and the other Lender Agreements. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article 13 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement and the other Lender Agreements.
Section 13.7. AMENDMENT OF ARTICLE 13. The Borrower hereby agrees that the
foregoing provisions of this Article 13 constitute an agreement among the Agent
and the Lenders (and the Agent and the Lenders acknowledge that except for the
provisions of Section 13.6, the Borrower is not a party to or bound by such
foregoing provisions) and that any and all of the provisions of this Article 13
may be amended at any time by the Lenders without the consent or approval of, or
notice to, the Borrower (other than the requirement of notice to the Borrower of
the resignation of the Agent and the appointment of a successor Agent).
ARTICLE 14. MISCELLANEOUS
Section 14.1. NOTICES. All notices and other communications made or
required to be given pursuant to this Agreement shall be in writing and shall be
mailed by United States mail, postage prepaid, or sent by hand, by telecopy or
by nationally-recognized overnight carrier service, addressed as follows:
(a) If to the Agent, at 28 State Street, Boston, Massachusetts 02109,
Telecopier No. (617) 725-5690, Attention: Ms. Lori B. Leeth, Senior Vice
President, with a copy to: Goodwin, Procter & Hoar LLP, Exchange Place, Boston,
MA 02109, Telecopier No.
Credit Agreement
41
<PAGE> 47
617-523-1231, Attention: Edward Matson Sibble, Jr., or at such other address(es)
or to the attention of such other Person(s) as the Agent shall from time to time
designate in writing to the Borrower and the Lenders.
(b) If to the Borrower, at 151 Merrimac Street, Boston, Massachusetts
02114, Telecopier No. (617) 720-7833, Attention: Mr. Richard Pond, Executive
Vice President and Chief Financial Officer, or at such other address(es) or to
the attention of such other Person(s) as the Borrower shall from time to time
designate in writing to the Agent and the Lenders.
(c) If to any Lender, at the address(es) and to the attention of the
Person(s) specified below such Lender's name on the execution page of this
Agreement (or in the case of a Successor Lender, at the address(es) and to the
attention of the Person(s) specified in the Assignment and Acceptance Agreement
executed by such Successor Lender), or at such other address(es) and to the
attention of such other Person(s) as any Lender shall from time to time
designate in writing to the Agent and the Borrower.
Any notice so addressed and mailed by registered or certified mail shall be
deemed to have been given when mailed. Any notice so addressed and sent by hand,
by telecopy or by overnight carrier service shall be deemed to have been given
when received. A notice from the Agent stating that it has been given on behalf
of the Lenders shall be relied upon by the Borrower as having been given by the
Lenders.
Section 14.2. MERGER. This Agreement and the other Lender Agreements and
documents contemplated hereby constitute the entire agreement of the Borrower
and the Agent and the Lenders and express their entire understanding with
respect to credit advanced or to be advanced by the Lenders to the Borrower.
Section 14.3. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall
be governed by and construed and enforced under the laws of The Commonwealth of
Massachusetts. The Borrower hereby irrevocably submits itself to the
non-exclusive jurisdiction of the courts of The Commonwealth of Massachusetts
and to the non-exclusive jurisdiction of any Federal court of the United States
located in the District of Massachusetts for the purpose of any suit, action or
other proceeding arising out of this Agreement or any other Lender Agreement or
any of the transactions contemplated hereby or thereby.
Section 14.4. COUNTERPARTS. This Agreement and all amendments to this
Agreement may be executed in several counterparts, each of which shall be an
original. The several counterparts shall constitute a single Agreement.
Section 14.5. EXPENSES AND INDEMNIFICATION.
(a) The Borrower agrees to pay, on demand, all of the Agent's
reasonable expenses in preparing, executing, delivering and administering this
Agreement, the Lender Agreements and all related instruments and documents,
including, without limitation, the reasonable fees and out-of-pocket expenses of
the Agent's special counsel, Goodwin, Procter
Credit Agreement
42
<PAGE> 48
& Hoar LLP, and the Agent's and Lenders' expenses in connection with periodic
audits of the Borrower provided that the Borrower shall be obligated to pay for
only one such audit annually unless a Default has occurred. The Borrower also
agrees to pay, on demand, all reasonable out-of-pocket expenses incurred by the
Agent and the Lenders, including, without limitation, reasonable legal and
accounting fees, in connection with the collection of amounts due hereunder and
under all other Lender Agreements upon the occurrence of an Event of Default
hereunder, the revision, protection or enforcement of any of the Agent's or the
Lenders' rights against the Borrower under this Agreement, the Revolving Credit
Notes and all other Lender Agreements and the administration of special problems
that may arise under this Agreement or any other Lender Agreement. The Borrower
also agrees to pay all stamp and other taxes in connection with the execution
and delivery of this Agreement and related instruments and documents.
(b) Without limitation of any other obligation or liability of the
Borrower or right or remedy of the Agent or the Lenders contained herein, the
Borrower hereby covenants and agrees to indemnify and hold the Agent, the
Lenders, and the directors, officers, subsidiaries, shareholders, agents,
affiliates and Persons controlling the Agent and the Lenders, harmless from and
against any and all damages, losses, settlement payments, obligations,
liabilities, claims, including, without limitation, claims for finder's or
broker's fees, actions or causes of action, and reasonable costs and expenses
incurred, suffered, sustained or required to be paid by any such indemnified
party in each case by reason of or resulting from any claim relating to the
transactions contemplated hereby, other than any such claims which are
determined by a final, non-appealable judgment or order of a court of competent
jurisdiction to be the result of the gross negligence or willful misconduct of
such indemnified party. Promptly upon receipt by any indemnified party hereunder
of notice of the commencement of any action against such indemnified party for
which a claim is to be made against the Borrower hereunder, such indemnified
party shall notify the Borrower in writing of the commencement thereof, although
the failure to provide such notice shall not affect the indemnification rights
of any such indemnified party hereunder unless and only to the extent the
Borrower demonstrates to the reasonable satisfaction of such party that such
failure to provide notice prejudiced the Borrower in its defense of such claim.
The Borrower shall have the right, at its option upon notice to the indemnified
parties, to defend any such matter at its own expense and with its own counsel,
except as provided below, which counsel must be reasonably acceptable to the
indemnified parties. The indemnified party shall cooperate with the Borrower in
the defense of such matter. The indemnified party shall have the right to employ
separate counsel and to participate in the defense of such matter at its own
expense. In the event that (a) the employment of separate counsel by an
indemnified party has been authorized in writing by the Borrower, (b) the
Borrower has failed to assume the defense of such matter within fifteen (15)
days of notice thereof from the indemnified party, or (c) the named parties to
any such action (including impleaded parties) include any indemnified party who
has been advised by counsel that there may be one or more legal defenses
available to it or prospective bases for liability against it, which are
different from those available to or against the Borrower, then the Borrower
shall not have the right to assume the defense of such matter with respect to
such indemnified party. The Borrower shall not compromise or settle any such
matter against an indemnified party without the written consent of the
indemnified party, which consent may not be unreasonably withheld or delayed.
Credit Agreement
43
<PAGE> 49
Section 14.6. CONFIDENTIALITY. The Agent and the Lenders agree to use
commercially reasonable efforts to keep in confidence all financial data and
other information relative to the affairs of the Borrower heretofore furnished
or which may hereafter be furnished to them pursuant to the provisions of this
Agreement; PROVIDED, HOWEVER, that this Section 14.6 shall not be applicable to
information otherwise disseminated to the public by the Borrower or any of its
Affiliates; and PROVIDED FURTHER, HOWEVER, that such obligation of the Agent and
the Lenders shall be subject to the Agent's or the Lenders', as the case may be,
(a) obligation to disclose such information pursuant to a request or order under
applicable laws and regulations or pursuant to a subpoena or other legal
process, (b) right to disclose any such information to bank examiners,
affiliates, auditors, accountants and counsel who agree to keep such information
confidential, and (c) right to disclose any such information (i) in connection
with the transactions set forth herein including assignments or the sale of
participation interests pursuant to Article 12, so long as such potential
assignees or participants shall agree in writing to be bound by the terms of
this Section 14.6, or (ii) in connection with any litigation or dispute
involving the Agent or any transfer or other disposition by the Agent or the
Lenders, as the case may be, of any of the Lender Obligations; provided that
information disclosed pursuant to this provision shall be so disclosed subject
to such procedures as are reasonably calculated to maintain the confidentiality
thereof.
Section 14.7. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS AND THE BORROWER
AGREE THAT NONE OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON OR
ARISING OUT OF, THIS AGREEMENT, THE REVOLVING CREDIT NOTES, ANY LENDER
AGREEMENT, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY EACH OF
THE AGENT, THE LENDERS AND THE BORROWER WITH THEIR RESPECTIVE COUNSEL, AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NONE OF THE AGENT, THE LENDERS OR
THE BORROWER HAS
Credit Agreement
44
<PAGE> 50
AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS
PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
Section 14.8. TERMINATION. This Agreement shall continue in full force and
effect, and the obligations and agreements of the Borrower hereunder shall
continue to be fully operative, until all of the Lender Obligations shall have
been paid and satisfied in full. To the extent that the Borrower or any
guarantor of or provider of collateral for Lender Obligations, including without
limitation CCC, makes any payment on the Lender Obligations that is subsequently
invalidated, declared to be fraudulent or preferential or set aside or is
required to be repaid to a trustee, receiver or any other party under any
bankruptcy, insolvency or reorganization act, state or federal law, common law
or equitable cause or to Morgan Guaranty Trust Company of New York pursuant to
the Consent, Acknowledgment and Control Agreement of even date herewith (such
payment being hereinafter referred to as a "Voided Payment"), then to the extent
of such Voided Payment, that portion of the Lender Obligations that had been
previously satisfied by such Voided Payment shall be revived and continue in
full force and effect as if such Voided Payment had never been made.
Credit Agreement
45
<PAGE> 51
IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders have caused
this Credit Agreement to be executed by their duly authorized officers as of the
date set forth above.
BOSTON CELTICS LIMITED
PARTNERSHIP
By CELTICS, INC., Its General Partner
By: /s/ Richard G. Pond
------------------------------------
Name: Richard G. Pond
Title: Executive Vice President and
Chief Financial Officer
CITIZENS BANK OF
MASSACHUSETTS, as Agent
By: /s/ Lori B. Leeth
------------------------------------
Name: Lori B. Leeth
Title: Senior Vice President
THE ROYAL BANK OF SCOTLAND plc
By: /s/ David Dougan
------------------------------------
Name: David Dougan
Title: Vice President
Wall Street Plaza
88 Pine Street
New York, NY 10005
Telecopier No: (212) 480-0791
Attention: David Dougan, Vice President
Credit Agreement
46
<PAGE> 52
SCHEDULE 1
COMMITMENT PERCENTAGES
<TABLE>
<CAPTION>
Commitment Maximum Amount
Lender Percentage of Revolving Loans
------ ---------- ------------------
<S> <C> <C>
The Royal Bank of Scotland plc 100.00% $60,000,000.00
TOTALS 100.00% $60,000,000.00
</TABLE>
Credit Agreement
47
<PAGE> 53
EXHIBIT A
FORM OF REVOLVING CREDIT NOTE
-----------------------------
$_____________ May __, 1998
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, BOSTON CELTICS LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Borrower"), HEREBY PROMISES TO PAY to the
order of ________________________ (the "Lender") the principal sum of
___________________________________ DOLLARS ($____________) (or, if less, the
aggregate unpaid principal amount of all Revolving Credit Advances made by the
Lender to the Borrower pursuant to the Credit Agreement as hereinafter defined),
together with interest on the unpaid principal from time to time outstanding at
the rate or rates and computed and payable at the times as described in the
Credit Agreement. The entire balance of outstanding principal and accrued and
unpaid interest shall be paid in full on the Revolving Credit Termination Date
(as defined in the Credit Agreement).
This note represents indebtedness for one or more Revolving Credit Advances
made by the Lender to the Borrower under the Credit Agreement dated as of May
__, 1998 (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement") by and among the Borrower, the Lenders from time
to time parties thereto, and Citizens Bank of Massachusetts, a Massachusetts
trust company, as Agent for the Lenders (the "Agent"). Capitalized terms used
herein and not otherwise defined shall have the meaning set forth in the Credit
Agreement.
The Borrower shall have the right, at any time, to voluntarily prepay all
or any part of the outstanding principal amount of this note subject to the
provisions of the Credit Agreement.
In addition to the payment of interest as provided above, the Borrower
shall, on demand, pay interest on any overdue installments of principal and, to
the extent permitted by applicable law, on overdue installments of interest at
the rate set forth in the Credit Agreement.
The holder of this note is entitled to all the benefits and rights of a
Lender under the Credit Agreement to which reference is hereby made for a
statement of the terms and conditions under which the entire unpaid balance of
this note, or any portion hereof, shall become immediately due and payable. Any
capitalized term used in this note which is not otherwise expressly defined
herein shall have the meaning ascribed thereto in the Credit Agreement.
The Borrower hereby waives presentment, demand, notice, protest and other
demands and notices in connection with the delivery, acceptance or enforcement
of this note.
No delay or omission on the part of the holder of this note in exercising
any right hereunder shall operate as a waiver of such right or of any other
right under this note, and a
Credit Agreement
48
<PAGE> 54
waiver, delay or omission on any one occasion shall not be construed as a bar to
or waiver of any such right on any future occasion.
The Borrower hereby agrees to pay on demand all reasonable costs and
expenses, including, without limitation, reasonable attorneys' fees and legal
expenses, incurred or paid by the holder of this note in enforcing this note on
default.
THE LENDER AND THE BORROWER AGREE THAT NEITHER OF THEM NOR ANY OF THEIR
ASSIGNEES OR SUCCESSORS SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM OR ANY OTHER ACTION BASED UPON OR ARISING OUT OF, THIS NOTE, THE
CREDIT AGREEMENT, ANY LENDER AGREEMENT, ANY DOCUMENT, INSTRUMENT OR AGREEMENT
EXECUTED IN CONNECTION WITH ANY OF THE FOREGOING, ANY COLLATERAL SECURING ALL OR
ANY PART OF THE LENDER OBLIGATIONS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN
OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF
THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY EACH OF THE LENDER AND THE BORROWER
WITH THEIR RESPECTIVE COUNSEL, AND THESE PROVISIONS SHALL BE SUBJECT TO NO
EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED
TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN
ALL INSTANCES.
This note shall be deemed to be under seal, and all rights and obligations
hereunder shall be governed by the laws of The Commonwealth of Massachusetts
(without giving effect to any conflicts of law provisions contained therein).
BOSTON CELTICS LIMITED
PARTNERSHIP
By CELTICS, INC., Its General Partner
By:
-----------------------------------
Name:
Title:
Credit Agreement
49
<PAGE> 55
EXHIBIT B
FORM OF NOTICE OF REVOLVING CREDIT BORROWING
--------------------------------------------
BOSTON CELTICS LIMITED PARTNERSHIP
__________________, ____
Citizens Bank of Massachusetts, as Agent
28 State Street
Boston, Massachusetts 02109
Attention: Ms. Lori B. Leeth, Senior Vice President
Re: Credit Agreement Dated as of May __, 1998 by and among
Boston Celtics Limited Partnership, the Lenders parties thereto,
and Citizens Bank of Massachusetts, as Agent (the "Credit Agreement")
---------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.1 of the Agreement the undersigned hereby requests
that the Lenders make Revolving Credit Advances to the Borrower in the aggregate
amount of $________ on ____________, 199_. The proceeds of such Revolving Credit
Advances will be used for __________, and after the making of such Revolving
Credit Advances, $__________ of the outstanding Revolving Credit Advances have
been used for working capital purposes.
The representations and warranties contained or referred to in Article 5 of
the Credit Agreement are true and accurate on and as of the effective date of
the requested Revolving Credit Advances as though made at and as of such date
(except as to representations and warranties made as of a certain date, which
shall be true and correct as of such date, except as to transactions permitted
by the Credit Agreement, and except that the references in the Agreement to the
1997 Financial Statements are deemed to refer to the most recent annual
financial statements furnished to the Agent and the Lenders pursuant to Section
6.2 of the Credit Agreement); and no Default has occurred and is continuing or
will result from the requested Revolving Credit Advances.
BOSTON CELTICS LIMITED PARTNERSHIP
By CELTICS, INC., Its General Partner
By:
----------------------------------------
Name:
Title:
Credit Agreement
50
<PAGE> 56
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
------------------------------
BOSTON CELTICS LIMITED PARTNERSHIP
_____________, 199_
Citizens Bank of Massachusetts, as Agent
28 State Street
Boston, Massachusetts 02109
Attention: Ms. Lori B. Leeth, Senior Vice President
Re: Credit Agreement Dated as of May __, 1998 by and among
Boston Celtics Limited Partnership, the Lenders parties thereto,
and Citizens Bank of Massachusetts, as Agent (the "Credit Agreement")
---------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to the provisions of Section 6.1 or 6.2 of the Credit Agreement,
the undersigned hereby certifies on behalf of the Borrower as follows:
(A) Revolving Credit Advances................................ $________
(B) The lesser of (i) the Borrowing Base ($_______) or
(ii) the Maximum Revolving Credit Amount, ($________)
in each case less the Cohen Reserve ($________).......... $________
(C) Amount available for Revolving Credit
Advances under the Credit Agreement
(line B minus line A).................................... $________
(D) (1) The representations and warranties made by or on behalf of the
Borrower in the Credit Agreement and in all other Lender
Agreements are true and correct in all material respects on and
as of the date hereof, with the same effect as if made at and as
of the date hereof (except as to representations and warranties
made as of a certain date, which shall be true and correct only
as of such date, except as to transactions permitted under the
terms of the Credit Agreement, and except that the references in
the Agreement to the 1997 Financial Statements are deemed to
refer to the most recent annual financial statements furnished to
the Agent and the Lenders pursuant to Section 6.2 of the Credit
Agreement).
Credit Agreement
51
<PAGE> 57
(2) since the end of the last fiscal year, no Material Adverse Effect
has occurred;
(3) except as set forth in the certificates attached hereto and
except as heretofore disclosed to the Agent in a previous
Compliance Certificate, there has been no change (i) in the
partnership agreement, charter documents or By-Laws of the
Borrower heretofore certified to the Agent or (ii) in the
incumbency of the officers of the Borrower whose signatures have
heretofore been certified to the Agent;
(4) the financial statements attached hereto as SCHEDULE 1 are in
compliance with the applicable provisions of Section 6.1 or 6.2
of the Credit Agreement, as the case may be;
(5) the undersigned has caused the provisions of the Credit Agreement
to be reviewed and there is no Default thereunder, and no
condition which, with the passage of time or giving of notice or
both, would constitute a Default thereunder, other than as set
forth on SCHEDULE 2 attached hereto.
(E) Attached hereto as SCHEDULE 3 are calculations demonstrating
that, based upon the consolidated financial statements of the
Borrower attached hereto as SCHEDULE 1, the Borrower is in
compliance with all financial restrictions set forth in the
Credit Agreement.
Terms defined in the Credit Agreement and not otherwise expressly defined
herein are used herein with the meanings so defined in the Credit Agreement.
In witness whereof, the undersigned has caused an authorized officer to
execute this Certificate on this _____ day of ____________, ____.
BOSTON CELTICS LIMITED PARTNERSHIP
By CELTICS, INC., Its General Partner
By:
----------------------------------------
Name:
Title:
- --------
1 Must be signed by the chief executive officer or chief financial officer
of the Borrower.
Credit Agreement
52
<PAGE> 58
SCHEDULE 1
TO COMPLIANCE CERTIFICATE
The financial statements attached to this Schedule are submitted in
compliance with the following section of the Credit Agreement (check one):
[ ] Section 6.1
[ ] Section 6.2
Credit Agreement
53
<PAGE> 59
SCHEDULE 2
TO COMPLIANCE CERTIFICATE
DEFAULTS - ACTION BEING TAKEN
Credit Agreement
54
<PAGE> 60
SCHEDULE 3
TO COMPLIANCE CERTIFICATE
For purposes of computing the ratios and limitations comprising the financial
restrictions that follow, terms that are capitalized and not defined herein will
be given the meanings ascribed to such terms in the Credit Agreement.
[*]
- --------
* Detailed calculations of each financial covenant should follow.
Credit Agreement
55
<PAGE> 61
EXHIBIT D
FORM OF LIBOR PRICING NOTICE
----------------------------
BOSTON CELTICS LIMITED PARTNERSHIP
__________________,____
Citizens Bank of Massachusetts, as Agent
28 State Street
Boston, Massachusetts 02109
Attention: Ms. Lori B. Leeth, Senior Vice President
Re: Credit Agreement Dated as of May __, 1998 by and among
Boston Celtics Limited Partnership, the Lenders parties thereto,
and Citizens Bank of Massachusetts, as Agent (the "Credit Agreement")
---------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.4 of the Agreement, the undersigned hereby confirms
its request made on _______________, for a LIBOR Rate Loan in the amount of
$__________ comprising all or a portion of outstanding Revolving Credit
Advances, effective __________.
The Interest Period applicable to said LIBOR Rate Loan will be [one] [two]
[three] [six] or [twelve] months.
Said LIBOR Rate Loan represents a [conversion/continuation] of the [Base]
[LIBOR] Rate Loan in the same amount made on __________.*
BOSTON CELTICS LIMITED PARTNERSHIP
By CELTICS, INC., Its General Partner
By:
----------------------------------------
Name:
Title:
- --------
1 To be inserted in any request for a conversion.
Credit Agreement
56
<PAGE> 62
EXHIBIT E
FORM OF CCC PLEDGE AGREEMENT
----------------------------
Credit Agreement
57
<PAGE> 63
EXHIBIT F
FORM OF BCCLP CREDIT SUPPORT AGREEMENT
--------------------------------------
Credit Agreement
58
<PAGE> 64
EXHIBIT G
FORM OF OPINION OF BORROWER'S COUNSEL
-------------------------------------
Credit Agreement
59
<PAGE> 65
EXHIBIT H
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
-------------------------------------------
Assignment and Acceptance Agreement dated as of _______, ____, by and
between __________ (the "Assignor") and __________ (the "Successor Lender").
WHEREAS, the Assignor is one of the Lenders party to the Credit Agreement
referred to below; and
WHEREAS, the Assignor desires to sell and the Successor Lender desires to
purchase, all or a portion of the outstanding loans, advances of credit and
commitments of Assignor under the Credit Agreement and the other documents,
instruments and agreements related thereto.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties agree as follows:
Reference is made to the Credit Agreement dated as of May __, 1998 (as
amended or supplemented and as from time to time in effect, the "Credit
Agreement"), among Boston Celtics Limited Partnership (the "Borrower"), the
lenders party thereto (the "Lenders"), and Citizens Bank of Massachusetts, as
agent for the Lenders (the "Agent"). Terms defined in the Credit Agreement and
not otherwise defined herein are used herein with the meanings so defined.
1. ASSIGNMENT AND ACCEPTANCE. Pursuant to Section 12.2 of the Agreement, as
of the close of business on __________________ (the "Assignment Date"), the
Assignor hereby assigns to the Successor Lender $________ of its $____________
current interest in the outstanding Revolving Credit Advances and a ____%
interest in its Commitment Percentage.
The foregoing assignment which constitutes a ___% Commitment Percentage
under the Credit Agreement, is made together with the concomitant proportionate
amount of the undersigned's other rights and obligations under the Credit
Agreement and the other Lender Agreements, and the Successor Lender hereby
accepts and assumes such rights and obligations completely. After giving effect
to this assignment, the Assignor and the Successor Lender shall have the
interests in the Revolving Credit Notes and the Commitment Percentages set forth
on SCHEDULE 1 attached hereto, and the Commitment Percentages of all of the
Lenders under the Credit Agreement shall be as set forth on SCHEDULE 2 attached
hereto.
2. REPRESENTATIONS AND WARRANTIES.
(a) Other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned her by free and clear of any
adverse claim, the Assignor makes no representation or warranty and assumes no
responsibility with respect to (i) the execution, delivery, effectiveness,
enforceability, genuineness, validity or adequacy of the Credit Agreement, the
Revolving Credit Notes or any other Lender Agreement, (ii) any recital,
Credit Agreement
60
<PAGE> 66
representation, warranty, document, certificate, report or statement in,
provided for in, received under or in connection with, the Credit Agreement or
any other Lender Agreement, or (iii) the existence, validity, enforceability,
perfection, recordation, priority, adequacy or value, now or hereafter, of any
lien or other direct or indirect security afforded or purported to be afforded
by any of the Lender Agreements or otherwise from time to time.
(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to (i) the performance or observance of any of the
terms or conditions of the Credit Agreement or any other Lender Agreement on the
part of the Borrower, (ii) the business, operations, condition (financial or
otherwise) or prospects of the Borrower or any other Person, or (iii) the
existence of any Default.
(c) The Successor Lender confirms that it has received a copy of the
Credit Agreement and each of the other Lender Agreements, together with copies
of the most recent financial statements delivered pursuant to Sections 6.1 and
6.2 of the Credit Agreement, and such other documents and information as it has
deemed appropriate to make its own credit and legal analysis and decision to
enter into this Assignment and Acceptance Agreement. The Successor Lender
confirms that it has made such analysis and decision independently and without
reliance upon the Agent, the Assignor or any other Lender.
(d) The Successor Lender, independently and without reliance upon the
Agent, the Assignor or any other Lender, and based on such documents and
information as it shall be deem appropriate at the time, will make its own
decisions to take or not take action under or in connection with the Credit
Agreement or any other Lender Agreement.
(e) The Successor Lender irrevocably appoints the Agent to act as
Agent for the Successor Lender under the Credit Agreement and the other Lender
Agreements, all in accordance with Article 13 of the Agreement and the other
provisions of the Credit Agreement and each other Lender Agreement.
(f) The Successor Lender agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement and the other Lender Agreements are required to be performed by it as
a Lender.
(g) Except as to paragraph (a) above, the foregoing assignment is made
without any representation, warranty or recourse of any kind by the Assignor.
3. PARTY TO THE AGREEMENT, ETC. Upon (a) the execution and delivery hereof
by the parties hereto at least 5 Business Days prior to the Assignment Date, and
(b) the payment by the Successor Lender to Assignor of an amount equal to the
purchase price agreed between the Successor Lender and the Assignor, and (c)
payment to the Agent of the fee required to be paid pursuant to Section 12.2(a)
of the Agreement, the Successor Lender shall automatically become party to the
Credit Agreement as a signatory thereto. As of the Assignment Date, the
Successor Lender shall have all the rights and obligations of a Lender under the
Credit Agreement and the other Lender Agreements as and to the extent set forth
on SCHEDULE 1 and SCHEDULE 2 attached
Credit Agreement
63
<PAGE> 67
hereto. Copies of all notices and other information required to be delivered to
the Lenders under the Credit Agreement shall be delivered to the Successor
Lender at the address(es) and to attention of the Person(s) specified below the
Successor Lender's name on the execution page of this Assignment and Acceptance
Agreement. As of the Assignment Date, the Assignor shall be released from its
obligations under the Credit Agreement to a corresponding extent, and no further
consent or action by any party shall be required.
4. MISCELLANEOUS. This Assignment and Acceptance Agreement may be executed
in any number of counterparts, which together shall constitute one instrument,
shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts (without giving effect to the conflict of laws
rules of any jurisdiction) and shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
Credit Agreement
62
<PAGE> 68
IN WITNESS WHEREOF, the Assignor and the Successor Lender have executed
this Assignment and Acceptance Agreement as of the date first above written.
[ASSIGNOR]
By:
-------------------------------------
Name:
Title:
[SUCCESSOR LENDER]
By:
-------------------------------------
Name:
Title:
[Address for Notices]
Telecopier No.:
Attention:
------------------------------
The foregoing is hereby
acknowledged and approved:
BOSTON CELTICS LIMITED PARTNERSHIP*
By CELTICS, INC., Its General Partner
By:
-------------------------------------
Name:
Title:
CITIZENS BANK OF MASSACHUSETTS, as Agent
By:
-------------------------------------
Name:
Title:
- --------
1 Include if Section 12.2 of the Credit Agreement provides for the
Borrower's consent to assignments.
Credit Agreement
63
<PAGE> 69
SCHEDULE 1
SUCCESSOR LENDER'S AND ASSIGNOR'S INTEREST
The Successor Lender's interest under the Credit Agreement on and after the
Assignment Date shall be as follows:
Commitment Percentage ____%
Principal Amount of Revolving Credit Note $______
The Assignor's interest under the Credit Agreement on and after the Assignment
Date shall be as follows:
Commitment Percentage ____%
Principal Amount of Revolving Credit Note $______
Credit Agreement
64
<PAGE> 70
SCHEDULE 2
LENDERS' COMMITMENT PERCENTAGES
After giving effect to the assignment on the Assignment Date, the Lenders'
respective Commitment Percentages under the Credit Agreement shall be as
follows:
<TABLE>
<CAPTION>
Commitment Maximum Amount
Lender Percentage of Revolving Loans
------ ---------- ------------------
<S> <C> <C>
- ------------------ ----.--% $ --------.--
- ------------------ ----.--% $ --------.--
- ------------------ ----.--% $ --------.--
TOTALS 100.00% $ ________.00
</TABLE>
Credit Agreement
65
<PAGE> 1
Item 17(c)
WALCOTT PARTNERS, L.P.
33 East 63rd Street
New York, New York 10021
April 14, 1998
Stephen C. Schram
548 Alda Road
Mamaroneck, New York 10543
Re: Letter Agreement relating to Unit Option
(Non-Assignable) to Purchase Units of Boston Celtics
Limited Partnership in the name of Stephen C. Schram,
dated December 31, 1993 (as amended on January 8,
1998)
Dear Mr. Schram:
This letter agreement (the "Letter Agreement") memorializes the
following agreements between Walcott Partners, L.P. ("Walcott") and you
("Schram") relating to the Unit Option (Non-Assignable) to Purchase Units of
Boston Celtics Limited Partnership ("BCLP") in the name of Stephen C. Schram,
dated December 31, 1993 (as amended by the Agreement and Release between Schram
and BCLP, dated January 8, 1998) (the "Unit Option"), a copy of which is
attached hereto as Exhibit A. Capitalized terms used but not defined in this
Letter Agreement have the meanings given them in the Unit Option.
Schram and Walcott agree as follows:
1. Option Exercise. Not later than May 26, 1998, Schram shall
exercise the Unit Option in full by giving written notice to BCLP
pursuant to the terms of the Unit Option. In such notice, Schram shall
specify (a) that June 1, 1998 (the "Option Exercise Date") is the date
of exercise and (b) that he will purchase, pursuant to the Unit Option,
250,000 BCLP Units at a price of $8.50 per Unit, for a total purchase
price of $2,125,000 (the "Purchase Price"). The 250,000 BCLP Units so
purchased, and any Castle Creek Interests (as defined in the Agreement
and Plan of Reorganization among BCLP, Boston Celtics Limited
Partnership II, Castle Creek Partners, L.P., Celtics Limited
Partnership, Celtics, Inc., BCLP II GP, Inc., Castle Creek GP, Inc.,
Boston Celtics Corporation, and Celtics Capital Corporation, dated as
of April 14, 1998, a copy of which is attached to this Agreement as
Exhibit B (the "Plan")) distributed with respect to these Units in the
Reorganization (as defined in the Plan), are referred to herein
collectively as the "Option Units."
2. Secured Loan. On the Option Exercise Date, (i) Walcott shall
lend to Schram an amount (the "First Loan Amount") equal to the sum of
(a) the Purchase Price and
<PAGE> 2
(b) 37% of the difference between the Purchase Price and the fair
market value (as defined in the Unit Option, measured as of the Option
Exercise Date) of the Option Units in connection with his exercise of
the Unit Option (the "Loan") by transferring to BCLP on Schram's
behalf, upon receipt of the Walcott Note (as defined herein) executed
by Schram, the First Loan Amount in immediately available funds, and
(ii) Schram shall execute a promissory note in favor of Walcott (the
"Walcott Note"), the form of which is attached to this Agreement as
Exhibit C, and grant therein to Walcott a first-priority security
interest in the Option Units and all proceeds therefrom (the "Walcott
Lien"). The Loan will be due and payable on the earlier of (a) the date
on which Schram sells the Option Units (subject to the terms and
provisions of this Agreement) and (b) April 15, 1999. No interest will
be charged by Walcott on the Loan. The Loan will be recourse to Schram.
Walcott and Schram agree that the Walcott Note shall be a "security
agreement" under the provisions of Article 8 of the Delaware Uniform
Commercial Code (Del. Code Ann., Title 6, Subtitle I), and that the
security interest granted thereby shall be a "purchase money security
interest" under the provisions of Article 9 of the Delaware Uniform
Commercial Code. Schram agrees to effect his pledge to Walcott of the
Option Units by directing BCLP's transfer agent to deliver the Option
Units to Walcott at such location, or to such third-party holder, as
Walcott directs, along with duly executed instruments of transfer or
assignment in blank, in form and substance satisfactory to Walcott, in
order further to perfect Walcott's security interest therein. Walcott
and Schram agree to take all reasonable steps necessary to effectuate
such pledge of the Option Units, in compliance with all applicable laws
and regulations.
3. Schram's Covenants. In consideration of the Loan, Schram
agrees to the following covenants for the periods stated:
(a) Schram shall hold the Option Units for a period of
seven months from the Option Exercise Date, provided, that if the Call
(as defined herein) is exercised pursuant to the terms of this
Agreement, Schram shall sell the Option Units in accordance with the
Call.
(b) In connection with the Reorganization (as defined in
the Plan), Schram shall take all necessary actions to (i) vote the
Option Units in favor of the Reorganization, and (ii) elect to receive
a distribution consisting entirely of Castle Creek Units in the
Distribution (as defined in the Plan) with respect to the Option Units.
If Walcott at any time should possess voting authority with respect to
the Option Units, then Walcott shall vote the Option Units in
accordance with the preceding sentence.
4. The Call.
(a) Schram agrees to grant BCLP the right (the "Call") to
purchase all of the Option Units on any day in which Federal Reserve
member banks are open in Wilmington, Delaware ("Business Day"), from
the date of this Letter Agreement through March 31, 1999, for a
purchase price (without set-off, deduction or counterclaim) (the "Call
Price") consisting of:
2
<PAGE> 3
(x) payable on the date of exercise of the Call, cash in
an amount equal to fair market value (as defined in the Unit
Option, measured as of the Option Exercise Date) of the Option
Units, plus
(y) payable on January 15, 2004, cash in an amount equal
to (i) the aggregate amount of interest paid by BCLP from the
date of this Letter Agreement until January 10, 2004 with
respect to $5,000,000 in aggregate principal amount of
Subordinated Debentures (as defined in the Plan) and (ii) the
aggregate amount of distributions paid by BCLP II (as defined
in the Plan) from the date of this Letter Agreement until
January 10, 2004 with respect to 250,000 BCLP II Units (as
defined in the Plan).
(b) Immediately upon exercise of the Call, Schram shall
direct BCLP to wire such portion of the Call Price to Walcott (without
set-off, deduction or counterclaim) that is equal to the amount of the
Walcott Note. Walcott, on receipt of payment in full of all amounts due
under the Walcott Note, shall release the Walcott Lien on the Option
Units and deliver the Option Units to BCLP, along with duly executed
instruments of transfer or assignment in blank, in form and substance
satisfactory to Walcott. Schram shall cause the Option Units to be
delivered to BCLP free and clear of all liens and encumbrances, except
for the Walcott Lien, the release of which is provided for in the
preceding sentence. Payments to Walcott and to Schram will be to the
accounts specified in writing by such persons to BCLP.
(c) In connection with and upon consummation of the
Reorganization, the Call will be transferred from BCLP to Castle Creek
without any action by Schram or Walcott.
(d) If the Call is not exercised on or before March 31,
1999, then on April 15, 1999, (i) Schram shall repay the Loan in full,
(ii) Walcott shall lend Schram an amount (the "New Loan Amount") equal
to the Fair Market Value (as defined in the Unit Option, measured as of
the Option Exercise Date) of the Option Units (the "New Loan") upon
receipt from Schram an executed promissory note in favor of Walcott
(the "New Walcott Note"), the form of which is attached to this
Agreement as Exhibit D, and (iii) Schram shall grant to Walcott a
first-priority security interest in the Option Units and all proceeds
therefrom. The New Loan will otherwise be non-recourse to Schram. The
New Loan will be due and payable on April 15, 2004. No interest will be
charged by Walcott on the New Loan.
5. Adjustments. If after the completion of the Reorganization but
before the expiration of the Call, any split or combination is made in
the BCLP II Units or Castle Creek Interests, then the Call Price will
be adjusted appropriately to reflect each such split or combination.
6. Condition. The obligations of Schram in paragraph 3 of this
Letter Agreement are expressly conditioned upon the consummation and
completion of the Reorganization. If the Reorganization has not been
consummated and completed on
3
<PAGE> 4
or before March 31, 1999, then (i) the Loan shall be extended such that
it shall be due and payable on January 10, 2004, (ii) the First Loan
Amount shall be increased such that the total amount due under the Loan
equals the sum of (a) the Purchase Price and (b) 50% of the difference
between the Purchase Price and the fair market value (as defined in the
Unit Option, measured as of the Option Exercise Date) of the Option
Units (the "Increased Loan Amount"), (iii) Walcott shall lend to Schram
an amount (the "Difference Amount") equal to the difference between the
Increased Loan Amount and the Loan Amount by transferring the
Difference Amount to Schram in immediately available funds and (iv) the
Call shall be exercisable by BCLP on any Business Day prior to January
10, 2004 at a price consisting of (x) payable on the date of exercise
of the Call, cash in an amount equal to fair market value (as defined
in the Unit Option, measured as of the Option Exercise Date) of the
Option Units, plus (y) payable on January 15, 2004, cash in an amount
equal to the aggregate amount of distributions paid by BCLP from the
date of exercise of the Call until January 10, 2004 with respect to
250,000 BCLP Units.
7. Notices. Any notices or communications ("Notices") permitted
or required under this Letter Agreement shall be deemed sufficiently
given if hand-delivered, or by overnight delivery service or facsimile
transmission, or sent postage prepaid by registered or certified mail,
return receipt requested to the addresses of the parties first set
forth above, or to such other address as either party may notify the
other of in writing. Unless a Notice delivered by facsimile
transmission is transmitted on other than a Business Day, in which case
it shall be conclusively deemed to be delivered on the next Business
Day thereafter, all Notices delivered by facsimile transmission shall
be conclusively deemed to be delivered and received on the date on
which such facsimile is transmitted. With respect to notices given by
facsimile, the sending party shall take reasonable precautions to
ensure that such facsimile notice has been received. Notices delivered
by overnight delivery service shall be conclusively deemed to be
delivered and received on the third Business Day after such Notice is
timely deposited with such overnight delivery service. Notices mailed
by registered or certified mail shall be conclusively deemed to be
delivered on the tenth Business Day after they have been mailed.
8. Binding Effect; Assignment. This Letter Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, successors and permitted
assigns, but neither this Letter Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other parties. Except
as to the provisions of Section 4 with respect to Castle Creek, this
Letter Agreement is not intended to confer upon any other person except
the parties hereto, their successors and permitted assigns any rights
or remedies hereunder.
9. Further Assurances. Schram and Walcott agree that at any time
and from time to time, upon written request, they shall execute and
deliver such further documents and do such further acts and things as
may be reasonably requested in order to effectuate the purposes of this
Letter Agreement and the Walcott Note and the transactions contemplated
hereby and thereby. Without limitation of the foregoing, at
4
<PAGE> 5
Walcott's request, Schram shall (i) perform such acts as may be
necessary or advisable in the opinion of Walcott or that Walcott may
request to assure the attachment, perfection and first priority of
Walcott's security interest in the Option Units, to exercise the rights
and remedies of Walcott hereunder or under the Walcott Note or to carry
out the intent of this Agreement, and (ii) execute and deliver at any
time and from time to time all supplemental documentation that Walcott
may request, in form and substance acceptable to Walcott.
10. Counterparts. This Letter Agreement may be executed
simultaneously in one or more counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same
instrument.
11. Headings. The headings contained in this Letter Agreement are
for reference purposes only and shall not affect in any way the meaning
or interpretation of this Letter Agreement.
12. Severability. If any term or provision specified herein is
held by a court or arbitral panel of competent jurisdiction to be in
violation of any applicable local, state or federal ordinance, statute,
law, administrative or judicial decision, or public policy, and if such
court or arbitral panel should declare such term or provision to be
illegal, invalid, unlawful, void, violable, or unenforceable as
written, then such provision shall be given full force and effect to
the fullest possible extent that it is legal, valid and enforceable,
and the remainder of the terms and provisions herein shall be construed
as if such illegal, invalid, unlawful, void, voidable or unenforceable
term or provision was not contained herein, but only to the extent that
giving effect to such provision and the remainder of the terms and
provisions hereof shall be in accordance with the intent of the
parties.
13. Governing Law. THIS LETTER AGREEMENT SHALL BE GOVERNED UNDER
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF.
14. Waiver. The failure of any party at any time or times to
enforce or require performance of any provision hereof shall in no way
operate as a waiver or affect the right of such party at a later time
to enforce the same. No waiver by any party of any condition or the
breach of any term or provision of this Letter Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to
be or construed as a further or continuing waiver of any such condition
or breach, or a waiver of any other condition or of any breach of any
other term or provision of this letter agreement.
15. Specific Performance; Remedies. Each of the parties
acknowledges that it would be irreparably damaged in the event that any
of the provisions of this Letter Agreement within the reasonable
control of Schram or Walcott, as the case may be, are not performed in
accordance with their specific terms or are otherwise breached, and
that monetary damages would not provide an adequate remedy in such
event. Accordingly, it is agreed that each of Schram or Walcott, as the
case may be, shall be
5
<PAGE> 6
entitled to injunctive relief to prevent breaches of the provisions of
this Letter Agreement within the reasonable control of Walcott or
Schram, as the case may be, and on compliance with all its obligations
hereunder, specifically to enforce the terms and provisions hereof in
any action instituted in any court of the United States or any state
thereof having subject matter jurisdiction.
16. Entire Agreement. This Letter Agreement and all the Exhibits
attached hereto, and all other securities and documents referred to
herein, constitute the entire understanding of the parties hereto
concerning the subject matter hereof, and supersedes all previous
agreements and understandings, oral and written, between the parties
with respect to such subject matter. No modification of this Letter
Agreement or waiver of the terms, conditions, warranties,
representations and rights hereunder will be binding on either party
unless signed in writing by such party or its representative.
6
<PAGE> 7
If the foregoing accurately reflects our understandings and agreements,
please so indicate by signing below, whereupon this Letter Agreement shall
constitute a binding agreement between the parties hereto.
WALCOTT PARTNERS, L.P.
By: DRAYCOTT, INC.
Its: General Partner
By: /s/ Paul E. Gaston
-------------------------
Paul E. Gaston
Chief Executive Officer
SO AGREED:
By: /s/ Stephen C. Schram
-------------------------
Stephen C. Schram
7
<PAGE> 1
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 22, 1998
INFORMATION STATEMENT/PROSPECTUS
BOSTON CELTICS LIMITED PARTNERSHIP II
LIMITED PARTNERSHIP UNITS
BOSTON CELTICS LIMITED PARTNERSHIP
6% SUBORDINATED DEBENTURES DUE 2038
CASTLE CREEK PARTNERS, L.P.
LIMITED PARTNERSHIP INTERESTS
This Information Statement/Prospectus (the "Prospectus") is being furnished
to holders of units (the "BCLP Units") representing limited partnership
interests in Boston Celtics Limited Partnership ("BCLP") in connection with a
plan of reorganization (the "Plan") of BCLP, proposed in response to changes in
applicable federal income tax law and in consideration of the differing
investment objectives of BCLP Unit holders. Pursuant to the Plan, existing
public holders of BCLP may, on the terms and conditions set forth in the Plan
and described herein, continue their investment in the business of BCLP in the
form of either publicly traded equity interests in Boston Celtics Limited
Partnership II ("BCLP II"), a newly formed Delaware limited partnership that
will be subject to corporate-level taxation, plus a publicly traded debt
instrument with annual interest payments, or in the form of transfer-restricted
equity interests in Castle Creek Partners, L.P. ("Castle Creek"), a newly formed
Delaware limited partnership that will be a private entity with "pass-through"
taxation. The Plan provides for, among other things, (i) the distribution (the
"Distribution"), at the option of each BCLP Unit holder, of either (x) $20 in
principal amount of 6% Subordinated Debentures due 2038 of BCLP (the
"Subordinated Debentures") plus $1 in cash for each BCLP Unit or (y) one limited
partnership interest (each, a "Castle Creek Interest") in Castle Creek for each
100 BCLP Units, and (ii) the merger (the "Merger") of a subsidiary ("Merger
Sub") of BCLP II, with and into BCLP, which will be the surviving entity, in
which merger each BCLP Unit with respect to which Subordinated Debentures and
cash are distributed in the Distribution will be converted into one unit
representing a limited partnership interest in BCLP II (each, a "BCLP II Unit"),
and each BCLP Unit with respect to which Castle Creek Interests are distributed
in the Distribution will be canceled, all as described herein. Distributions of
Castle Creek Interests will be effected only with respect to "blocks" of 100
BCLP Units; no fractional Castle Creek Interests will be issued. As a result,
holders of fewer than 100 BCLP Units will be unable to receive Castle Creek
Interests, and will be compelled to receive BCLP II Units, Subordinated
Debentures and cash.
The Distribution and the Merger are referred to collectively as the
"Reorganization." Pursuant to the Plan, and in anticipation of the
Reorganization, BCLP will consummate several transactions (the "Restructuring
Transactions"), which are designed to facilitate the Reorganization. See
"Summary -- Restructuring Transactions." The charts on pages viii and ix
describe BCLP's structure before and after the Reorganization.
The Restructuring Transactions, the Distribution and the Merger are
interdependent; unless all are consummated, none will be consummated and the
Reorganization will not occur. See "Special Factors -- Terms of Reorganization."
Upon consummation of the Reorganization, BCLP II will change its name to, and do
business as, "Boston Celtics Limited Partnership" and BCLP will change its name
to "Boston Celtics Limited Partnership II."
BCLP is a Delaware limited partnership that holds, through subsidiaries,
the Boston Celtics professional basketball team of the National Basketball
Association (the "Team") and certain investment assets. Approximately 47.8% of
the outstanding BCLP Units presently are held by Don F. Gaston, Paula B. Gaston,
<PAGE> 2
Paul E. Gaston and certain related parties (collectively, the "Gaston
Affiliates"). As a result of the Merger, BCLP will become a 99%-owned subsidiary
partnership of BCLP II.
The portion of those assets held directly or indirectly by BCLP (including
the Team) that will be owned directly or indirectly by BCLP II and Castle Creek,
respectively, after the Reorganization will be in exact proportion to the number
of BCLP Units electing to receive, in the Distribution, a distribution of
Subordinated Debentures and cash compared to those electing to receive a
distribution of Castle Creek Interests (the "Proportionate Election"). After the
Reorganization, the Team will be owned by Celtics Basketball Limited Partnership
("Celtics Basketball"), the limited partnership interests of which will be held
indirectly by BCLP II and Castle Creek, respectively, in exact proportion to the
Proportionate Election. The pre-Reorganization net assets of BCLP (other than
the Team) will also be held directly or indirectly by BCLP II and Castle Creek,
respectively, in exact proportion to the Proportionate Election. See "Special
Factors -- Allocation of Interests in the Reorganization."
The primary objective of the Reorganization is to permit, after the Tax
Change (as defined and described herein), existing public holders of BCLP Units,
at their option, to maintain a proportionate investment in the Team and BCLP's
investment assets through either (i) BCLP II, a publicly traded entity taxed as
a corporation, and Subordinated Debentures, which will provide a fixed minimum
return in the form of annual interest payments; or (ii) Castle Creek, a private
partnership that will continue to be treated as a "pass-through" entity for tax
purposes, with respect to which distributions will be discretionary. BCLP II
Units and the Subordinated Debentures will be publicly traded; Castle Creek
Interests will be subject to significant transfer restrictions and will not be
traded on any exchange or other market, and will therefore not offer the same
liquidity as existing BCLP Units. See "Special Factors -- Terms of the
Reorganization." Upon consummation of the Reorganization, former holders of BCLP
Units will, based on their election in the Distribution, hold either (i) BCLP II
Units and Subordinated Debentures, (ii) Castle Creek Interests, or (iii) some
combination thereof.
All trading in BCLP Units on the New York Stock Exchange ("NYSE") and the
Boston Stock Exchange ("BSE") will cease following the Reorganization, and
thereafter BCLP II Units and Subordinated Debentures will be the sole publicly
traded investments in the Boston Celtics business. The BCLP II Units have been
approved for listing on the NYSE, under the symbol "BOS," and the Subordinated
Debentures have been approved for listing the NYSE, under the symbol "BOS-38,"
in both instances subject to official notice of issuance. In connection with the
Reorganization, it will not be necessary for BCLP Unit holders who elect to
receive Subordinated Debentures to exchange their existing BCLP Unit
certificates for BCLP II Unit certificates; however, BCLP Unit holders who elect
to receive Castle Creek Interests must, if their interests are certificated,
enclose their BCLP Unit certificates with their election form or, if their
interests are not certificated, authorize the transfer agent to cancel their
BCLP Units. See "Voting Information."
This Prospectus constitutes the Prospectus for the offering of Subordinated
Debentures, BCLP II Units and Castle Creek Interests to be received by BCLP Unit
holders in connection with the Reorganization. This Prospectus does not
constitute a Prospectus for, or an offer of, any other interests in BCLP II,
BCLP or Castle Creek or of any other securities in connection with the
Reorganization. This Prospectus does not cover any resales of BCLP II Units,
Subordinated Debentures or Castle Creek Interests, and no person is authorized
to make use of this Prospectus in connection with any such resale.
Upon consummation of the Merger, each BCLP Unit with respect to which
Subordinated Debentures and cash were distributed in the Distribution will be
converted into one BCLP II Unit, and each BCLP Unit with respect to which a
Castle Creek Interest was distributed in the Distribution will be canceled. As a
result of the Reorganization: (i) holders of BCLP Units with respect to which
Subordinated Debentures were distributed in the Distribution will hold one BCLP
II Unit and $20 in principal amount of Subordinated Debentures and $1 in cash
for each such BCLP Unit previously held; (ii) BCLP will become a 99%-owned
subsidiary partnership of BCLP II, which will indirectly own a proportionate
interest in the Team and BCLP's other pre-Reorganization net assets; (iii)
holders of BCLP Units with respect to which Castle Creek Interests were
distributed in the Distribution will hold one Castle Creek Interest for each 100
such BCLP Units previously held; and (iv) Castle Creek will directly or
indirectly own a proportionate interest in the Team and BCLP's other
pre-Reorganization net assets. See "Special Factors -- Terms of Reorganization."
The Plan has been approved by the Board of Directors of Celtics, Inc., in
its capacity as general partner of BCLP, on behalf of BCLP. Certain members of
the Board of Directors of Celtics, Inc. have interests that are
ii
<PAGE> 3
potentially in conflict with BCLP Unit holders. Under the Delaware Revised
Uniform Limited Partnership Act, approval of the Reorganization requires
approval of a majority of all outstanding BCLP Units (the "Requisite Approval").
BCLP Unit holders holding greater than a majority of all outstanding BCLP Units
have executed or agreed to execute consents approving the Reorganization.
Accordingly, proxies are not required and are not being sought from BCLP Unit
holders.
On April 16, 1998, the last trading day before the announcement of the
Reorganization, the closing sale price for the BCLP Units on the NYSE was
$21.00. On May 20, 1998, the closing sale price for the BCLP Units on the NYSE
was $20.81.
WE CALL YOUR ATTENTION TO THE FACTORS SPECIFIED UNDER THE CAPTION "RISK
FACTORS AND OTHER IMPORTANT CONSIDERATIONS" BEGINNING ON PAGE 26, WHICH ADDRESS
CERTAIN CONSIDERATIONS RELATING TO AN INVESTMENT IN BCLP II AND CASTLE CREEK.
------------------------
THIS INFORMATION STATEMENT/PROSPECTUS IS BEING PROVIDED TO YOU SOLELY FOR
YOUR INFORMATION. NO MEETING OF BCLP UNIT HOLDERS IS BEING HELD TO CONSIDER THE
REORGANIZATION. NEITHER BCLP NOR CELTICS, INC. IS ASKING FOR A PROXY OR CONSENT
AND YOU ARE REQUESTED NOT TO SEND A PROXY OR CONSENT.
------------------------
NEITHER THIS TRANSACTION NOR THESE SECURITIES HAVE BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION OR THE ACCURACY OR
ADEQUACY OF THIS INFORMATION STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS INFORMATION STATEMENT/PROSPECTUS IS MAY , 1998.
iii
<PAGE> 4
AVAILABLE INFORMATION
BCLP is and, after the Reorganization, BCLP II and Castle Creek will be,
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information filed with the Commission can
be inspected and copied at the public reference facility maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should also be available for inspection and copying at the
regional offices of the Commission located at 75 Park Place, Fourteenth Floor,
New York, New York 10048 and Room 1400, Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies can also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a site
accessible to the public by computer on the World Wide Web at
http://www.sec.gov., which contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission, including BCLP. In addition, such material can be inspected at the
offices of the NYSE at 20 Broad Street, New York, NY 10005.
ADDITIONAL INFORMATION
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-4 and exhibits thereto (the "Registration
Statement") that BCLP, BCLP II and Castle Creek have filed with the Commission
pursuant to the Securities Act of 1933, as amended, (the "Securities Act") and
to which reference is hereby made. The principal executive offices of BCLP, BCLP
II and Castle Creek are located at 151 Merrimac Street, Boston, MA 02114 and
their telephone number is (617) 523-6050.
iv
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
Overview of the Reorganization......................... 1
Pre-Reorganization Ownership by Current BCLP Unit
Holders............................................... 4
Post-Reorganization Ownership by Current BCLP Unit
Holders............................................... 4
The Partnerships....................................... 5
Existing Economic Interests of BCLP Unit Holders....... 6
Risk Factors........................................... 7
Reasons to Reorganize.................................. 8
Alternatives to the Reorganization..................... 9
Allocation of Interests in the Reorganization.......... 10
Restructuring Transactions............................. 10
Summary of the Terms of the Reorganization............. 12
Subordinated Debentures................................ 16
Background of the Reorganization....................... 18
Recommendation of General Partner and Fairness
Determination......................................... 19
Comparative Rights of the Interests and the Securities
to be Issued.......................................... 19
Certain Federal Income Tax Consequences................ 19
Accounting Treatment................................... 19
Conditions to the Reorganization....................... 19
No Appraisal Rights.................................... 20
Consequences if Reorganization is Not Consummated...... 20
List of Partners....................................... 20
Summary Historical Consolidated Financial Information
of BCLP and Summary Unaudited Pro Forma Consolidated
Financial Information of BCLP II and Castle Creek..... 21
Ratio of Earnings to Fixed Charges..................... 25
RISK FACTORS AND OTHER IMPORTANT CONSIDERATIONS............. 26
Risks Relating to the Reorganization................... 26
Risks Relating to BCLP II After the Reorganization..... 28
Risks Relating to the Subordinated Debentures.......... 30
Risks Relating to Castle Creek After the
Reorganization........................................ 31
VOTING INFORMATION.......................................... 34
Vote Required; Written Consent in Lieu of Meeting...... 34
No Appraisal Rights.................................... 34
SPECIAL FACTORS............................................. 35
Background of the Reorganization....................... 35
Existing Partnership Structure......................... 35
Existing Economic Interests of the Partners............ 36
Reasons to Reorganize.................................. 36
Alternatives to the Reorganization..................... 36
Terms of the Reorganization............................ 38
Financing the Reorganization........................... 40
Allocation of Interests in the Reorganization.......... 40
Accounting Treatment................................... 41
Determinations of the Board of Directors of Celtics,
Inc................................................... 41
Consequences if Reorganization is Not Consummated...... 46
COMPARISON OF INTERESTS AND SECURITIES TO BE ISSUED......... 46
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 50
Partnership Status and Taxation of Entities............ 51
Formation of Entities.................................. 52
Distribution of Subordinated Debentures and Interests
in Castle Creek....................................... 53
Tax Consequences of Ownership of Interests in Castle
Creek................................................. 55
General Tax Treatment of the Merger.................... 56
Certain Tax Consequences of the Merger to Holders of
Units................................................. 56
</TABLE>
v
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Tax Consequences of Ownership of Subordinated
Debentures............................................ 58
Persons Other Than United States Persons............... 59
Information Reporting to Holders....................... 59
Withholding............................................ 59
Other Tax Issues Affecting Holders of BCLP Units....... 60
Tax Consequences to BCLP II and BCLP................... 60
Unrelated Business Taxable Income...................... 61
Other Tax Aspects...................................... 61
MARKET PRICES AND DISTRIBUTIONS............................. 61
CAPITALIZATION.............................................. 63
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............. 64
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.................................. 65
General................................................ 65
Results of Operations.................................. 65
Liquidity and Capital Resources........................ 68
BUSINESS.................................................... 70
Basketball Operations.................................. 70
Sources of Revenue..................................... 70
Ticket Sales........................................... 70
Television, Cable and Radio Broadcasting............... 71
Other Sources.......................................... 71
Basketball Team........................................ 71
Basketball Facilities.................................. 73
Competition............................................ 74
Insurance.............................................. 74
Employees.............................................. 75
Legal Proceedings...................................... 75
MANAGEMENT.................................................. 76
Directors and Executive Officers....................... 76
Directors and Executive Officers after the
Reorganization........................................ 77
Executive Compensation................................. 78
Employment and Consulting Agreements................... 79
CLP/The Team........................................... 80
Compensation Committee Interlocks and Insider
Participation......................................... 80
Security Ownership of Certain Beneficial Owners and
Management............................................ 81
Certain Relationships and Related Transactions......... 81
Section 16(a) Beneficial Ownership Reporting
Compliance............................................ 82
DESCRIPTION OF BCLP II UNITS................................ 83
DESCRIPTION OF CASTLE CREEK INTERESTS....................... 90
DESCRIPTION OF SUBORDINATED DEBENTURES...................... 97
LEGAL MATTERS............................................... 105
EXPERTS..................................................... 105
INDEX TO FINANCIAL STATEMENTS............................... F-1
EXHIBIT A: GLOSSARY OF DEFINED TERMS........................ A-1
EXHIBIT B: AGREEMENT AND PLAN OF REORGANIZATION............. B-1
</TABLE>
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE REORGANIZATION OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS. ANY INFORMATION OR REPRESENTATIONS WITH RESPECT TO SUCH
MATTERS NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY BCLP II, BCLP OR CASTLE CREEK.
------------------------
vi
<PAGE> 7
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 SUCH OFFER OR SOLICITATION OF SUCH SECURITIES IN ANY STATE OR OTHER
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION. THE DISTRIBUTION OF THIS PROSPECTUS AND THE OFFERING OF
THE CASTLE CREEK INTERESTS DESCRIBED HEREIN MAY BE RESTRICTED IN CERTAIN
JURISDICTIONS BY LAW. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES ARE
REQUIRED TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY SUCH RESTRICTIONS.
vii
<PAGE> 8
CURRENT STRUCTURE*
[CURRENT STRUCTURE FLOW CHART]
* Includes only those affiliates of BCLP involved in the Reorganization and
related transactions.
viii
<PAGE> 9
POST-REORGANIZATION STRUCTURE
[POST-REORGANIZATION STRUCTURE CHART]
* Generally referred to in this Prospectus as "BCLP II."
+ Generally referred to in this Prospectus as "BCLP."
+ Generally referred to in this Prospectus as "BCLP II GP;" to become "BCLP GP,
Inc." after the Reorganization.
** Generally referred to in this Prospectus as "BCLP GP" to become "BCLP II GP,
Inc." after the Reorganization.
X = 99.999% of the percentage of outstanding BCLP Units upon which Castle Creek
Interests are distributed in the Distribution.
Y = 99.999% of the percentage of outstanding BCLP Units upon which Subordinated
Debentures and cash are distributed in the Distribution.
ix
<PAGE> 10
SUMMARY
The following Summary is not intended to be complete and is qualified in
all respects by the more detailed information set forth elsewhere in this
Prospectus and the documents incorporated by reference herein. A glossary of
frequently used capitalized and other specialized terms is attached as Exhibit A
and charts describing the BCLP structure before and after the Reorganization are
set forth immediately preceding this Summary. Unless otherwise indicated, the
information contained in this Prospectus assumes that 50.116473% of BCLP Units
outstanding at the time of the Reorganization (comprised of BCLP Units held by
Gaston Affiliates and BCLP Units subject to the Unit Exercise Agreement (as
defined herein)) elect to receive, and in fact receive, Castle Creek Interests
in the Distribution (such 50.116473% election to receive Castle Creek Interests
herein is referred to as the "Assumed Castle Creek Election Percentage"). It is
likely that the actual percentage of BCLP Unit holders who elect to receive
Castle Creek Interests in the Distribution will be greater than the Assumed
Castle Creek Election Percentage. BCLP Unit holders are urged to review
carefully the entire Prospectus.
This Prospectus contains certain statements and information that are
"forward-looking statements," including statements relating to prospective
revenues, expenses and distributions, and expectations, intentions and
strategies regarding the future. Such forward-looking statements may be found
under the captions "Risk Factors and Other Important Considerations,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as in the Prospectus generally, and involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of BCLP, BCLP II or Castle Creek to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Factors that could
cause BCLP's, BCLP II's or Castle Creek's financial condition, results of
operation, liquidity and capital resources to differ materially include the
Team's competitive success, uncertainties as to increases in players' salaries,
the team's ability to attract and retain talented players, uncertainties
relating to labor relations involving players, the risk of injuries to key
players, uncertainties regarding media contracts, uncertainties regarding the
future performance of investment assets, uncertainties relating to the impact of
the Reorganization and those matters discussed in "Risk Factors and Other
Important Considerations" and set forth in the Prospectus generally.
OVERVIEW OF THE REORGANIZATION
At the time of BCLP's organization, publicly traded limited partnerships
("PTPs" or "Master Limited Partnerships") such as BCLP were not subject to
federal income tax at the partnership level. In December 1987, however, Congress
passed the Revenue Act of 1987. Among other things, the Revenue Act of 1987
provided that PTPs generally would be taxed as corporations for federal income
tax purposes (the "Tax Change"), except that PTPs existing on December 17, 1987
would be "grandfathered" until their first taxable year beginning after December
31, 1997. BCLP will become taxable as a corporation during its taxable year
beginning July 1, 1998 if it remains a PTP, unless it elects to pay the Toll Tax
(as defined below).
In August 1997, Congress passed the Taxpayer Relief Act of 1997, which
permits PTPs to elect, as an alternative to taxation as a corporation, to pay a
federal tax at a rate of 3.5% of gross income from the active conduct of trades
or businesses (the "Toll Tax") in taxable years beginning after December 31,
1997.
After evaluating the Tax Change and alternatives to minimize the adverse
impact of the Tax Change, including payment of the Toll Tax, Celtics, Inc., as
general partner of BCLP, proposes to consummate the Reorganization pursuant to
the Plan, in which BCLP will:
- distribute in the Distribution to holders of BCLP Units, at each holder's
option, either (i) $20 in principal amount of Subordinated Debentures and
$1 in cash for each BCLP Unit held of record, or (ii) one Castle Creek
Interest for each 100 BCLP Units held of record; and
- become a subsidiary partnership of BCLP II, a publicly held entity taxed
as a corporation, through the Merger, in which (i) holders of BCLP Units
that received Subordinated Debentures and cash in the Distribution will
receive one BCLP II Unit for each BCLP Unit held of record upon which
Subordinated Debentures and cash were distributed and (ii) holders of
BCLP Units who received
1
<PAGE> 11
Castle Creek Interests in the Distribution will retain their Castle Creek
Interests, but the BCLP Units with respect to which Castle Creek
Interests were distributed will be canceled.
Immediately after the Reorganization, holders of BCLP Units will own (i)
BCLP II Units and Subordinated Debentures, (ii) Castle Creek Interests, or (iii)
a combination thereof, depending on their election in the Distribution. BCLP
Unit holders who do not make an election with respect to the Distribution will
continue their investment in the form of BCLP II Units and Subordinated
Debentures. The diagrams on pages viii and ix describe BCLP's ownership
structure before and after the Reorganization. A copy of the Plan is attached
hereto as Exhibit B.
Each of the transactions comprising the Restructuring Transactions and the
Reorganization is interdependent. Unless all such transactions are consummated,
none will be consummated and the Reorganization will not occur. The
Reorganization will be consummated (i) after consummation of the Distribution
and satisfaction or waiver of the conditions set forth in the Plan, and (ii)
upon the filing with the Office of the Secretary of State of Delaware of a
certificate of merger relating to the Merger, or such later time as is specified
in such certificate of merger. Celtics, Inc. may decide not to pursue the
Reorganization at any time before it becomes effective. See "Special
Factors -- Terms of Reorganization."
Gaston Affiliates currently hold approximately 47.8% of all outstanding
BCLP Units and have executed consents in favor of the Reorganization with
respect to all of their BCLP Units. In addition, Walcott Partners, L.P.
("Walcott"), a Gaston Affiliate, has entered into an agreement (the "Option
Exercise Agreement") with Stephen C. Schram, a former executive officer of BCLP,
pursuant to which Mr. Schram has agreed to (i) exercise certain options to
purchase BCLP Units (the "Unit Option") and (ii) execute a consent with respect
to the BCLP Units obtained upon such exercise (the "Additional Units") in favor
of the Reorganization. BCLP Unit holders holding greater than a majority of all
outstanding BCLP Units thus have executed or have agreed to execute consents
approving the Reorganization. Accordingly, proxies are not required and are not
being sought from BCLP Unit holders. In connection with the Option Exercise
Agreement, Mr. Schram has granted BCLP a call option to purchase the Additional
Units. See "Voting Information -- Vote Required," "Management -- Certain
Relationships and Related Transactions."
BCLP has been further advised that Gaston Affiliates intend, and Mr. Schram
has agreed as part of the Option Exercise Agreement, to elect to receive Castle
Creek Interests with respect to substantially all of their BCLP Units in the
Distribution based on the tax benefits to be recognized by Castle Creek as a
pass-through entity, and because their long-term investment horizon does not
necessarily require liquidity. Mr. Marsh, the only other member of the Board of
Directors of Celtics, Inc. or executive officer who presently owns BCLP Units,
has advised BCLP of his intent to elect to receive Subordinated Debentures and
cash in the Distribution; accordingly, Mr. Marsh will receive BCLP II Units in
the Merger. Continuation of his investment in the form of BCLP II Units and
Subordinated Debentures is consistent with Mr. Marsh's investment objectives,
which include a desire to preserve liquidity and to receive annual cash returns.
The table set forth on page 41 compares the equity ownership of BCLP before
the Reorganization to the equity ownership of BCLP II and Castle Creek after the
Reorganization, based on various possible Proportionate Elections.
Following consummation of the Reorganization, BCLP II Units and
Subordinated Debentures are expected to trade on the NYSE, but interests in
Castle Creek will not be publicly traded. It is intended that BCLP II, the
publicly traded entity, will be taxable as a corporation, whereas Castle Creek,
which will not have freely tradable units, will retain pass-through treatment
for tax purposes.
Holders of record of BCLP Units on , 1998 (the "Record
Date") will be mailed a copy of this Prospectus along with a form (a
"Distribution Election Form") pursuant to which they may elect to receive in the
Distribution (i) Subordinated Debentures and cash (a "Debenture Election"), (ii)
Castle Creek Interests (a "Castle Creek Election"), or (iii) some combination
thereof. The accompanying letter of transmittal ("Letter of Transmittal") and
instructions relating thereto, will set forth the procedures by which Unit
holders may make a Debenture Election or Castle Creek Election. HOLDERS WHO TAKE
NO ACTION WILL BE DEEMED TO HAVE MADE A DEBENTURE ELECTION. THUS, HOLDERS
2
<PAGE> 12
WHO WANT TO MAKE A DEBENTURE ELECTION DO NOT NEED TO COMPLETE A DISTRIBUTION
ELECTION FORM OR SEND ANYTHING TO BCLP. Holders may make a Castle Creek Election
only in "lots" of 100 BCLP Units and must return an executed and properly
completed Distribution Election Form by , 1998 (the "Election
Deadline"), accompanied by unit certificates for their Units and such evidence
of ownership of such Units as BCLP shall require.
Certificates representing Subordinated Debentures and Castle Creek
Interests will not be issued; ownership of Subordinated Debentures and Castle
Creek Interests will be recorded and maintained in book entry form by the
respective transfer agents for BCLP and Castle Creek after consummation of the
Reorganization.
3
<PAGE> 13
PRE-REORGANIZATION OWNERSHIP BY CURRENT BCLP UNIT HOLDERS
- Current BCLP Unit holders own a 99% limited partnership interest in BCLP,
a Delaware limited partnership.
- BCLP owns a 99% limited partnership interest in Celtics Limited
Partnership, a Delaware limited partnership ("CLP").
- CLP owns the Team.
For a graphic depiction of the Pre-Reorganization ownership structure of
BCLP and its affiliates, see the diagram on page viii.
POST REORGANIZATION OWNERSHIP BY CURRENT BCLP UNIT HOLDERS
After the Reorganization, current BCLP Unit holders will own their interest
in the Team as follows:
Current BCLP Unit holders who elect to receive Subordinated Debentures and
cash in the Distribution:
- These BCLP Unit holders will own Subordinated Debentures of BCLP and a
99% limited partnership interest in BCLP II, which after the
Reorganization will be renamed "Boston Celtics Limited Partnership" (to
avoid confusion this Prospectus refers to BCLP II, both before and after
the Reorganization, as "BCLP II");
- BCLP II will own a 99% limited partnership interest in BCLP, which after
the Reorganization will be renamed "BCLP Limited Partnership" (to avoid
confusion, this Prospectus refers to BCLP, both before and after the
Reorganization, as "BCLP");
- BCLP will own a 99% limited partnership interest in CLP;
- CLP will own a 99.999% general partnership interest in Celtics Pride
General Partnership, a Delaware general partnership that was formed in
connection with the Reorganization ("Celtics Pride");
- Celtics Pride will own a percentage of the limited partnership interests
in Celtics Basketball Holdings Limited Partnership, a Delaware limited
partnership that was formed in connection with the Reorganization
("Celtics Basketball Holdings"), equal to the proportion of BCLP Units
with respect to which Subordinated Debentures are distributed in the
Distribution;
- Celtics Basketball Holdings will own a 99.999% limited partnership
interest in Celtics Basketball Limited Partnership, a Delaware limited
partnership that was formed in connection with the Reorganization
("Celtics Basketball"); and
- Celtics Basketball will own the Team.
Current BCLP Unit Holders who elect to receive Castle Creek Interests in
the Distribution:
- These BCLP Unit holders will own limited partnership interests in Castle
Creek;
- Castle Creek will own a percentage of the limited partnership interests
in Celtics Basketball Holdings equal to the proportion of BCLP Units with
respect to which Castle Creek Interests are distributed in the
Distribution;
- Celtics Basketball Holdings will own a 99.999% limited partnership
interest in Celtics Basketball; and
- Celtics Basketball will own the Team.
For a graphic depiction of the Post-Reorganization ownership structure of
BCLP and its affiliates, see the diagram on page ix.
4
<PAGE> 14
THE PARTNERSHIPS
BCLP
BCLP was organized as a Delaware limited partnership on December 4, 1986 to
acquire, own and operate the Team. Shortly thereafter, BCLP completed an initial
public offering of BCLP Units. BCLP currently owns a 99% limited partnership
interest in CLP, which in turn owns and operates the Team. The 1% general
partnership interest of BCLP is held by Celtics, Inc., a Delaware corporation
that is wholly owned and controlled by Gaston Affiliates. Gaston Affiliates
presently own approximately 47.8% of the BCLP Units presently outstanding. BCLP
presently does not pay management fees to its general partner.
In the early 1990's, BCLP, through subsidiaries, owned and operated a radio
station and a television station, each in Boston, Massachusetts. In 1994 and
1995, these broadcast properties were sold. CCC, an indirect wholly owned
subsidiary of BCLP, holds proceeds from these sales.
Prior to the Reorganization and as part of the Restructuring Transactions,
Celtics, Inc. will transfer its 1% general partnership interest in BCLP to BCLP
GP, Inc. a newly formed Delaware corporation that is wholly owned and controlled
by Celtics Inc., which is in turn wholly owned and controlled by Gaston
Affiliates, BCLP will change its name to "Boston Celtics Limited Partnership
II", and BCLP GP, Inc. will change its name to "BCLP II GP, Inc."
BCLP's principal executive offices are located at 151 Merrimac Street,
Boston, Massachusetts 02114 and its telephone number is (617) 523-6050.
CLP
CLP is a Delaware limited partnership that currently owns and operates the
Team. BCLP currently owns a 99% limited partnership interest in CLP. The 1%
general partnership interest of CLP is held by Boston Celtics Corporation
("BCC"), which is wholly owned and controlled by Gaston Affiliates. CLP pays a
management fee to BCC of $750,000 per annum, subject to annual increases based
on annual cash flows from basketball operations after June 30, 1989. Management
fees paid to BCC in the fiscal years ended June 30, 1997, 1996 and 1995 totaled
$820,000, $1,555,000 and $1,336,000, respectively. After the Reorganization, it
is anticipated that management fees relating to the management and operation of
the Team will be paid by Celtics Basketball to BCC.
CLP's and BCC's principal executive offices are located at 151 Merrimac
Street, Boston, Massachusetts 02114 and its telephone number is (617) 523-6050.
BCLP II
BCLP II is a Delaware limited partnership that was formed in connection
with the Reorganization and is not yet engaged in any business operations. The
1% general partnership interest of BCLP II is held by BCLP II GP, Inc. ("BCLP II
GP") which is wholly owned and controlled by Celtics, Inc., a Gaston Affiliate.
BCLP II's partnership agreement provides that management fees may be paid by
BCLP II to BCLP II GP. Although BCLP II's payment of management fees to BCLP II
GP after the Reorganization is not presently contemplated, such fees may be paid
at any time. BCLP II will directly or indirectly hold a percentage of BCLP's
pre-Reorganization net assets (including the Team) equal to the proportion of
BCLP Units with respect to which Subordinated Debentures are distributed in the
Distribution. See "Special Factors -- Terms of the Reorganization."
Upon consummation of the Reorganization, BCLP II will change its name to,
and do business as, "Boston Celtics Limited Partnership," and BCLP II GP will
change its name to "BCLP GP, Inc." BCLP II's and BCLP II GP's principal
executive offices are located at 151 Merrimac Street, Boston, Massachusetts
02114 and its telephone number is (617) 523-6050.
CASTLE CREEK
Castle Creek is a Delaware limited partnership that was formed in
connection with the Reorganization and is not yet engaged in any business
operations. The 1% general partnership interest of Castle Creek LP is
5
<PAGE> 15
held by Castle Creek GP, a Delaware corporation that initially will be owned by
BCLP and after the Reorganization will be wholly owned and controlled by
Celtics, Inc., which in turn is wholly owned and controlled by Gaston
Affiliates. BCLP is currently the sole limited partner of Castle Creek. Although
Castle Creek's payment of management fees immediately after the Reorganization
to Castle Creek GP presently is not contemplated, Castle Creek's partnership
agreement provides that management fees may be paid by Castle Creek to Castle
Creek GP. Castle Creek's and Castle Creek GP's principal executive offices are
located at 151 Merrimac Street, Boston, Massachusetts 02114 and its telephone
number is (617) 523-6050.
CELTICS PRIDE
Celtics Pride is a Delaware general partnership that was formed in
connection with the Reorganization. CLP will hold a 99.999% general partnership
interest in Celtics Pride after the Reorganization. CCC will hold a 0.001%
general partnership interest in Celtics Pride after the Reorganization. Celtics
Pride does not presently contemplate paying management fees to either of its
general partners. Celtics Pride's principal executive offices are located at 151
Merrimac Street, Boston, Massachusetts 02114 and its telephone number is (617)
523-6050.
CELTICS BASKETBALL HOLDINGS
Celtics Basketball Holdings is a Delaware limited partnership that was
formed in connection with the Reorganization. The 0.001% general partnership
interest of Celtics Basketball Holdings will be held by BCC. Although Celtics
Basketball Holdings' payment of management fees to BCC is not presently
contemplated, Celtics Basketball Holdings' partnership agreement will provide
that management fees may be paid by Celtics Basketball Holdings to BCC. Celtics
Basketball Holdings' principal executive offices are located at 151 Merrimac
Street, Boston, Massachusetts 02114 and its telephone number is (617) 523-6050.
CELTICS BASKETBALL
Celtics Basketball is a Delaware limited partnership that was formed in
connection with the Reorganization. Celtics Basketball Holdings will be the sole
limited partner of Celtics Basketball. The 0.001% general partnership interest
of Celtics Basketball will be held by BCC. Celtics Basketball's partnership
agreement will provide that management fees may be paid by Celtics Basketball to
BCC. After the Reorganization it is contemplated that Celtics Basketball will
pay management fees to BCC in an amount equal to the management fees currently
to BCC by CLP. Management fees paid to BCC may be increased at any time. Celtics
Basketball's principal executive offices are located at 151 Merrimac Street,
Boston, Massachusetts 02114 and its telephone number is (617) 523-6050.
BCLP will complete the Restructuring Transactions pursuant to the Plan and
in anticipation of the Reorganization. If the Reorganization is not consummated,
the Restructuring Transactions will, to the extent possible, be reversed. See
"-- Restructuring Transactions."
EXISTING ECONOMIC INTERESTS OF BCLP UNIT HOLDERS
Pursuant to the BCLP Partnership Agreement, Celtics, Inc. determines from
time to time, in its sole discretion, the amount of cash or other assets
distributable by BCLP, declares the amount of the distribution and specifies the
record date for determining the partners and Unit holders entitled to receive
the distribution. To the extent distributions are made, they are required to be
made on a pro rata basis. Celtics, Inc. also is authorized in its sole
discretion to cause BCLP to distribute cash from reserves or from borrowings
incurred for the purpose of making distributions, and to make other
distributions, at such times and in such amounts, as Celtics, Inc. determines to
be appropriate. BCLP Unit holders have no assurance of any specific level or
schedule of distributions, since the timing and amount of distributions are
determined in the sole discretion of Celtics, Inc.
Upon any liquidation of BCLP, after provision for payment of creditors,
BCLP Unit holders would receive a distribution in accordance with their
respective capital account balances and a further distribution of remaining
amounts in accordance with their respective percentage interests.
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<PAGE> 16
RISK FACTORS
See "Risk Factors and Other Important Considerations" beginning on page 26
for a description of certain risks relevant to the Reorganization and investment
in BCLP II Units, Subordinated Debentures and Castle Creek Interests, which
risks include the following.
- Celtics, Inc. has determined the terms of the Reorganization, including
the allocation of the net assets of BCLP between BCLP II and Castle
Creek. Because Gaston Affiliates control Celtics, Inc. and, through
Celtics, Inc., BCLP's general partner, also control BCLP, Celtics, Inc.
has a substantial conflict of interest in determining the terms of the
Reorganization. No independent appraisal or fairness opinion has been
obtained in connection with the Reorganization. Furthermore, holders of
BCLP Units were not separately represented in establishing the terms of
the Reorganization, which are not the result of arms' length
negotiations. Because BCLP Unit holders are not separately represented,
there is a risk that the best interests of such holders are not being
protected in connection with the Reorganization.
- If the Reorganization is approved by the Requisite Approval, all BCLP
Unit holders will be bound by this approval, with the result that
non-consenting holders' ownership interests in BCLP will be converted
into either ownership interests in BCLP II plus Subordinated Debentures
or Castle Creek Interests, or a combination thereof, even though such
holders, individually, may not have been in favor of the Reorganization.
Gaston Affiliates presently beneficially own approximately 47.8% of the
outstanding BCLP Units and have executed consents in favor of the
Reorganization with respect to all of their Units. In addition, Walcott
has entered into the Option Exercise Agreement with Stephen C. Schram.
BCLP Unit holders holding greater than a majority of all outstanding BCLP
Units thus have executed or agreed to execute consents approving the
Reorganization. Under Delaware law, holders of BCLP Units have no
dissenters' or appraisal rights in the Reorganization and will not be
entitled to receive cash payments from BCLP for the fair value of their
BCLP Units if they dissent and the Reorganization is approved and
consummated.
- After consummation of the Reorganization, Gaston Affiliates will continue
to beneficially own all of the outstanding capital stock of Celtics,
Inc., BCLP II GP, BCLP GP, BCC and Castle Creek GP. As a result, by
virtue of their control of these general partners, Gaston Affiliates will
have the ability to control the management policies and operations of
Castle Creek, BCLP II, BCLP, CLP, Celtics Pride, Celtics Basketball
Holdings and Celtics Basketball (including, in each case, whether
distributions are made to holders of partnership interests and the timing
and amount of such distributions, if any), and will have the power to
elect the Boards of Directors of the general partners of each of Castle
Creek, BCLP II, BCLP, CLP, Celtics Pride, Celtics Basketball Holdings and
Celtics Basketball. Applicable provisions of the respective partnership
agreements of Castle Creek, BCLP II, BCLP, CLP, Celtics Pride, Celtics
Basketball Holdings and Celtics Basketball permit removal of the
respective general partner without cause only if certain super-majority
voting requirements are met.
- The amount, timing and manner of distributions to holders of Castle Creek
Interests will be in the sole discretion of Castle Creek GP, and Castle
Creek GP will not be required to make distributions to holders in
connection with any tax liability relating to such holders' allocable
share of taxable income of Castle Creek. Thus, an investment in Castle
Creek Interests may result in tax liability even if cash distributions
are not made.
- As a result of the Reorganization, BCLP II, on a pro forma consolidated
basis as compared to BCLP before the Reorganization, will have increased
levels of debt, including the Subordinated Debentures and debt incurred
in connection with the Restructuring Transactions.
- The obligations of BCLP under the Subordinated Debentures will be
unsecured obligations and will be subordinate and junior in right of
payment to all Senior Indebtedness of BCLP, as defined in the applicable
Indenture. As of March 31, 1998 (on a pro forma basis, assuming the
Reorganization had occurred on that date), BCLP would have had
approximately $47.3 million principal amount of Senior Indebtedness
outstanding. The terms of the Subordinated Debentures do not limit BCLP's
ability to
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<PAGE> 17
incur additional indebtedness, including Senior Indebtedness. Holders of
Subordinated Debentures will be subject to the risk that BCLP's cash flow
will be insufficient to meet required payments under the Subordinated
Debentures. On a pro forma basis, for the year ended June 30, 1997,
earnings would have been inadequate to cover interest payments on the
Subordinated Debentures and other debt of BCLP. See "Summary -- Ratio of
Earnings to Fixed Charges." In addition, the Subordinated Debentures will
be effectively subordinated to the claims of creditors of BCLP's
subsidiaries.
- BCLP II will apply to list the BCLP II Units on the NYSE, and BCLP will
apply to list the Subordinated Debentures on the NYSE, in each case
subject to official notice of issuance. The BCLP II Units and the
Subordinated Debentures will be new securities and may trade at prices
that, in the aggregate, are less than the prior trading prices of BCLP
Units. There can be no assurance concerning the prices or the volatility
of the prices at which BCLP II Units or Subordinated Debentures will
trade after consummation of the Reorganization or as to the volume of any
trading activity with respect to the BCLP II Units or Subordinated
Debentures.
- Holders of BCLP Units in less than 100-BCLP Unit "lots" ("Fractional
Lots") who elect to receive Castle Creek Interests in the Distribution
(and who do not purchase on the market or otherwise acquire a sufficient
number of BCLP Units to create 100 Unit "lots") will not receive Castle
Creek Interests with respect to such Fractional Lots, but instead will
receive Subordinated Debentures and cash and, upon consummation of the
Merger, BCLP II Units.
- Castle Creek intends to remain a non-publicly traded entity and to
maintain substantial transfer restrictions on Castle Creek Interests in
order to preserve pass-through treatment for tax purposes. In addition,
Castle Creek intends to remain exempt from investment company regulation.
Therefore, if Castle Creek has more than one hundred beneficial holders
after the Reorganization, it may take certain actions to reduce the
number of its beneficial holders to qualify for an exemption from
investment company regulation. Such actions could include a reverse split
of Castle Creek Interests, which, under the Castle Creek Partnership
Agreement, is authorized at any time, in Castle Creek GP's discretion and
upon such terms and conditions as Castle Creek GP shall determine. Castle
Creek may also take other actions, such as redeeming or repurchasing
Castle Creek Interests, to reduce the number of its beneficial holders.
In connection with any of these actions, the number of holders of Castle
Creek Interests may be small enough to eliminate any obligations Castle
Creek otherwise may have to register and report under the Exchange Act.
As a non-reporting entity, Castle Creek would not be obligated to provide
detailed information to holders of Castle Creek Interests concerning,
among other matters, Castle Creek's business operations, financial
statements and certain relationships in related transactions, which
information could better enable investors to assess the financial
operations and policies of Castle Creek.
- The Distribution is a tax-free transaction, and the Merger will generally
qualify for tax-free treatment under Section 351(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). However, the tax
consequences of the Merger to BCLP Unit holders are complex and, to some
extent, variable and may depend, among other things, upon the basis of a
holder in BCLP Units. See "Certain Federal Income Tax Consequences."
REASONS TO REORGANIZE
The primary objective of the Reorganization is to permit, after the Tax
Change, existing public holders of BCLP Units, at their option and based on each
holder's investment objectives, to maintain a proportionate investment in the
Team and BCLP's investment assets through either (i) BCLP II, a publicly traded
entity taxed as a corporation, or (ii) Castle Creek, a private partnership that
will continue to be treated as a "pass-through" entity for tax purposes. BCLP
Unit holders who participate in BCLP II also will have received Subordinated
Debentures and cash in the Distribution, which will provide a fixed minimum
return in the form of annual interest payments (whereas the timing and frequency
of BCLP's distributions are presently in the sole discretion of Celtics, Inc.).
Although BCLP II will be taxed as a corporation, interest paid on the
Subordinated Debentures will reduce BCLP II's federal taxable income. Castle
Creek, like BCLP at the
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<PAGE> 18
present time, will be treated as a "pass-through" entity for tax purposes. But
Castle Creek Interests will be subject to significant transfer restrictions and
will not be traded on any exchange or other market, and therefore will not offer
the same liquidity as existing BCLP Units, BCLP II Units or the Subordinated
Debentures. Distributions in respect of Castle Creek Interests will be
discretionary. See "Description of BCLP II Units" and "Description of Castle
Creek Interests."
After the Reorganization is consummated, BCLP II and Castle Creek will each
directly or indirectly hold a percentage of BCLP's pre-Reorganization net assets
(including the Team) that is exactly in proportion to the Proportionate
Election. See "Special Factors -- Allocation of Interests in the
Reorganization."
ALTERNATIVES TO THE REORGANIZATION
The alternatives to the Reorganization that BCLP and Celtics, Inc.
considered were (i) allowing BCLP to be taxed as a corporation pursuant to the
Tax Change, (ii) maintaining BCLP's status as a limited partnership for tax
purposes by electing to pay the Toll Tax, (iii) imposing restrictions on the
transferability of BCLP Units and delisting the BCLP Units from the NYSE and the
BSE, and (iv) selling the Team and liquidating BCLP. Celtics, Inc.'s Board of
Directors believes that the Reorganization will be more beneficial to BCLP's
Unit holders than any of these alternatives for the following reasons:
- Based on BCLP's management's analysis, the Board of Directors of Celtics,
Inc. believes that the Reorganization will result, in the aggregate, in
after-tax income available for distribution (in the discretion of the
respective general partner) that, when added to the fixed interest
payments on the Subordinated Debentures, would exceed the amount that
would be available if BCLP were to pay the Toll Tax or were to be taxed
as a corporation. See "Special Factors -- Background of the
Reorganization."
- The Board of Directors of Celtics, Inc. believes that the Reorganization
allows BCLP's current Unit holders to continue their investment in the
Team and to choose between participating in BCLP II and Castle Creek
based on their own tax considerations and investment objectives. BCLP II
will be subject to corporate-level tax and BCLP II Units and Subordinated
Debentures will be publicly traded securities. Castle Creek will be
treated as a partnership for tax purposes, but Castle Creek Interests
will be non-publicly traded, illiquid securities. See "Special
Factors -- Terms of the Reorganization."
- The Board of Directors of Celtics, Inc. believes that the imposition of
restrictions on transferability and delisting of BCLP Units would result
in BCLP Unit holders owning an illiquid investment and would likely
result in a significant reduction in the market value of the BCLP Units.
- The Board of Directors of Celtics, Inc. believes that liquidating BCLP
rather than effecting the Reorganization could benefit BCLP Unit holders
if the currently realizable value of BCLP's assets exceeds the value of
BCLP as a continuing business. Liquidating BCLP would, however, involve
selling the Team, which the Board of Directors of Celtics, Inc. believes
has potential for substantial future appreciation in value. In addition,
the Board of Directors of Celtics, Inc. believes that current market
conditions are such that the Team's inherent value would not be
recognized in a sale. Accordingly, the Board of Directors of Celtics,
Inc. believes that liquidating BCLP's assets at this time would not
benefit BCLP Unit holders. See "Special Factors -- Alternatives to the
Reorganization" and "Special Factors -- Determinations of the Board of
Directors of Celtics, Inc."
BCLP's management and Celtics, Inc.'s Board of Directors examined, over a
lengthy period of time, alternatives to the Reorganization. See "Special
Factors -- Background of the Reorganization."
The Board of Directors of Celtics, Inc. believes that the Reorganization is
fair to unaffiliated holders of BCLP Units, that the Reorganization will result
in certain benefits to such Unit holders and to BCLP and that such benefits
outweigh the disadvantages of the Reorganization. The Board of Directors of
Celtics, Inc. further believes that allocating BCLP's pre-Reorganization net
assets (including the Team) to BCLP II and Castle Creek, respectively, exactly
in accordance with the Proportionate Election, is fair to BCLP Unit holders.
Accordingly, the Board of Directors of Celtics, Inc. unanimously approved the
Reorganization. The
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<PAGE> 19
conclusions of the Board of Directors of Celtics, Inc. are based on an analysis
of a number of factors relating to the Reorganization and consideration of
various alternatives, as discussed herein. No independent fairness opinion has
been rendered with respect to the fairness of the consideration to be received
by BCLP Unit holders in the Reorganization. See "Special
Factors -- Determinations of the Board of Directors of Celtics, Inc."
ALLOCATION OF INTERESTS IN THE REORGANIZATION
Immediately after the Reorganization, the former public holders of BCLP
Units will hold either BCLP II Units and Subordinated Debentures or Castle Creek
Interests, or a combination thereof. The post-Reorganization relative ownership
percentages of former public holders of BCLP in BCLP II and Castle Creek will
vary depending on the Proportionate Election. The table set forth under "Special
Factors -- Allocation of Interests in the Reorganization -- Ownership of BCLP II
and Castle Creek after the Reorganization" compares the equity ownership of BCLP
before the Reorganization to the equity ownership of BCLP II and Castle Creek
after the Reorganization, based on various possible Proportionate Elections.
Pursuant to the Plan and in connection with the Reorganization, BCLP and
Celtics, Inc. will effect the Restructuring Transactions. As a result of the
Restructuring Transactions and the Reorganization, Castle Creek will hold a
percentage of BCLP's pre-Reorganization net assets (including the Team) equal to
the percentage of former BCLP Units with respect to which Castle Creek Interests
are distributed in the Distribution. BCLP II will hold a percentage of BCLP's
pre-Reorganization net assets (including the Team) equal to the percentage of
former BCLP Units with respect to which Subordinated Debentures and cash are
distributed in the Distribution. The cash component of the Distribution will not
reduce the amount or percentage of BCLP's net assets that are transferred to and
retained by Castle Creek; however, holders of BCLP Units who elect to receive
only Castle Creek Interests will not receive any cash in the Distribution.
RESTRUCTURING TRANSACTIONS
Pursuant to the Plan and in anticipation of the Reorganization, BCLP will
complete the Restructuring Transactions. If the Reorganization is not
consummated, the Restructuring Transactions will, to the extent possible, be
reversed. The Restructuring Transactions are as follows:
- CLP will contribute the Team to Celtics Basketball in exchange for a
99.999% limited partnership interest in Celtics Basketball.
- BCLP will contribute approximately $39.6 million in investment assets to
Castle Creek and approximately $0.4 million in investment assets to
Castle Creek GP (based on the Assumed Castle Creek Election Percentage);
Castle Creek GP will in turn contribute this $0.4 million in investment
assets to Castle Creek in exchange for its GP interest.
- CLP will buy a certain investment asset from CCC for approximately $6.5
million in cash.
- CLP will transfer its 99.999% limited partnership interest in Celtics
Basketball and the certain investment asset purchased from CCC to Celtics
Basketball Holdings in exchange for a 99.999% limited partnership
interest in Celtics Basketball Holdings.
- CLP will distribute 99% of the Assumed Castle Creek Election Percentage
of its limited partnership interest in Celtics Basketball Holdings to
BCLP, and 1% of the Assumed Castle Creek Election Percentage of its
limited partnership interest in Celtics Basketball Holdings to BCC
(assuming that only Gaston Affiliates elect to receive Castle Creek
Interests in the Distribution). BCLP will in turn transfer 99% of these
interests in Celtics Basketball Holdings received by it to Castle Creek
and transfer 1% of these interests in Celtics Basketball Holdings to
Castle Creek GP. Castle Creek GP will in turn transfer these interests in
Celtics Basketball Holdings to Castle Creek. BCC will transfer the
limited partnership interests in Celtics Basketball Holdings received by
it to Castle Creek. The actual percentage of Celtics Basketball Holdings
limited partnership interests distributed by CLP will depend
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upon the Proportionate Election, which likely will be greater than the
Assumed Castle Creek Election Percentage.
- CLP will contribute the remainder of its limited partnership interests in
Celtics Basketball Holdings to Celtics Pride.
- BCLP will distribute all issued and outstanding stock of Castle Creek GP
to Celtics, Inc.
- Celtics, Inc. will contribute its 1% general partnership interest in BCLP
to BCLP GP.
- BCLP II GP will contribute approximately $0.2 million in cash to BCLP II,
subject to later adjustment based upon market trading prices.
As a result of the Restructuring Transactions, among other things: (i) BCLP
II will own a 99% limited partnership interest in BCLP, which will in turn own a
99% limited partnership interest in CLP, which will in turn own a 99.999%
general partnership interest in Celtics Pride; (ii) Celtics Pride will own a
49.883029% limited partnership interest in Celtics Basketball Holdings (based on
the Assumed Castle Creek Election Percentage); (iii) Celtics Basketball Holdings
will own a 99.999% limited partnership interest in Celtics Basketball, which
will in turn own the Team; (iv) Castle Creek will own a 50.115971% limited
partnership interest in Celtics Basketball Holdings and approximately $40.0
million in investment assets (based on the Assumed Castle Creek Election
Percentage); and (v) BCLP GP will be BCLP's general partner and will be wholly
owned by Celtics, Inc. The respective ownership interests of Celtics Pride and
Castle Creek in Celtics Basketball Holdings may vary from the percentages set
forth above, depending on the actual Proportionate Election, which likely will
be greater than the Assumed Castle Creek Election Percentage.
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SUMMARY OF THE TERMS OF THE REORGANIZATION
TERMS OF REORGANIZATION....... The Reorganization will be effected pursuant to
the terms of the Plan. Upon consummation of the
Reorganization:
- the Distribution will have been consummated,
in which each BCLP Unit holder will receive,
at its option, either (i) $20 in principal
amount of Subordinated Debentures and $1 in
cash for each BCLP Unit held, (ii) one Castle
Creek Interest for each 100 BCLP Units held,
or (iii) some combination thereof; and
- the Merger will be consummated, in which each
BCLP Unit upon which Subordinated Debentures
and cash were distributed in the Distribution
will be converted into one BCLP II Unit and
each BCLP Unit upon which Castle Creek
Interests were distributed in the
Distribution will be canceled.
Distributions of Castle Creek Interests will be
effected only with respect to lots of 100 BCLP
Units. Holders of Fractional Lots who elect to
receive Castle Creek Interests in the
Distribution will not receive Castle Creek
Interests, but instead will receive
Subordinated Debentures and cash and, when the
Merger is consummated, BCLP II Units. Such
holders could, however, purchase additional
BCLP Units in the market to create 100 Unit
lots. Holders who make no election will receive
Subordinated Debentures and cash in the
Distribution and BCLP II Units in the Merger.
In the Merger, Merger Sub, a subsidiary of BCLP
II, will be merged with and into BCLP, which
will be the surviving entity. Merger Sub is a
Delaware corporation whose principal executive
offices are located at 151 Merrimac Street,
Boston, MA 02114.
EFFECTIVE DATE................ After consummation of the Distribution and
satisfaction or waiver of the conditions set
forth in the Plan, upon the filing with the
Office of the Secretary of State of Delaware of
a certificate of merger relating to the Merger,
or such later time as is specified in such
certificate of merger. The Effective Date will
be at least 20 days after this Prospectus is
first mailed to BCLP Unit holders.
TOTAL NUMBER OF BCLP II
UNITS TO BE ISSUED.......... Up to 5,596,164 BCLP II Units.
TRADING MARKET................ The BCLP II Units have been approved for
listing on the NYSE and BSE, under the symbol
"BOS," and the Subordinated Debentures have
been approved for listing on the NYSE, under
the symbol "BOS-38," in both instances subject
to official notice of issuance. Upon
consummation of the Reorganization, all trading
in BCLP Units on the NYSE and BSE will cease.
TRANSFER RESTRICTIONS ON
CASTLE CREEK INTERESTS...... Castle Creek Interests are not transferable,
other than (i) by gift, bequest or intestate
succession, and (ii) once in any calendar year,
with the permission of Castle Creek GP. Castle
Creek Interests may not be held in "street
name." By electing to receive Castle Creek
Interests in the Distribution, each holder will
be deemed to have agreed to comply with the
restrictions described in the preceding
sentence.
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VOTING REQUIREMENTS........... Pursuant to the provisions of the Delaware
Revised Uniform Limited Partnership Act (the
"Delaware Act"), approval of the Merger, which
is an interdependent part of the
Reorganization, will require the approval of
the holders of a majority of the outstanding
interests entitled to vote (the "Requisite
Approval"). BCLP has been advised that Gaston
Affiliates intend to execute consents with
respect to all of their BCLP Units in favor of
the Reorganization. In addition, Walcott has
entered into the Option Exercise Agreement with
Stephen C. Schram, pursuant to which Mr. Schram
has agreed, among other things, to (i) exercise
certain options to purchase BCLP Units and (ii)
execute a consent with respect to the
Additional Units in favor of the
Reorganization. BCLP Unit holders holding
greater than a majority of all outstanding BCLP
Units have executed or agreed to execute
consents approving the Reorganization. See
"Voting Information -- Vote Required; Written
Consent in Lieu of Meeting."
CONDITIONS TO THE
REORGANIZATION................ The conditions to the Reorganization include
approval of the Reorganization by the Requisite
Approval, receipt of any necessary regulatory
or NBA approvals and the expiration or early
termination of applicable waiting periods
(including those applicable under the
Hart-Scott-Rodino Antitrust Improvements Act of
1976, if any) and consummation of both of the
Distribution and the Merger.
DISSENTERS' RIGHTS............ Delaware law does not provide holders of
partnership interests with appraisal,
dissenters' or similar rights in connection
with a merger. Approval of the Reorganization
by the Requisite Approval thus will bind all
holders, and objecting holders will have no
alternative to receiving BCLP II Units and
Subordinated Debentures and cash or Castle
Creek Interests other than selling their BCLP
Units before consummation of the
Reorganization. See "Risk Factors and Other
Important Considerations -- Risks Relating to
the Reorganization."
NO FAIRNESS OPINION; NO
SEPARATE REPRESENTATION OF
BCLP UNIT HOLDERS........... Celtics, Inc. has determined the terms of the
Reorganization, including the allocation of the
total value of BCLP between BCLP II and Castle
Creek and the consideration to be received by
the holders of BCLP Units. No independent
appraisal or fairness opinion has been obtained
in connection with the Reorganization. Holders
of BCLP Units have not been separately
represented in connection with the
Reorganization. See "Risk Factors and Other
Important Considerations -- Risks Relating to
the Reorganization."
FEDERAL INCOME TAX
CONSEQUENCES OF THE
REORGANIZATION.............. The Distribution is a tax-free transaction, and
the Merger will generally qualify for tax-free
treatment under Section 351(a) of the Code.
However, the tax consequences of the Merger to
BCLP Unit holders are complex and, to some
extent, variable and may depend, among other
things, upon the basis of a holder in BCLP
Units. See "Certain Federal Income Tax
Consequences."
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<PAGE> 23
DISTRIBUTION POLICY OF BCLP
II............................ The amount, timing and manner of distributions
to holders of BCLP II Units will be in the sole
discretion of BCLP II GP. See "Risk Factors and
Other Important Considerations -- Risks
Relating to BCLP II After the
Reorganization -- No Assurance of
Distributions." The Subordinated Debentures,
which will be distributed in the Distribution
to all BCLP Unit holders who participate in
BCLP II, will provide holders a fixed annual
return that will afford a federal income tax
deduction to BCLP, thereby reducing BCLP II's
taxable income. See "Description of
Subordinated Debentures."
GOVERNANCE OF BCLP II......... With respect to matters upon which limited
partners have voting rights, the BCLP II
partnership agreement will authorize action by
written consent and generally will require (i)
the vote of a majority of limited partners
voting, if the general partner (acting by
majority of its board of directors) has either
proposed or approved the matter in question, or
(ii) the vote of eighty percent (80%) of all
outstanding limited partnership interests, if
the general partner has not proposed or
approved the matter in question. See
"Description of BCLP II Units."
DISTRIBUTION POLICY OF CASTLE
CREEK......................... The amount, timing and manner of distributions
to holders of Castle Creek Interests will be in
the sole discretion of Castle Creek GP.
GOVERNANCE OF CASTLE CREEK.... The Castle Creek partnership agreement will
authorize action by written consent and
generally will authorize holders of a majority
of outstanding Interests to determine the
outcome of matters upon which a vote is taken
or consent is given. The Castle Creek
partnership agreement also will broadly
authorize the holders of a majority of
outstanding Castle Creek Interests to approve
corporate actions relating to the Interests,
including reverse splits. Because Castle Creek
intends to remain a non-publicly traded entity
in order to preserve pass-through treatment for
tax purposes, and to remain exempt from
investment company regulation, if Castle Creek
has one hundred or more beneficial holders upon
consummation of the Reorganization, a reverse
split of Castle Creek Interests could be
effected to reduce the number of its beneficial
holders. See "Description of Castle Creek
Interests." After the Reorganization, Gaston
Affiliates will control Castle Creek GP and
will likely own a substantial majority of the
outstanding Castle Creek Interests. See
"Special Factors -- Allocation of Interests in
the Reorganization."
MANAGEMENT FEES............... CLP currently pays an annual management fee to
BCC, its general partner, of $750,000, subject
to annual increases based on annual cash flows
from basketball operations after June 30, 1989.
Management fees paid to BCC in the fiscal years
ended June 30, 1997, 1996 and 1995 totaled
$820,000, $1,555,000 and $1,336,000,
respectively. BCC is wholly owned and
controlled by Gaston Affiliates. Although the
BCLP Partnership Agreement authorizes the
payment of management fees to Celtics, Inc., no
other management fees presently are paid to
Celtics, Inc. or any other affiliated entity.
BCLP II's and Castle Creek's respective
partnership agreements provide that management
fees may be paid by BCLP II and
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<PAGE> 24
Castle Creek to their respective general
partners. Although payment of management fees
by BCLP II and Castle Creek to their respective
general partners currently is not contemplated,
such fees may be paid at any time in the
future. After the Reorganization it is
contemplated that Celtics Basketball will pay a
management fee to BCC in an amount equal to,
and in lieu of, the management fees currently
collected by BCC from CLP. Management fees paid
to BCC may be increased at any time.
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<PAGE> 25
SUBORDINATED DEBENTURES
SECURITIES OFFERED............ 6% Subordinated Debentures due 2038 (the
"Subordinated Debentures"). $20 in principal
amount of Subordinated Debentures will be
distributed for each BCLP Unit with respect to
which a BCLP Unit holder elects to receive
Subordinated Debentures and cash in the
Distribution.
INTEREST PAYMENT DATES........ June 30, commencing June 30, 1999.
MATURITY DATE................. June 30, 2038.
INTEREST RATE................. The Subordinated Debentures will bear interest
at 6% per annum.
MINIMUM DENOMINATION.......... $20 and integral multiples thereof.
REDEMPTION.................... There will be no mandatory redemption of the
Subordinated Debentures. BCLP, at its option,
may redeem in the aggregate up to 100% of the
original principal amount of the Subordinated
Debentures at any time and from time to time at
a redemption price equal to 100% of the
principal amount thereof plus accrued interest
to the redemption date. The Subordinated
Debentures will not be entitled to any sinking
fund.
SUBORDINATION................. The Subordinated Debentures will be unsecured
obligations and will be subordinate and junior
in right of payment to the prior payment in
full in cash of all Senior Indebtedness of
BCLP. Senior Indebtedness is defined generally
as the principal of and premium, if any, and
interest on all indebtedness of BCLP for money
borrowed, in respect of letters of credit or
for purchase money indebtedness of BCLP, not
including (i) amounts owed to trade creditors
in the ordinary course of business, (ii)
indebtedness of BCLP which, by its terms, is
subordinate in right of payment to or pari
passu with the Subordinated Debentures or (iii)
indebtedness of BCLP to a subsidiary of BCLP.
The Indenture contains no limitations on the
incurrence of Senior Indebtedness by BCLP. As
of March 31, 1998 (on a pro forma basis,
assuming that the Reorganization had occurred
on that date), BCLP would have had
approximately $47.3 million principal amount of
Senior Indebtedness outstanding.
BOOK-ENTRY FORM............... The Subordinated Debentures initially will be
issued, to the extent possible, in the form of
one or more Global Subordinated Debentures (the
"Global Debenture"). Each Global Debenture will
be deposited on the Issue Date with The
Depository Trust Company (the "Depositary") or
its custodian and registered in the name of
Cede & Co., as nominee of the Depositary (such
nominee being referred to herein as the "Global
Debenture Holder").
LISTING....................... The Subordinated Debentures have been approved
for listing on the NYSE, under the symbol
"BOS-38," subject to official notice of
issuance.
EVENTS OF DEFAULT............. An Event of Default is defined in the Indenture
as: (i) a default in the payment of interest on
the Subordinated Debentures when due, continued
for 30 days; (ii) a default in the payment of
principal of and premium, if any, on any
Subordinated Debenture when due at its Stated
Maturity, upon optional redemption, upon
required
16
<PAGE> 26
repurchase, upon declaration of acceleration or
otherwise; (iii) the failure by BCLP to file
with the Commission and furnish to the Trustee
any reports that may be required of BCLP under
the Exchange Act and 30 days or more shall have
expired after a Senior Officer of BCLP first
becomes aware of such failure; (iv) the failure
by BCLP to comply for 30 days after notice with
its other agreements and covenants contained in
the Indenture; or (v) certain events of
bankruptcy, insolvency or reorganization of
BCLP. A default under clause (iv), however,
will not constitute an Event of Default until
the Trustee or the Holders of 25% in principal
amount of the outstanding Subordinated
Debentures notify BCLP of the Default and BCLP
does not cure such Default within the time
specified after receipt of such notice.
AMENDMENT..................... Subject to certain exceptions, the Indenture
may be amended with the consent of the Holders
of a majority in principal amount of the
Subordinated Debentures then outstanding
(including consents obtained in connection with
a tender offer or exchange for the Subordinated
Debentures) and any past Default or compliance
with any provisions may be waived with the
consent of the Holders of a majority in
principal amount of the Subordinated Debentures
then outstanding. Certain amendments to the
Indenture may be made by BCLP and the Trustee
without the consent of any Holder, including
amendments to cure any ambiguity, omission,
defect or inconsistency in the Indenture. See
"Description of Subordinated Debentures."
ORIGINAL ISSUE DISCOUNT....... If the issue price of the Subordinated
Debentures is less than their stated principal
amount (i.e., the Subordinated Debentures are
issued with original issue discount), a holder
of Subordinated Debentures will be required to
include an amount of original issue discount in
such holder's taxable income on an annual
basis. (This amount will be in addition to the
actual cash interest payments on the
Subordinated Debentures.) Since the precise
amount of original issue discount, if any,
depends on the fair market value of the
Subordinated Debentures on the date that they
are issued, that amount cannot be determined
precisely at this time. It is anticipated that
this amount will be very small initially and
will gradually increase annually. Original
issue discount on the Subordinated Debentures,
although includible in income annually by the
holders thereof, may, in some circumstances,
not be deductible by BCLP until paid at
maturity of the Subordinated Debentures and, in
some circumstances, a small portion of the
original issue discount may not be deductible
even at that time. See "Certain Federal Income
Tax Consequences."
17
<PAGE> 27
BACKGROUND OF THE REORGANIZATION
In anticipation of the Tax Change, the Board of Directors of Celtics, Inc.
began considering appropriate courses of action in 1995. The Board engaged tax
and legal advisors, reviewed and analyzed a number of strategic options,
including a variety of reorganization structures ("Reorganization
Alternatives"), and formulated a recommended reorganization proposal.
In September 1997, the Board of Directors of Celtics, Inc. appointed a
special committee of directors (the "Special Committee") to consider a
reorganization plan (the "Initial Recommendation") proposed by management of
Celtics, Inc. as a strategic response to the anticipated impact of the Tax
Change. The members of the Special Committee were John B. Marsh, III and John
H.M. Leithead. Following Mr. Leithead's resignation from the Special Committee
in November 1997, Mr. Marsh continued as the sole member of the Special
Committee.
The Special Committee retained Kavanagh, Maloney & Osnato LLP as its legal
counsel and engaged Houlihan Lokey Howard & Zukin ("Houlihan Lokey") as its
financial advisor to assist the Committee in conducting a preliminary analysis
of the Initial Recommendation. Following informal consultation with Houlihan
Lokey, and based on its preliminary review, the Special Committee determined not
to ask Houlihan Lokey to proceed further as to its analysis and consulted on an
informal basis with another major investment banking firm regarding the Initial
Recommendation. Based on these consultations and the Special Committee's own
analysis of the Initial Recommendation, and in light of the fact that the
Initial Recommendation required an implicit determination of the market value of
the Team, and the inherent difficulty and uncertainty of any such valuation, the
management of Celtics, Inc. withdrew the Initial Recommendation. In March 1998,
the Special Committee delivered its final report to the Board of Directors and
management of Celtics, Inc., in which the Special Committee confirmed its
recommendation that the Initial Recommendation not be pursued further.
Following receipt of this advice from the Special Committee with respect to
the Initial Recommendation, Mr. Paul E. Gaston substantially revised the Initial
Recommendation and proposed the Reorganization. The Reorganization differs from
the Initial Recommendation in the following principal respects:
- Under the Initial Recommendation, BCLP II would have held primarily the
Team and Team-associated assets, while Castle Creek would have held only
investment assets and a 20% limited partnership interest in BCLP II. The
Reorganization, in contrast, provides for allocation of all of BCLP's net
assets, including the Team, between BCLP II and Castle Creek in exact
proportion to the Proportionate Election, thus eliminating the need to
make a market value determination as to the Team.
- Under the Initial Recommendation, BCLP would have incurred substantial
debt to fund its contribution to Castle Creek. The Reorganization
requires substantially less borrowing.
- Under the Initial Recommendation, Castle Creek would have owned a 20%
limited partnership interest in BCLP II and would have had preemptive
rights with respect to BCLP II's issuance of additional BCLP II Units.
Under the Reorganization, Castle Creek has no ownership interest in BCLP
II.
- Under the Initial Recommendation, the number of BCLP Units upon which
Castle Creek Interests could be distributed was limited. The
Reorganization does not limit the number of BCLP Units upon which Castle
Creek Interests may be distributed or the number of Castle Creek
Interests so distributed.
- Under the Initial Recommendation, interest on the Subordinated Debentures
could, subject to certain limitations, be paid by the issuance of
additional Subordinated Debentures rather than in cash. Under the
Reorganization, interest on the Subordinated Debentures must be paid in
cash.
- Under the Initial Recommendation, the Distribution did not include any
cash. Under the Reorganization, Unit holders who elect to receive
Subordinated Debentures also will receive cash of $1 per BCLP Unit.
18
<PAGE> 28
RECOMMENDATION OF GENERAL PARTNER AND
FAIRNESS DETERMINATION
The Board of Directors of Celtics, Inc., BCLP's general partner, has
determined that the Reorganization is fair to BCLP Unit holders. This
determination is principally based on an analysis of the advantages and
disadvantages of the Reorganization, as discussed herein. The Board of Directors
of Celtics, Inc. took into account the allocation of assets to BCLP II and
Castle Creek, respectively, exactly in accordance with the Proportionate
Election, the alternatives to the Reorganization and other considerations. See
"Special Factors -- Alternatives to the Reorganization" and "Special
Factors -- Determinations of the Board of Directors of Celtics, Inc." Because
the Reorganization provides for the allocation of BCLP's net assets, including
the Team, to BCLP II and Castle Creek exactly in accordance with the
Proportionate Election, no independent fairness opinion has been rendered with
respect to the fairness of the consideration to be received by BCLP Unit holders
in the Reorganization. See "Risk Factors and Other Important Considerations --
Risks Relating to the Reorganization -- No Independent Fairness Opinion."
The Board of Directors of Celtics, Inc. believes that the Reorganization is
in the best interests of BCLP and its Unit holders. There are conflicts of
interest between Celtics, Inc. and BCLP's Unit holders with respect to certain
matters relating to the Reorganization. See "Risk Factors and Other Important
Considerations -- Risks Relating to the Reorganization -- Conflicts of Interest;
Terms of Reorganization."
COMPARATIVE RIGHTS OF THE INTERESTS AND
THE SECURITIES TO BE ISSUED
If the Reorganization is approved, holders of BCLP II Units and Castle
Creek Interests will be subject to rights and limitations that are similar in
some respects, and different in other respects, from those to which they are
presently subject as BCLP Unit holders. Those rights and limitations are
discussed below under the heading "Comparison of Interests and Securities to be
Issued."
CERTAIN FEDERAL INCOME
TAX CONSEQUENCES
See "Certain Federal Income Tax Consequences" for a general description of
the tax consequences of the Distribution, the Merger and the Reorganization to
BCLP and BCLP Unit holders.
ACCOUNTING TREATMENT
For financial accounting purposes, the Reorganization will be accounted for
as a series of business combinations and similar transactions among affiliated
entities, with the assets and liabilities recorded at their historical cost.
CONDITIONS TO THE REORGANIZATION
The principal conditions to the Reorganization are (i) approval of the
Reorganization by the Requisite Approval; (ii) approval of the BCLP II Units for
listing on the NYSE and BSE and the Subordinated Debentures for listing on NYSE
or other exchange, market or trading facility; (iii) receipt of a satisfactory
tax opinion and tax ruling; (iv) receipt of any necessary regulatory or NBA
approvals and the expiration or early termination of applicable waiting periods,
if any; (v) no material change in applicable law, including with respect to the
tax treatment of the Reorganization, BCLP II, Castle Creek or the Subordinated
Debentures; and (vi) consummation of both of the Distribution and the Merger.
See "Special Factors -- Terms of the Reorganization."
19
<PAGE> 29
NO APPRAISAL RIGHTS
BCLP Unit holders who object to the Reorganization will have no appraisal,
dissenters' or similar rights. Therefore, BCLP Unit holders who dissent will not
be entitled to receive cash payments from BCLP for the fair value of their
interests when the Reorganization is consummated. See "Risk Factors and Other
Important Considerations -- Risks Relating to the Reorganization -- No
Dissenters', Appraisal or Similar Rights for Nonconsenting Holders of BCLP
Units."
CONSEQUENCES IF REORGANIZATION IS NOT CONSUMMATED
If the Reorganization is not consummated for any reason, BCLP presently
intends to continue to operate as an ongoing business in its current partnership
form. As a result, BCLP would either be taxed as a corporation pursuant to the
Tax Change or would instead elect to pay the Toll Tax. In either event, BCLP
would be subject to increased federal income tax liability and, as a result,
would likely have less cash available for distribution (in the discretion of
Celtics, Inc.) to holders of BCLP Units. Alternatively, BCLP may impose certain
transfer restrictions on and delist its Units from the NYSE and BSE, as is
contemplated in the BCLP Partnership Agreement. In the event that the
Reorganization is not consummated, the Restructuring Transactions will be
reversed to the extent possible. It further is anticipated that if the
Reorganization is not consummated, the Bank Loan (as defined herein) and any
other borrowings undertaken in expectation of the Reorganization may be repaid,
depending on market conditions and other considerations. See "Risk Factors and
Other Important Considerations -- Risks Relating to the
Reorganization -- Consequences if Reorganization is Not Consummated" and
"Special Factors -- Consequences if Reorganization is Not Consummated."
LIST OF PARTNERS
Each BCLP Unit holder has the right, for a proper purpose reasonably
related to the Unit holder's interest in BCLP, upon reasonable demand and at the
Unit holders' own expense, to have furnished to the Unit holder a current list
of the name and last known business, residence and mailing address of each
partner and Unit holder of BCLP. Notification of any such request should be
directed to Celtics, Inc. at 151 Merrimac Street, Boston, MA 02114, Attn:
Secretary.
20
<PAGE> 30
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
OF BCLP
AND
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
OF BCLP II AND CASTLE CREEK
The following tables set forth summary historical consolidated financial
information of BCLP and summary unaudited pro forma consolidated financial
information of BCLP II and Castle Creek as of the dates and for the periods
indicated. The historical consolidated financial information set forth below for
BCLP as of and for each of the three years in the period ended June 30, 1997 are
derived from the audited consolidated financial statements included elsewhere
herein. The historical consolidated financial information set forth below for
BCLP as of and for each of the two years in the period ended June 30, 1994 are
derived from audited consolidated financial statements not included elsewhere
herein. The historical consolidated financial information set forth below as of
and for the nine months ended March 31, 1998 and 1997 is derived from BCLP's
unaudited consolidated financial statements included elsewhere herein and, in
the opinion of management, includes all adjustments (which include only normal
recurring adjustments) necessary to fairly present the financial position and
results of operations for the interim periods.
The summary unaudited pro forma consolidated financial information gives
effect to the Reorganization as if it occurred at the beginning of the period
presented with respect to pro forma consolidated statements of income and as of
the date presented with respect to the pro forma consolidated balance sheets.
The summary unaudited pro forma consolidated financial information is also
presented excluding nonrecurring income tax benefits. The summary historical
consolidated financial information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of BCLP included elsewhere
herein and the Unaudited Pro Forma Consolidated Financial Statements and Notes
thereto of BCLP II and Castle Creek included elsewhere herein. The summary
unaudited consolidated pro forma financial information is not necessarily
indicative of the consolidated operating results or financial position that
would have occurred had the Reorganization been consummated at the beginning of
the periods presented, nor is it necessarily indicative of future operating
results or financial position. See "Index to Financial Statements," page F-1.
The summary unaudited pro forma consolidated financial information is based
on the assumptions set forth in the Notes to the Unaudited Pro Forma
Consolidated Financial Statements of BCLP II and Castle Creek included elsewhere
herein.
21
<PAGE> 31
BCLP SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
MARCH 31, YEAR ENDED JUNE 30,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED STATEMENT OF
INCOME DATA:
Revenues............................... $ 64,945 $ 54,495 $ 62,998 $ 64,780 $ 52,325 $ 44,583 $ 47,559
Costs and expenses..................... 49,575 43,015 62,275 48,830 51,810 38,178 36,278
Interest income (expense), net......... 459 462 736 1,788 (2,567) (1,665) (982)
Net revenue from league expansion...... 7,114
Net proceeds from life insurance....... 5,592
Net realized gains (losses) on
investments.......................... (9) 400 361 (101) 110 (3,595) 79
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing operations
before income taxes.................. 15,820 12,342 1,820 17,637 5,172 6,737 10,378
Provision for (benefit from) income
taxes................................ 1,400 1,000 1,400 1,850 (345) (600)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing operations...... 14,420 11,342 420 15,787 5,517 7,337 10,378
Income (loss) from discontinued
operations........................... 83 10,639 2,145 (5,150)
Gain from disposal of discontinued
operations........................... 38,331 14,284
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income............................. $ 14,420 $ 11,342 $ 420 $ 54,201 $ 16,156 $ 23,766 $ 5,228
========== ========== ========== ========== ========== ========== ==========
Income from continuing operations
applicable to limited partners....... $ 14,098 $ 11,084 $ 358 $ 15,437 $ 5,396 $ 7,124 $ 10,214
Net income applicable to limited
partners............................. $ 14,098 $ 11,084 $ 358 $ 52,910 $ 15,545 $ 23,126 $ 5,157
Per limited partnership unit:
Income from continuing
operations -- basic.................. $ 2.90 $ 2.09 $ 0.07 $ 2.68 $ 0.84 $ 1.11 $ 1.59
Income from continuing
operations -- diluted................ $ 2.56 $ 1.92 $ 0.06 $ 2.59 $ 0.84 $ 1.11 $ 1.59
Net income -- basic.................... $ 2.90 $ 2.09 $ 0.07 $ 9.18 $ 2.43 $ 3.61 $ 0.80
Net income -- diluted.................. $ 2.56 $ 1.92 $ 0.06 $ 8.89 $ 2.43 $ 3.61 $ 0.80
Distributions declared................. $ 1.00 $ 1.00 $ 1.00 $ 1.50 $ 3.00 $ 1.25 $ 1.25
Cash distributions to BCCLP ........... $ 2.40
Book value (deficit) per unit at end of
period............................... $ 0.24 $ (0.23) $ (1.46) $ 2.81 $ (2.46) $ (2.00) $ (4.39)
Weighted average units
outstanding -- basic................. 4,861,278 5,293,979 5,186,100 5,764,966 6,399,722 6,399,722 6,419,493
Weighted average units
outstanding -- diluted............... 5,511,885 5,773,306 5,672,552 5,950,679 6,399,722 6,399,722 6,419,493
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED BALANCE SHEET
DATA:
Current assets......................... $ 105,593 $ 101,938 $ 103,801 $ 135,903 $ 186,101 $ 79,492 $ 50,976
Current liabilities.................... 34,315 28,222 39,139 40,289 126,010 23,289 18,809
Total assets........................... 120,905 115,721 119,200 145,233 210,655 102,933 73,347
Deferred taxes -- noncurrent........... 20,100 20,100 20,100 20,100 6,000 2,900
Notes payable -- noncurrent............ 50,000 50,000 47,500 50,000 60,000 60,000 69,560
Deferred compensation -- noncurrent.... 9,174 10,788 10,380 11,750 14,850 18,248 9,670
Other noncurrent liabilities........... 6,038 7,784 9,870 6,575 19,515 11,325 3,434
Partners' capital (deficit)............ 1,278 (1,173) (7,790) 16,520 (15,720) (12,829) (28,126)
</TABLE>
22
<PAGE> 32
BCLP II
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
MARCH 31, JUNE 30,
1998 1997
------------ ----------
<S> <C> <C>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA:
Equity in income of BCLP.................................... $ 7,805 $ 1,981
Costs and expenses.......................................... 1,464 4,670
Interest income (expense), net.............................. (1,885) (2,074)
Net realized gains (losses) on investments.................. (9) 361
---------- ----------
Income (loss) before income taxes........................... 4,447 (4,402)
Provision for income taxes.................................. 1,400 1,400
---------- ----------
Net income (loss)........................................... $ 3,047 $ (5,802)
========== ==========
Net income (loss) applicable to limited partners............ $ 3,016 $ (5,774)
Per limited partnership unit:
Net income (loss) -- basic.................................. $ 1.08 $ (2.06)
Net income (loss) -- diluted................................ $ 1.08 $ (2.06)
Weighted average units outstanding -- basic................. 2,791,564 2,791,564
Weighted average units outstanding -- diluted............... 2,800,944 2,791,564
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1998
------------
<S> <C> <C>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DATA:
Current assets.............................................. $ 86,556
Current liabilities......................................... 19,824
Total assets................................................ 87,448
Notes payable to bank -- noncurrent......................... 30,000
Subordinated debentures..................................... 41,873
Other noncurrent liabilities................................ 10,027
Partners' capital (deficit)................................. (41,849)
Book value (deficit) per unit at end of period.............. $ (14.99)
</TABLE>
23
<PAGE> 33
CASTLE CREEK
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
MARCH 31, JUNE 30,
1998 1997
------------ ----------
<S> <C> <C>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues.................................................... $ 64,945 $62,998
Costs and expenses.......................................... 49,310 57,605
Interest income (expense), net.............................. (378) (1,079)
-------- -------
Income from operations before minority interest............. 15,257 4,314
Minority interest in Celtics Basketball Holdings L.P........ (7,963) (2,021)
-------- -------
Net income.................................................. $ 7,294 $ 2,293
======== =======
Net income applicable to limited partners................... $ 7,220 $ 2,270
Per limited partnership unit:
Net income -- basic......................................... $ 311.27 $ 97.84
Net income -- diluted....................................... $ 257.45 $ 80.93
Weighted average units outstanding -- basic................. 23,197 23,197
Weighted average units outstanding -- diluted............... 28,046 28,046
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1998
------------
<S> <C> <C>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DATA:
Current assets.............................................. $ 48,577
Current liabilities......................................... 15,695
Total assets................................................ 90,271
Notes payable to bank -- noncurrent......................... 50,000
Deferred compensation -- noncurrent......................... 9,174
Other noncurrent liabilities................................ 13,174
Minority interest in capital deficiency of Celtics
Basketball Holdings L.P................................... (27,573)
Partners' capital........................................... 2,228
Book value per unit at end of period........................ $ 79.44
</TABLE>
24
<PAGE> 34
RATIO OF EARNINGS TO FIXED CHARGES
BCLP's and BCLP II's ratio of earnings to fixed charges for each of the
periods indicated are as follows:
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED YEARS ENDED
MARCH 31, JUNE 30,
----------- --------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BCLP Historical Ratio of Earnings to Fixed
Charges.......................................... 4.53 3.73 1.30 3.72 1.54 2.49 5.62
BCLP II Pro Forma Ratio of Earnings to
Fixed Charges (1)................................ 1.59 0.55
</TABLE>
(1) The pro forma earnings for the year ended June 30, 1997 are inadequate
to cover the minimum fixed charge ratio of 1.0 to 1. The pro forma
coverage deficiency amounted to $4,401,587.
The ratio of earnings to fixed charges is computed by dividing fixed
charges into pre-tax income from continuing operations plus fixed charges. Fixed
charges consist of interest expense and that portion of net rental expense
deemed representative of the interest factor.
25
<PAGE> 35
RISK FACTORS AND OTHER IMPORTANT CONSIDERATIONS
Each holder of BCLP Units should carefully read this Prospectus, including
the exhibits hereto, and should give particular attention to the significant
factors discussed below.
RISKS RELATING TO THE REORGANIZATION
Conflicts of Interest; Terms of Reorganization. In considering the
recommendation of the Board of Directors of Celtics, Inc., holders of BCLP Units
should be aware that current members of BCLP's management and the Board of
Directors of Celtics, Inc. have certain interests that may present them with
conflicts of interest in connection with the Reorganization and the transactions
contemplated thereby. Celtics, Inc. has determined the terms of the
Reorganization, including the amount and nature of the Distribution and the
allocation of the total value of the assets of BCLP between BCLP II and Castle
Creek. Because Gaston Affiliates control Celtics, Inc. and, through Celtics,
Inc., control BCLP, and will control, after the Reorganization BCLP II GP,
Celtics, Inc., Castle Creek GP and BCC, Celtics, Inc. has a substantial conflict
of interest in determining the terms of the Reorganization. Gaston Affiliates
also are expected to hold, after consummation of the Reorganization, a
substantial majority of the outstanding Castle Creek Interests. Additionally,
current members of the Board of Directors of Celtics, Inc. (who also presently
are members of the Board of BCC) are expected to serve on the Boards of
Directors of BCLP II GP and Castle Creek GP. Although Celtics, Inc.'s Board of
Directors believes that the terms of the Reorganization are fair to the holders
of BCLP Units, such terms are not the result of arms' length negotiations and
there can be no assurance that the terms of the Reorganization are as favorable
as could be obtained absent such potential conflicts of interest.
No Independent Representation of Holders of BCLP Units. Holders of BCLP
Units were not separately represented in establishing the terms of the
Reorganization. The terms of the Reorganization were determined by Celtics, Inc.
without consultation with any separate representative of the public holders of
BCLP Units. Because the holders of BCLP Units are not separately represented in
the Reorganization, there is a risk that their best interests are not being
protected in connection with the Reorganization and that, had independent
representation been obtained, it is possible that the terms and conditions of
the Reorganization would be different.
No Independent Fairness Opinion or Appraisal. No independent appraisal or
fairness opinion has been rendered with respect to the fairness of the
consideration to be received by BCLP Unit holders in the Reorganization and no
opinions, valuations or reports from outside parties concerning the fairness of
the Reorganization were obtained. The Board of Directors of Celtics, Inc.
determined that the Reorganization was fair to the holders of BCLP Units based
on its own analysis. See "Special Factors -- Determinations of the Board of
Directors of Celtics, Inc."
Nonconsenting Holders of BCLP Units Bound by Majority Approval. BCLP Unit
holders holding greater than a majority of all outstanding BCLP Units have
executed or agreed to execute consents approving the Reorganization. If the
Reorganization is approved by the Requisite Approval, all of the existing
holders of BCLP Units will be bound and will receive BCLP II Units, Subordinated
Debentures and cash, Castle Creek Interests or some combination thereof in
respect of their BCLP Units, even if such holder is not in favor of the
Reorganization. It is anticipated that the Reorganization will be approved. See
"Voting Information -- Vote Required; Written Consent in Lieu of Meeting."
No Dissenters', Appraisal or Similar Rights for Nonconsenting Holders of
BCLP Units. Under the Delaware Act and the terms of the BCLP Partnership
Agreement, holders of BCLP Units will have no dissenters', appraisal or similar
rights in connection with the Reorganization, nor will such rights be
voluntarily accorded by BCLP. Therefore, holders of BCLP Units will not be
entitled to receive cash payment for the fair value of their interests if they
dissent and the Reorganization is consummated. Objecting holders of BCLP Units
will have no alternative to the receipt of BCLP II Units, Subordinated
Debentures and cash or Castle Creek Interests, or some combination thereof,
other than selling their BCLP Units before consummation of the Reorganization.
26
<PAGE> 36
Control by Gaston Affiliates. Gaston Affiliates presently own
approximately 47.8% of outstanding BCLP Units and all of the outstanding capital
stock of Celtics, Inc., and have executed consents with respect to all of their
BCLP Units in favor of the Reorganization. In addition, pursuant to the Option
Exercise Agreement, Stephen C. Schram has agreed to (i) exercise certain options
to purchase BCLP Units and (ii) execute a consent with respect to the Additional
Units in favor of the Reorganization. BCLP Unit holders holding greater than a
majority of all outstanding BCLP Units thus have executed or agreed to execute
consents approving the Reorganization. See "Voting Information -- Vote Required;
Written Consent in Lieu of Meeting."
After consummation of the Reorganization, Gaston Affiliates will continue
to beneficially own all of the outstanding capital stock of Celtics, Inc. and
also will beneficially own all of the outstanding capital stock of BCLP II GP
and Castle Creek GP. Additionally, the Board of Directors of Celtics, Inc.
presently includes members of the Gaston family (who also are members of the
Board of BCC), who are expected to serve on the Boards of Directors of BCLP II
GP and Castle Creek GP. Gaston Affiliates also are expected to hold, after
consummation of the Reorganization, a substantial majority of the outstanding
Castle Creek Interests. As a result, the Gaston Affiliates will have the ability
to control the management policies and operations of Castle Creek, BCLP II,
BCLP, CLP, Celtics Pride, Celtics Basketball Holdings and Celtics Basketball
(including, in each case, whether distributions are made to holders of limited
partnership interests and the timing and amount of such distributions, if any),
and will have the power to elect the Boards of Directors of the general partners
of each of Castle Creek, BCLP II, BCLP, CLP, Celtics Pride, Celtics Basketball
Holdings and Celtics Basketball. Currently, control of BCLP is vested in
Celtics, Inc., which is owned and controlled by Gaston Affiliates, and holders
of BCLP Units have limited rights to vote only in certain circumstances. See
"Comparison of Interests and Securities to be Issued."
Consequences if Reorganization Not Consummated. If the Reorganization is
not consummated for any reason, BCLP currently intends to continue to operate as
an ongoing business in its current partnership form. As a result, BCLP would
either be taxed as a corporation pursuant to the Tax Change or would instead
elect to pay the Toll Tax. In either event, BCLP would be subject to increased
federal income tax liability and, as a result, would likely have less cash
available for distribution (in the discretion of Celtics, Inc.) to holders of
BCLP Units. Alternatively, BCLP may impose certain transfer restrictions on and
delist its Units from the NYSE and BSE, as is contemplated in the BCLP
Partnership Agreement. In the event that the Reorganization is not consummated,
the Restructuring Transactions will be reversed to the extent possible. It
further is anticipated that if the Reorganization is not consummated, the Bank
Loan (as defined herein) and any other borrowings undertaken in expectation of
the Reorganization may be repaid, depending on market conditions and other
considerations. No other transaction currently is being considered by BCLP as an
alternative to the Reorganization, although BCLP may from time to time explore
other alternatives.
Tax Considerations. If the issue price of the Subordinated Debentures is
less than their stated principal amount (i.e., the Subordinated Debentures are
issued at a discount), a holder of Subordinated Debentures will be required to
include an amount of original issue discount in such holder's taxable income on
an annual basis. (This amount will be in addition to the actual cash interest
payments on the Subordinated Debentures.) Since the precise amount of original
issue discount, if any, depends on the fair market value of the Subordinated
Debentures on the date that they are issued, that amount cannot be determined
precisely at this time. It is anticipated that this amount will be very small
initially and will gradually increase annually. Original issue discount on the
Subordinated Debentures, although includible in income annually by the holders
thereof, may, in some circumstances, not be deductible by BCLP until paid at
maturity of the Subordinated Debentures and, in some circumstances, a small
portion of the original issue discount may not be deductible even at that time.
A holder of BCLP Units may recognize some amount of taxable gain as a
result of the Merger. The precise amount of such gain, if any, will depend upon
a number of factors, including the holder's cost for the BCLP Units. A holder of
BCLP Units who receives both Subordinated Debentures and cash and Castle Creek
Interests in the Distribution may recognize a greater amount of taxable gain in
the Merger than if such holder had received only Subordinated Debentures and
cash.
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Transaction Costs. Transaction costs are expected to amount to
approximately $1.5 million in connection with the Reorganization, all of which
will be paid by BCLP whether or not the Reorganization is completed.
Change in Ownership Rights. As a result of the Reorganization, holders of
BCLP Units will lose certain rights associated with their ownership of BCLP
Units and will acquire certain rights associated with their ownership of BCLP II
Units and Subordinated Debentures or Castle Creek Interests. For a comparison of
these factors, which may be related to investment objectives of limited
partners, see "Comparison of Interests and Securities to Be Issued."
Castle Creek Interests to Be Issued Only on 100 to One Basis. Holders of
BCLP Units in less than 100-BCLP Unit "lots" ("Fractional Lots") who elect to
receive Castle Creek Interests in the Distribution (and who do not purchase on
the market or otherwise acquire a sufficient number of BCLP Units to create 100
Unit "lots") will not receive Castle Creek Interests with respect to such
Fractional Lots, but instead will receive Subordinated Debentures and cash and,
upon consummation of the Merger, BCLP II Units.
RISKS RELATING TO BCLP II AFTER THE REORGANIZATION
Uncertainty Regarding Market Price of BCLP II Units. The BCLP II Units
will be a new security, reflecting the consummation of the Reorganization and
the replacement of BCLP Units with BCLP II Units in connection with the Merger
pursuant to the Plan. BCLP II GP is unable to predict the market price of the
BCLP II Units in relation to current market prices of the BCLP Units or
otherwise.
At present there is no trading market for BCLP II Units. Application has
been made to list the BCLP II Units on the NYSE and the BSE under the trading
symbol "BOS". There can be no assurance that an active market in the BCLP II
Units will develop or that holders of the BCLP II Units will be able to sell
their securities at favorable prices. If a market does develop for the BCLP II
Units, the BCLP II Units and the Subordinated Debentures may trade at prices
that, in the aggregate, are less than the prior trading prices of BCLP Units.
There also can be no assurance that holders of BCLP II Units will be able to
sell their securities at a price that recognizes the value of the underlying
assets of BCLP II and its subsidiaries, including the Team.
The closing price of BCLP Units on the NYSE on May 20, 1998 was $20.81.
Future Dilution. BCLP II will be permitted to issue additional equity or
debt securities without restriction for such consideration as BCLP II GP
determines to be in the best interests of BCLP II. Holders of BCLP II Units will
not be entitled to preemptive or similar rights. Issuances of additional equity
in BCLP II could adversely affect the equity interest of holders of BCLP II
Units and the market price of BCLP II Units, and the interests of BCLP II Unit
holders in the assets, liabilities, cash flow and results of operations of BCLP
II and the Team could be substantially diluted.
Provisions that May Discourage Changes of Control. The BCLP Partnership
Agreement presently contains many provisions which are designed to vest in
Celtics, Inc. the right to manage the business of BCLP and to restrict the right
of the limited partners and holders of BCLP Units to change management and to
approve transactions of a type that are generally subject to stockholder
approval in the case of a corporation. BCLP does not hold annual meetings of
limited partners or holders of BCLP Units and does not permit limited partners
or holders of BCLP Units to vote on many of the matters upon which stockholders
of a corporation generally are permitted to vote. Holders of BCLP Units have no
right to vote on directors of Celtics, Inc.
The BCLP II Partnership Agreement contains similar provisions restricting
the right of limited partners and holders of BCLP II Units to change management
and approve certain transactions. Upon effectiveness of the Reorganization,
holders of BCLP II Units will have the rights described under the captions
"Description of BCLP II Units" and "Comparison of Interests and Securities to Be
Issued." As with BCLP, BCLP II does not expect to hold annual meetings of
limited partners or holders of BCLP II Units and does not expect to permit
limited partners or holders of BCLP II Units to vote on many of the matters upon
which stockholders of a corporation generally are permitted to vote. Holders of
BCLP II Units will have no right to vote on
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directors of BCLP II GP. These provisions with respect to BCLP II may reduce
interest in BCLP II as a potential acquisition target or reduce the likelihood
of a change in the management or voting control of BCLP II without the consent
of BCLP II GP and the then-incumbent Board of Directors of BCLP II GP.
Differences Between BCLP Units and BCLP II Units. There are certain
differences between the BCLP Units and the BCLP II Units, including differences
in tax treatment. See "Certain Federal Income Tax Consequences." The differences
arise primarily from provisions of the Code, and differences between the
respective governing instruments of BCLP and BCLP II. See "Comparison of
Interests and Securities to Be Issued" for a description of these differences.
Increased Leverage; Decreased Liquid Assets. As a result of the
Reorganization, BCLP II, on a pro forma consolidated basis as compared to BCLP,
will have increased levels of debt, including the Subordinated Debentures and
approximately $30 million in additional debt incurred in connection with the
Reorganization for the purpose of funding BCLP's contribution to Castle Creek as
part of the Restructuring Transactions. In addition, BCLP II, on a pro forma
consolidated basis, will have a decrease of approximately $10 million in
investment assets after the Reorganization, reflecting the Restructuring
Transactions.
No Assurance of Distributions. Pursuant to the BCLP Partnership Agreement,
Celtics, Inc. determines from time to time in its sole discretion the amount
that is distributable by BCLP, declares the amount of the distribution and
specifies the record date for determining the partners and Unit holders entitled
to receive the distribution. After the Reorganization, BCLP II GP will have
similar complete discretion to determine whether distributions are made to
holders of BCLP II Units and the timing and amount of such distributions, if
any. As compared to BCLP, BCLP II may have less cash available for distribution
because of the interest payments to be made by BCLP on the Subordinated
Debentures.
Unknown Investments. After the Reorganization, the assets of BCLP II will
include existing investment assets held in subsidiaries of BCLP. Such investment
assets will continue to be held after the Reorganization in the same corporate
subsidiaries of BCLP as such assets are held before the Reorganization, and will
continue after the Reorganization to be managed by CCC, which will be indirectly
controlled by BCLP II. Although BCLP management has indicated its intent to
invest all or a portion of these assets in other operating businesses, no such
investments have been identified, nor can there be any assurance that any such
opportunities will be identified or that any potential investments or
acquisitions will occur. Holders of BCLP II Units will have no right to vote on
such investments or acquisitions and no opportunity to evaluate for themselves
the relevant economic, financial and other information regarding potential
investments. Just as holders of BCLP Units have been dependent on BCLP
management with respect to the management and investment of BCLP's investment
portfolio, holders of BCLP II Units likewise will be dependent on BCLP II
management with respect to such assets.
Control by General Partner and Gaston Affiliates. BCLP II Unit holders
will have only limited voting rights on matters affecting BCLP II's business and
will have no right to participate in BCLP II's management. Holders of BCLP II
Units will have no voting rights regarding the selection of the management of
BCLP II or the Board of Directors of BCLP II GP. After consummation of the
Reorganization, Gaston Affiliates will beneficially own all of the outstanding
capital stock of BCLP II GP and thus will have the power to elect the Board of
Directors of BCLP II GP. Additionally, members of the Gaston family are expected
to serve on the Board of Directors of BCLP II GP. As a result, after the
Reorganization, Gaston Affiliates will have the ability to control the
management policies and operations of BCLP II (including whether distributions
are made to holders of BCLP II Units and the timing and amount of such
distributions, if any). See "Special Factors -- Allocation of Interests in
Reorganization" and "Comparison of Interests and Securities to be Issued."
Limited Voting Rights. Holders of BCLP II Units will have limited voting
rights similar to those currently applicable to holders of BCLP Units. Like
BCLP, BCLP II will not be required to hold annual meetings and holders of BCLP
II Units will not be entitled to participate in electing directors of BCLP II
GP.
Investment Company Considerations. The regulatory scope of the Investment
Company Act of 1940 (the "Investment Company Act") extends generally to
companies engaged primarily in the business of
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investing, reinvesting, owning, holding or trading securities. The Investment
Company Act also may apply to a company that does not intend to be characterized
as an investment company, but that nevertheless engages in activities that
subject it to registration and regulation under the Investment Company Act's
definition of an investment company. The BCLP II Partnership Agreement does not
contemplate the substantial restrictions and limitations contained in the
Investment Company Act. Accordingly, BCLP II's current management structure and
certain transactions authorized by the BCLP II Partnership Agreement, including
certain borrowings and issuances of securities, may not be permitted under the
Investment Company Act. Management believes that application of the provisions
of the Investment Company Act to BCLP II could have a material adverse effect on
BCLP II's business and management flexibility. BCLP II may avail itself of a
safe harbor rule that will exempt it from regulation under the Investment
Company Act for a period of one year provided certain conditions are met. BCLP
II intends to remain exempt from investment company regulation either by not
engaging in investment company activities or by qualifying for an exemption from
investment company regulation based on asset composition.
Operational Risks. In addition to the factors noted above, an investment
in BCLP II Units is subject to risks associated with operating conditions,
competitive factors, economic conditions, industry conditions and equity market
conditions. These operational risks, particularly with respect to BCLP II's
indirect investment in the Team, include the following:
-- Competition. The Team competes for sports entertainment dollars
not only with other major league sports, but also with college athletics
and other sports-related entertainment.
-- Dependence on Competitive Success of the Team. The financial
results of BCLP II are expected to depend in part on the Team's competitive
success. Revenue can be adversely affected by a poor performance by the
Team.
-- Uncertainties of Increases in Players' Salaries. Players' salaries
in the NBA have increased significantly over the last several seasons.
There can be no assurance that increases or the rate of increase in
players' salaries can be effectively controlled by NBA rules or otherwise.
Significant increases in players' salaries could have a material adverse
effect on BCLP II's financial condition or results of operations.
-- Dependence on Talented Players. The success of the Team will
depend, in part, upon its ability to retain and attract talented players.
The Team competes with other NBA and non-NBA teams for available players.
There can be no assurance that the Team will be able to retain players upon
expiration of their contracts or identify and obtain new players of
adequate talent to replace players who retire or are injured, traded or
released.
-- Risk of Injuries. To the extent that the financial results of BCLP
II are dependent upon the competitive success of the Team, the likelihood
of achieving such success is substantially reduced by serious injuries to
key players.
-- Uncertainties Relating to Labor Relations in Professional
Sports. There can be no assurance that the NBA will not experience labor
relations difficulties in the future which could have a material adverse
effect on BCLP II's financial condition or results of operations.
-- Dependence on Media Contracts. The financial results of BCLP II
will depend, in part, upon the terms of its television, cable network,
radio and other media contracts. There can be no assurance that BCLP II
will be able to negotiate new media contracts upon expiration of BCLP's
current contracts or, if BCLP's current contracts are renegotiated, that
they will contain terms that are favorable to BCLP II.
RISKS RELATING TO THE SUBORDINATED DEBENTURES
Uncertainty Regarding Market Price of Subordinated Debentures. BCLP has
applied to list the Subordinated Debentures on the NYSE, subject to official
notice of issuance. The Subordinated Debentures will be new securities, and
there can be no assurance as to the prices or the volatility of the prices at
which they will trade after consummation of the Reorganization or as to the
volume of any trading activity.
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Insufficient Cash Flow to Meet Required Interest Payments. Holders of
Subordinated Debentures will be subject to the risk that BCLP's cash flow will
be insufficient to meet required payments under the Subordinated Debentures. In
connection with the Reorganization, BCLP will incur a significant amount of
indebtedness, and BCLP may incur additional indebtedness in connection with its
business operations. Furthermore, the Indenture does not impose restrictions on
BCLP's incurrence of debt. BCLP's ability to make scheduled payments of
principal of, or to pay the interest on, or to refinance, its indebtedness
(including the Subordinated Debentures), will depend on its future performance,
which to a certain extent is subject to general economic, financial, competitive
and other factors beyond its control (including uncertainties relating to player
salaries, player injuries, media contracts, the terms of any new collective
bargaining agreement and competitive factors impacting the Team). There can be
no assurance that BCLP's business will generate sufficient cash flow from
operations or that future borrowings will be available in an amount sufficient
to enable BCLP to service the Subordinated Debentures. On a pro forma basis for
the year ended June 30, 1997 earnings would have been inadequate to cover
interest payments on the Subordinated Debentures and other debt of BCLP. The pro
forma coverage deficiency amounted to $4,401,587. See "Summary -- Ratio of
Earnings to Fixed Charges."
Subordination of Debentures. The Subordinated Debentures will be unsecured
obligations and will be subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness of BCLP. Senior Indebtedness is
defined generally as the principal and premium, if any, and interest on all
indebtedness of BCLP for money borrowed, in respect of letters of credit or for
purchase money indebtedness of BCLP, not including (i) amounts owed to trade
creditors in the ordinary course of business, (ii) indebtedness of BCLP which,
by its terms, is subordinate in right of payment to or pari passu with the
Subordinated Debentures or (iii) indebtedness of BCLP to a subsidiary of BCLP.
As of March 31, 1998 (on a pro forma basis, assuming the Reorganization had
occurred on that date), BCLP would have had approximately $47.3 million
principal amount of Senior Indebtedness outstanding. There are no terms in the
Subordinated Debentures that limit BCLP's ability to incur additional
indebtedness, including indebtedness that ranks senior to or pari passu with the
Subordinated Debentures, or the ability of BCLP's subsidiaries to incur
additional indebtedness. See "Description of Subordinated Debentures."
Structural Subordination. Each of BCLP's subsidiaries is a separate legal
entity that has no obligation to pay any amounts due pursuant to the
Subordinated Debentures or to make any funds available therefor, whether by
dividends, loans or other payments. Because BCLP's subsidiaries will not
guarantee the payment of principal or interest on the Subordinated Debentures,
any right of BCLP to receive assets of its subsidiaries upon their liquidation
or reorganization (and the consequent right of holders of the Subordinated
Debentures to participate in the distribution or realize proceeds from those
assets) will be effectively subordinated to the claims of creditors of BCLP's
subsidiaries (including trade creditors and holders of indebtedness of such
subsidiaries), except if and to the extent that BCLP is itself a creditor of its
subsidiaries, in which case BCLP's claims would still be effectively
subordinated to any security interest in the assets of BCLP's subsidiaries held
by other creditors.
Tax Consequences of Original Issue Discount. If the issue price of the
Subordinated Debentures is less than their face amount (i.e., the Subordinated
Debentures are issued with "original issue discount"), each holder thereof,
including a taxpayer who otherwise uses the cash receipts and disbursements
method of accounting, may be required to include the holder's pro rata share of
original issue discount on the Subordinated Debentures in income as it accrues,
in accordance with a constant yield method based on a compounding of interest.
This method of accounting will generally require the annual inclusion of income
even in the absence of the receipt of (and/or in amounts greater than) cash
payments with respect to the Subordinated Debentures. See "Certain Federal
Income Tax Consequences" for a more detailed discussion of the U.S. federal
income tax consequences for the beneficial owners resulting from the purchase,
ownership and disposition of the Subordinated Debentures.
RISKS RELATING TO CASTLE CREEK AFTER THE REORGANIZATION
Restrictions on Transferability. Pursuant to the terms of the Castle Creek
Partnership Agreement, the Castle Creek Interests will not be freely
transferable. Castle Creek Interests will not be transferable, other
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than (i) by gift, bequest or intestate succession, and (ii) once in any calendar
year on a prescribed date, or with the permission of Castle Creek GP. See
"Description of Castle Creek Interests." In addition, the Castle Creek Interests
will not be traded on any exchange or other market and it is not anticipated
that an active market for Castle Creek Interests will develop.
Differences Between BCLP Units and Castle Creek Interests. There are
certain differences between BCLP Units and Castle Creek Interests which arise,
among other things, from tax considerations. See "Certain Federal Income Tax
Consequences." The differences arise primarily from provisions of the Code, and
differences between the respective governing instruments of BCLP and Castle
Creek. See "Comparison of Interests and Securities to Be Issued" for a
description of these differences.
Control by General Partner and Gaston Affiliates. Castle Creek GP will
have sole control over virtually all aspects of Castle Creek's operations, and
holders of Castle Creek Interests will have no right to participate in
management of Castle Creek and will have only limited voting rights on matters
affecting its business. Holders of Castle Creek Interests will have no voting
rights regarding the selection of the management of Castle Creek GP or the Board
of Directors of Castle Creek GP. In addition, after consummation of the
Reorganization, Gaston Affiliates will beneficially own all of the outstanding
capital stock of Castle Creek GP and thus will have the power to elect the Board
of Directors of Castle Creek GP. Additionally, members of the Gaston family are
expected to serve on the Board of Directors of Castle Creek GP. As a result,
after the Reorganization, the Gaston Affiliates will have the ability to control
management policies and operations of Castle Creek (including whether
distributions are made to holders of Castle Creek Interests and the timing and
amount of such distributions, if any).
Unknown Investments. Immediately following consummation of the
Reorganization, the assets of Castle Creek will consist of an interest in
Celtics Basketball Holdings and certain investment assets. Such investment
assets will be managed and invested in the sole discretion of Castle Creek GP's
management. Because these investments have not yet been identified, an
investment in Castle Creek presents increased risks and uncertainties. Although
Castle Creek GP's management has indicated its intent to invest all or a portion
of Castle Creek's liquid assets in operating businesses, no such investments
have been identified, nor can there be any assurance that any such opportunities
will be identified or that any potential investments or acquisitions will occur.
Holders of Castle Creek Interests will have no right to vote on such investments
or acquisitions and no opportunity to evaluate for themselves the relevant
economic, financial and other information regarding potential investments.
Holders of Castle Creek Interests thus will be dependent on Castle Creek's
management with respect to the operation of Castle Creek and the management and
investment of Castle Creek's investment portfolio.
Investment Company Considerations. Castle Creek will avail itself of a
safe harbor rule that will exempt it from regulation under the Investment
Company Act for a period of one year provided certain conditions are met.
Thereafter, Castle Creek intends to remain exempt from investment company
regulation either by (i) not engaging in investment company activities or (ii)
qualifying for an exemption from investment company regulation based on either
(a) asset composition or (b) having outstanding securities beneficially owned by
not more than one hundred persons. Management specifically reserves the right,
as permitted by the Castle Creek partnership agreement, to effect a reverse
split to reduce the number of holders of Castle Creek Interests as necessary to
avoid regulation under the Investment Company Act. See "Risk Factors and Other
Considerations -- Risks Relating to Castle Creek After the Reorganization." Any
such reverse split would be a taxable event to holders of Castle Creek Interests
who received cash in the transaction.
Public Reporting. Immediately following the Reorganization, Castle Creek
will be subject to certain reporting requirements under the Exchange Act. Also,
depending on the number of holders of Castle Creek Interests, Castle Creek may
be subject to the registration requirements of the Exchange Act after the end of
its first fiscal year. To avoid the attendant costs and administrative expense
of these requirements, however, Castle Creek management intends to take actions
such that Castle Creek, after the end of its first fiscal year, will not
continue to be subject to public reporting obligations. Management specifically
reserves the right, as permitted by the Castle Creek partnership agreement, to
effect a reverse split to reduce the number of holders of Castle Creek Interests
as necessary to avoid Exchange Act registration and related reporting
requirements.
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Any such reverse split would be a taxable event to holders of Castle Creek
Interests who received cash in the transaction.
Provisions that May Discourage Changes of Control. The Castle Creek
Partnership Agreement contains provisions, similar to those of the BCLP
Partnership Agreement, restricting the right of holders of Castle Creek
Interests to change management and approve certain transactions. Upon
effectiveness of the Reorganization, holders of Castle Creek Interests will have
the rights described under the captions "Description Of Castle Creek Interests"
and "Comparison Of Interests And Securities To Be Issued." As with BCLP, Castle
Creek does not expect to hold annual meetings of holders of Castle Creek
Interests and does not expect to permit holders of Castle Creek Interests to
vote on many of the matters upon which stockholders of a corporation generally
are permitted to vote. Holders of Castle Creek Interests will have no right to
vote on directors of Castle Creek GP. These provisions with respect to Castle
Creek may reduce interest in Castle Creek as a potential acquisition target or
reduce the likelihood of a change in the management or voting control of Castle
Creek without the consent of Castle Creek GP and the then-incumbent Board of
Directors of Castle Creek GP.
Cash Distributions. After the Reorganization, Castle Creek GP, like
Celtics, Inc. with respect to BCLP distributions prior to the Reorganization,
will have complete discretion to determine whether distributions are made to
holders of Castle Creek Interests and the timing and amount of such
distributions, if any. An investment in Castle Creek Interests may result in tax
liability even if cash distributions are not made.
Operational Risks. In addition to the factors noted above, an investment
in Castle Creek Interests is subject to risks associated with operating
conditions, competitive factors, economic conditions, industry conditions and
equity market conditions. These operational risks include risks described above
under "Risk Factors and Other Important Considerations -- Risks Relating to BCLP
II After the Reorganization -- Operational Risks."
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VOTING INFORMATION
VOTE REQUIRED; WRITTEN CONSENT IN LIEU OF MEETING
Under the BCLP Partnership Agreement, a limited partner of BCLP may cast
one vote for each limited partnership interest owned. Each BCLP Unit represents
an assignment by the Assignor Limited Partner (as defined therein) of beneficial
ownership of one limited partnership interest in BCLP. The Assignor Limited
Partner is the record holder of BCLP limited partnership interests and is
required to vote the limited partnership interests underlying the BCLP Units in
accordance with the written instructions of the BCLP Unit holders. A BCLP Unit
holder is entitled to instruct the Assignor Limited Partner to cast one vote for
each BCLP Unit owned. The BCLP Partnership Agreement authorizes the limited
partners of BCLP to take action by consent without a meeting if Celtics, Inc.,
BCLP's general partner, so agrees in writing and a written consent is signed by
limited partners owning not less than the minimum number of limited partnership
interests necessary to authorize such action. The Assignor Limited Partner shall
execute such consents as BCLP Unit holders shall instruct.
Approval of the Reorganization requires the affirmative vote of (i)
Celtics, Inc., and (ii) more than fifty percent (50%) of the aggregate number of
outstanding BCLP Units. Celtics, Inc. has approved the Reorganization and the
Plan. Gaston Affiliates presently hold approximately 47.8% of all outstanding
BCLP Units and have executed consents with respect to all of their BCLP Units in
favor of the Reorganization. Holders of greater than a majority of all
outstanding BCLP Units have executed or agreed to execute consents approving the
Reorganization. The Board of Directors of Celtics, Inc. has not conditioned the
Reorganization on approval of a majority of unaffiliated Unit holders.
Therefore, it is anticipated that the Reorganization will be approved by the
Requisite Approval and will be consummated without the approval of unaffiliated
Unit holders. In addition, Walcott has entered into the Option Exercise
Agreement with Stephen C. Schram, pursuant to which Mr. Schram has agreed, among
other things, to (i) exercise certain options to purchase BCLP Units and (ii)
execute a consent with respect to the Additional Units in favor of the
Reorganization.
NO APPRAISAL RIGHTS
Under the Delaware Act and the terms of the BCLP Partnership Agreement,
holders of BCLP Units will have no dissenters', appraisal or similar rights in
connection with the Reorganization, nor will such rights be voluntarily accorded
by BCLP. Therefore, holders of BCLP Units will not be entitled to receive cash
payment for the fair value of their interests if they dissent and the
Reorganization is consummated. Approval of the Reorganization by the Requisite
Approval will bind all BCLP Unit holders, and objecting holders of BCLP Units
will have no alternative to the receipt of their respective Distribution and
either BCLP II Units or Castle Creek Interests other than selling their BCLP
Units before consummation of the Reorganization.
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SPECIAL FACTORS
The Reorganization will be effected pursuant to the terms of the Plan. The
following description of the transactions that will comprise the Reorganization
describes the material provisions of the Plan. This description is qualified in
its entirety by reference to the full text of the Plan, which is included as
Exhibit B hereto.
BACKGROUND OF THE REORGANIZATION
BCLP was organized as a Delaware limited partnership on December 4, 1986 to
acquire, own and operate the Team. Shortly thereafter, BCLP completed an initial
public offering of BCLP Units. BCLP currently owns a 99% limited partnership
interest in CLP, which in turn owns and operates the Team. The 1% general
partnership interest of BCLP is held by Celtics, Inc., a Delaware corporation
that is wholly owned and controlled by Gaston Affiliates. Gaston Affiliates
presently own approximately 47.8% of the BCLP Units currently outstanding.
In the early 1990's, BCLP, through subsidiaries, owned and operated a radio
station and a television station, each in Boston, Massachusetts. In 1994 and
1995, these broadcast properties were sold. Celtics Capital Corporation ("CCC"),
an indirect wholly owned subsidiary of BCLP, holds proceeds from these sales.
At the time of BCLP's organization, PTPs such as BCLP were not subject to
federal income tax at the partnership level. In December 1987, however, Congress
passed the Revenue Act of 1987. Among other things, the Revenue Act of 1987
provided for the Tax Change, pursuant to which PTPs generally would be taxed as
corporations for federal income tax purposes, except that PTPs existing on
December 17, 1987 would be "grandfathered" until their first taxable year
beginning after December 31, 1997. BCLP will become taxable as a corporation
during its taxable year beginning July 1, 1998 if it remains an PTP, unless it
elects to pay the Toll Tax.
In August 1997, Congress passed the Taxpayer Relief Act of 1997, which
permits PTPs to elect, as an alternative to taxation as a corporation, to pay
the Toll Tax, which is a federal tax at a rate of 3.5% of gross income from the
active conduct of trades or businesses, in taxable years beginning after
December 31, 1997.
During the mid-1990's, management and the Board of Directors of Celtics,
Inc. examined the impact of the Tax Change from time to time. In 1995, in
anticipation of the Tax Change, management and the Board of Directors of
Celtics, Inc. began consideration of appropriate courses of action. Alternatives
to the Reorganization that were considered were: (i) allowing BCLP to be taxed
as a corporation pursuant to the Tax Change, (ii) maintaining BCLP's status as a
limited partnership for tax purposes by electing to pay the Toll Tax, (iii)
imposing restrictions on the transferability of BCLP Units and delisting the
BCLP Units from the NYSE and the BSE, and (iv) selling the Team and liquidating
BCLP. See " -- Alternatives to the Reorganization."
EXISTING PARTNERSHIP STRUCTURE
BCLP is a Delaware limited partnership. Unless earlier terminated pursuant
to the BCLP Partnership Agreement, BCLP will continue in existence until
December 31, 2061. Celtics, Inc. holds a 1% general partnership interest in
BCLP, whose limited partnership interests are held by the public and are traded
on the NYSE and the BSE. BCLP owns a 99% limited partnership interest in CLP,
which in turn owns and operates the Team. BCLP wholly owns BCCLP Holding
Corporation, a Delaware corporation, which in turn wholly owns CCC. BCLP also
wholly owns Celtics Investments Incorporated ("CII"), which, together with BCLP
and Celtics Communications, Inc. ("CCI"), owns a 100% general partnership
interest in Boston Celtics Communications Limited Partnership ("BCCLP").
CLP's general partner is BCC. BCCLP's general partner is CCI. Each of
Celtics, Inc., BCC and CCI is a Delaware corporation wholly owned by members of
the Gaston family and Walcott.
Celtics, Inc. makes all decisions relating to the management of BCLP; BCC
manages and controls the Team. Gaston Affiliates are the sole stockholders of
Celtics, Inc., BCC and CCI, and elect the members of the Boards of Directors of
each.
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<PAGE> 45
BCC receives an annual management fee from CLP of $750,000 per annum,
subject to annual increases based on annual cash flows from basketball
operations after June 30, 1989. Management fees paid to BCC in the fiscal years
ended June 30, 1997, 1996 and 1995 totaled $820,000, $1,555,000 and $1,336,000,
respectively. Although the BCLP Partnership Agreement authorizes the payment of
management fees to Celtics, Inc., no other management fees presently are paid to
Celtics, Inc. or any other affiliated entity.
EXISTING ECONOMIC INTERESTS OF THE PARTNERS
Pursuant to the BCLP Partnership Agreement, Celtics, Inc. determines from
time to time, in its sole discretion, the amount of cash or other assets
distributable by BCLP, declares the amount of the distribution and specifies the
record date for determining the partners and Unit holders entitled to receive
the distribution. To the extent distributions are made, they are required to be
made on a pro rata basis. Celtics, Inc. also is authorized, in its sole
discretion, to distribute cash from reserves or from borrowings incurred for the
purpose of making distributions, and to make other distributions, at such times
and in such amounts, as Celtics, Inc. determines to be appropriate. BCLP Unit
holders have no assurance of any specific level or schedule of distributions,
since the timing and amount of distributions from BCLP are determined in the
sole discretion of Celtics, Inc.
Upon any liquidation of BCLP, after provision for payment of creditors,
BCLP Unit holders would receive a distribution in accordance with their
respective capital account balances and a further distribution of remaining
amounts in accordance with their respective percentage interests.
REASONS TO REORGANIZE
The primary objective of the Reorganization is to permit, after the Tax
Change, existing public holders of BCLP Units, at their option and based on each
holder's investment objectives, to maintain a proportionate investment in the
Team and BCLP's investment assets through either (i) BCLP II, a publicly traded
entity taxed as a corporation, or (ii) Castle Creek, a private limited
partnership that will continue to be treated as a "pass-through" entity for tax
purposes. BCLP Unit holders who participate in BCLP II also will have received
Subordinated Debentures and cash in the Distribution. In contrast to
distributions with respect to BCLP Units, which are made at such times and in
such amounts as Celtics, Inc. in its sole discretion may determine, annual
interest payments on the Subordinated Debentures are structured to provide a
fixed minimum return to holders. Additionally, interest payments on the
Subordinated Debentures will be deductible and will offset to some extent the
tax disadvantages of taxation of BCLP II as a corporation. Castle Creek, like
BCLP at the present time, will be treated as a "pass-through" entity for tax
purposes. Unlike BCLP Units, however, Castle Creek Interests will be subject to
significant transfer restrictions and will not be traded on any exchange or
other market, and therefore will not offer the same liquidity as existing BCLP
Units, BCLP II Units or the Subordinated Debentures. Distributions in respect of
Castle Creek Interests will be discretionary. See "Description of BCLP II Units"
and "Description of Castle Creek Interests."
After the Reorganization is consummated, BCLP II and Castle Creek each will
hold a percentage of BCLP's pre-Reorganization net assets (including the Team)
that is exactly in proportion to the Proportionate Election. See " -- Allocation
of Interests in the Reorganization."
Celtics, Inc. believes that the principal reasons to reorganize pursuant to
the Plan at this time are (i) the prospective adverse impact on BCLP of the Tax
Change, and (ii) the potential ability to minimize the prospective adverse
impact of the Tax Change on, while accommodating, to a certain extent, the
various investment objectives of, holders of BCLP Units.
ALTERNATIVES TO THE REORGANIZATION
The alternatives to the Reorganization that BCLP and Celtics, Inc.
considered were (i) allowing BCLP to be taxed as a corporation pursuant to the
Tax Change, (ii) maintaining BCLP's status as a limited partnership for tax
purposes by electing to pay the Toll Tax, (iii) imposing restrictions on the
transferability of BCLP Units and delisting the BCLP Units from the NYSE and the
BSE, and (iv) selling the Team and
36
<PAGE> 46
liquidating BCLP, either immediately or over a period of time. The Board of
Directors of Celtics, Inc. believes that the Reorganization will be more
beneficial to BCLP's Unit holders than any of these alternatives.
Based on BCLP's management's analysis, the Board of Directors of Celtics,
Inc. believes that the Reorganization will result, in the aggregate, in
after-tax income available for distribution (in the discretion of the respective
general partner) that, when added to the fixed interest payments on the
Subordinated Debentures, would exceed the amount that would be available if BCLP
were to pay the Toll Tax or were to be taxed as a corporation. See "Certain
Federal Income Tax Consequences -- Partnership Status and Taxation of BCLP."
The Reorganization allows BCLP's current Unit holders to continue their
investment in the Team and to choose between participating in BCLP II and Castle
Creek based on their own tax considerations and investment objectives. BCLP II
will be subject to corporate-level tax and BCLP II Units and Subordinated
Debentures will be publicly traded securities. The Subordinated Debentures will
mitigate to some extent the adverse impact of corporate-level tax with respect
to BCLP II. Castle Creek will be treated as a partnership for tax purposes, but
Castle Creek Interests will be non-publicly traded, relatively illiquid
securities. See "-- Terms of the Reorganization."
Another alternative to the Reorganization considered by the Board of
Directors of Celtics, Inc. was imposing restrictions on transferability and
delisting BCLP Units from the NYSE and BSE to preserve BCLP's tax status as a
partnership. Imposition of transfer restrictions and delisting of BCLP Units
would result in BCLP Unit holders owning an illiquid investment and would likely
result in a significant reduction in the market value of the BCLP Units.
A final alternative to the Reorganization considered by the Board of
Directors of Celtics, Inc. was sale of the Team and liquidation of BCLP. One
benefit of liquidating BCLP at this time rather than effecting the
Reorganization would be the possibility that the currently realizable value of
BCLP's assets may exceed the value of BCLP as a continuing business. Another
benefit of liquidating while in partnership form is that a liquidation of BCLP
likely would result in less federal income taxes payable on any gains recognized
by BCLP than if BCLP were converted to a corporation and subsequently liquidated
because the partners of BCLP would only pay federal income tax on partnership
gains, while a corporation would pay federal income tax on gains derived from
liquidating its assets and the corporation's stockholders would also pay federal
income tax on the amount by which the liquidation proceeds received by the
stockholders exceeded their bases in the shares.
Liquidating BCLP would involve selling the Team, which the Board of
Directors of Celtics, Inc. believes has potential for substantial future
appreciation in value based upon a variety of factors, including (i) the Team's
improved performance prospects in future seasons as a result of changes in
coaching staff, among other things, (ii) the prospects for future increases in
overall revenues, and (iii) the increasing interest of media and entertainment
businesses in acquiring sports teams at favorable valuations. In addition,
although no efforts were made to solicit bids for the Team or to determine a
price or range of prices that the Team might bring, the Board of Directors of
Celtics, Inc. believes that current market conditions, including the possibility
of a player strike and current uncertainties relating to player salaries as a
result of on-going collective bargaining, will prevent the Team's inherent value
from being recognized in a sale at this time. The Board of Directors of Celtics,
Inc. also considered that liquidation would create an immediate large taxable
gain for BCLP's investors while the Reorganization would result in a
substantially smaller taxable gain. Accordingly, the Celtics, Inc. Board
believes that liquidating BCLP's assets at this time would not result in BCLP
Unit holders receiving acceptable value. See "-- Determination of Board of
Directors of Celtics, Inc." In addition, the Board of Directors rejected
liquidation as an alternative because liquidation would not provide the holders
of BCLP Units with any continuing equity interest in BCLP and the Team and would
be unlikely to be accomplished on a tax-advantaged basis. The Board believes
that in the long term the value of BCLP and the Team to the holders of BCLP
Units would exceed the value of the proceeds of a liquidation at this time.
As set forth under " -- Background of the Reorganization," BCLP's
management and Celtics, Inc.'s Board of Directors examined, over a lengthy
period of time, alternatives to the Reorganization. Information compiled by
management was used as the basis for the examination and the estimated impact of
alternatives
37
<PAGE> 47
on BCLP Unit holders was considered carefully. Based on BCLP's management's
analysis, the Board of Directors of Celtics, Inc. believes that the
Reorganization will result, in the aggregate, in after-tax income available to
BCLP's current Unit holders (distributable in the sole discretion of the
respective general partner) that, when added to the fixed interest payment on
the Subordinated Debentures, would exceed the amount that would be available
under either the alternative providing for payment of the Toll Tax or the
alternative providing for taxation as a corporation.
The Board of Directors of Celtics, Inc. believes that the Reorganization is
fair to unaffiliated holders of BCLP Units and that the Reorganization will
result in certain benefits to such Unit holders. Among the factors discussed
herein, the Board noted that, in contrast to the discretionary distributions
currently made to BCLP Unit holders, the Subordinated Debentures are intended to
provide a fixed, annual return to holders. The Board of Directors of Celtics,
Inc. further believe that allocating BCLP's net assets (including the Team) to
BCLP II and Castle Creek, respectively, exactly in accordance with the
Proportionate Election, is fair to BCLP Unit holders. The conclusions of the
Board of Directors of Celtics, Inc. are based on an analysis of a number of
factors relating to the Reorganization and consideration of various
alternatives, as discussed herein. No independent fairness opinion has been
rendered with respect to the fairness of the consideration to be received by
BCLP Unit holders in the Reorganization.
TERMS OF THE REORGANIZATION
Restructuring Transactions. Pursuant to the Plan and in anticipation of
the Reorganization, BCLP will complete the Restructuring Transactions. If the
Reorganization is not consummated, the Restructuring Transactions will, to the
extent possible, be reversed. The Restructuring Transactions are as follows:
- CLP will contribute the Team to Celtics Basketball in exchange for a
99.999% limited partnership interest in Celtics Basketball.
- BCLP will contribute approximately $39.6 million in investment assets to
Castle Creek and approximately $0.4 million in investment assets to
Castle Creek GP (based on the Assumed Castle Creek Election Percentage);
Castle Creek GP will in turn contribute this $0.4 million in investment
assets to Castle Creek in exchange for its general partner interest.
- CLP will buy a certain investment asset from CCC for approximately $6.5
million in cash.
- CLP will transfer its 99.999% limited partnership interest in Celtics
Basketball and the certain investment asset purchased from CCC to Celtics
Basketball Holdings in exchange for a 99.999% limited partnership
interest in Celtics Basketball Holdings.
- CLP will distribute 99% of the Assumed Castle Creek Election Percentage
of its limited partnership interest in Celtics Basketball Holdings to
BCLP, and 1% of the Assumed Castle Creek Election Percentage of its
limited partnership interest in Celtics Basketball Holdings to BCC
(assuming that only Gaston Affiliates elect to receive Castle Creek
Interests in the Distribution). BCLP will in turn transfer 99% of these
interests in Celtics Basketball Holdings received by it to Castle Creek
and transfer 1% of these interests in Celtics Basketball Holdings to
Castle Creek GP. Castle Creek GP will in turn transfer these interests in
Celtics Basketball Holdings to Castle Creek. BCC will transfer the
limited partnership interests in Celtics Basketball Holdings received by
it to Castle Creek. The actual percentage of Celtics Basketball Holdings
limited partnership interests distributed by CLP will depend upon the
Proportionate Election, which will likely be greater than the Assumed
Castle Creek Election Percentage.
- CLP will contribute the remainder of its limited partnership interests in
Celtics Basketball Holdings to Celtics Pride.
- BCLP will distribute all issued and outstanding stock of Castle Creek GP
to Celtics, Inc.
- Celtics, Inc. will contribute its 1% general partnership interest in BCLP
to BCLP GP.
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<PAGE> 48
- BCLP II GP will contribute approximately $0.2 million in cash to BCLP II,
subject to later adjustment based upon market trading prices.
As a result of the Restructuring Transactions, among other things: (i) BCLP
II will own a 99% limited partnership interest in BCLP, which will in turn own a
99% limited partnership interest in CLP, which will in turn own a 99.999%
general partnership interest in Celtics Pride; (ii) Celtics Pride will own a
49.883029% limited partnership interest in Celtics Basketball Holdings (based on
the Assumed Castle Creek Election Percentage); (iii) Celtics Basketball Holdings
will own a 99.999% limited partnership interest in Celtics Basketball, which
will in turn own the Team; (iv) Castle Creek will own a 50.115971% limited
partnership interest in Celtics Basketball Holdings and approximately $40.0
million in investment assets (based on Assumed Castle Creek Election
Percentage); and (v) BCLP GP will be BCLP's general partner and will be wholly
owned by Celtics, Inc. The respective ownership interests of Celtics Pride and
Castle Creek in Celtics Basketball may vary from the percentages set forth
above, depending on the actual Proportionate Election, which likely will be
greater than from the Assumed Castle Creek Election Percentage.
Effective Time. The Reorganization is expected to be consummated after
consummation of the Distribution and satisfaction or waiver of the conditions
set forth in the Plan, upon the filing with the Office of the Secretary of State
of Delaware of a certificate of merger relating to the Merger, or such later
time as is specified in such certificate of merger (the "Effective Time").
Conditions to the Reorganization. The principal conditions to the
Reorganization are (i) approval of the Reorganization by the Requisite Approval;
(ii) approval of the BCLP II Units for listing on the NYSE and the Subordinated
Debentures for listing on the NYSE or other exchange, market or trading
facility; (iii) receipt of a satisfactory tax opinion and tax ruling; (iv)
receipt of any necessary regulatory or NBA approvals and the expiration or early
termination of applicable waiting periods (including those applicable under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, if any); (v) no material
change in applicable law, including with respect to the tax treatment of the
Reorganization, BCLP II, Castle Creek or the Subordinated Debentures; and (vi)
consummation of both of the Distribution and the Merger. See
"-- Consequences if Reorganization is Not Consummated."
Authority of Celtics, Inc. to Effect the Reorganization. The BCLP
Partnership Agreement confers on Celtics, Inc. the authority to effect the
Distribution. Pursuant to the provisions of the Delaware Act, approval of the
Merger requires approval of Celtics, Inc. and the affirmative vote of the
holders of a majority of the outstanding interests entitled to vote.
Indemnification. Pursuant to the terms of the Plan, BCLP before the
Effective Time, and BCLP II and Castle Creek after the Effective Time, have
agreed to indemnify officers, directors, partners, stockholders, agents or
fiduciaries of BCLP, BCLP II, Castle Creek, their respective general partners
and their respective affiliates (collectively, "Indemnified Parties") for
damages paid pursuant to claims based on the fact that such person was an
officer, director, partner or stockholder of one or more of such entities. BCLP,
BCLP II and Castle Creek have also agreed to reimburse such Indemnified Parties
for expenses (including attorneys' fees) incurred in defending such claims.
Pursuant to the Plan, Castle Creek has agreed to indemnify and reimburse
BCLP for certain liabilities, claims and expenses relating to potential
obligations of BCLP and its subsidiaries for payment of taxes attributable to
prior periods. Castle Creek's obligation to indemnify and reimburse BCLP with
respect to such tax liabilities is limited to a proportionate amount of such tax
liabilities that is equal to the Proportionate Election.
Effects of the Reorganization. Immediately after the Reorganization, the
former public holders of BCLP Units will hold either BCLP II Units, Subordinated
Debentures and cash or Castle Creek Interests, or a combination thereof. The
post-Reorganization relative ownership percentages of former public holders of
BCLP in BCLP II and Castle Creek will vary depending on the Proportionate
Election. The table set forth under " -- Allocation of Interests in the
Reorganization -- Ownership of BCLP II and Castle Creek after the
Reorganization" compares the equity ownership of BCLP before the Reorganization
to the equity ownership of BCLP II and Castle Creek after the Reorganization,
based on various possible Proportionate Elections.
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<PAGE> 49
Pursuant to the Plan and in connection with the Reorganization, BCLP and
Celtics, Inc. will effect the Restructuring Transactions. As a result of the
Restructuring Transactions and the Reorganization, Castle Creek will hold a
percentage of BCLP's pre-Reorganization net assets (including the Team) equal to
the percentage of former BCLP Units with respect to which Castle Creek Interests
are distributed in the Distribution. BCLP II will hold a percentage of BCLP's
pre-Reorganization net assets (including the Team) equal to the percentage of
former BCLP Units with respect to which Subordinated Debentures are distributed
in the Distribution.
Tax Consequences of the Reorganization to Holders of BCLP Units. The
Distribution is a tax-free transaction, and the Merger will generally qualify
for tax-free treatment under Section 351(a) of the Code. However, the tax
consequences of the Merger to BCLP Unit holders are complex and, to some extent,
variable and may depend, among other things, upon the basis of a holder in BCLP
Units. See "Certain Federal Income Tax Consequences."
Termination or Amendment of the Reorganization. Celtics, Inc. may
terminate the Plan and abandon the Reorganization at any time before it becomes
effective, whether before or after approval by the holders of BCLP Units. Any
provision of the Plan may be waived at any time by the party that is entitled to
the benefits thereof, and the Plan may be amended at any time before the
Effective Time by agreement of the Board of Directors of Celtics, Inc. and the
other parties to the Plan. After any approval by the holders of BCLP Units,
however, no amendment or waiver may be made that decreases the amount or changes
the type of consideration or that in any way materially and adversely affects
the rights of BCLP Unit holders without the approval of a majority of such
holders.
Voting Arrangements. Walcott has entered into the Option Exercise
Agreement with Stephen C. Schram, pursuant to which Mr. Schram has agreed to (i)
exercise the Unit Option and (ii) execute a consent with respect to the
Additional Units in favor of the Reorganization. BCLP Unit holders holding
greater than a majority of all outstanding BCLP Units have executed or agreed to
execute consents approving the Reorganization. Accordingly, the Reorganization
has been approved by the Requisite Approval.
FINANCING THE REORGANIZATION
Although BCLP indirectly holds approximately $80 million in investment
assets held by CCC, a distribution of these assets to BCLP would be a taxable
event. Accordingly, BCLP will borrow in connection with the Restructuring
Transactions. Depending on the Proportionate Election, BCLP will borrow at least
$30 million in connection with the Restructuring Transactions. BCLP will rely
for these funds on a loan (the "Bank Loan") from Citizens Bank of Massachusetts,
as agent for The Royal Bank of Scotland plc, which BCLP has secured in
anticipation of the Reorganization. The Bank Loan is a revolving credit
agreement for a maximum principal amount of $60 million, $20 million of which is
reserved until certain indebtedness owed by BCLP to an unaffiliated former
principal Unit holder is repaid. See Note O to the consolidated financial
statements of BCLP, included elsewhere herein. Interest on unpaid balances
accrues at a rate of the greater of Citizens Bank of Massachusetts' "Base Rate"
and the Federal Funds Effective Rate plus 1/2 of 1% per annum. BCLP may,
however, elect that interest will accrue daily at LIBOR plus .70% per annum for
certain periods. The Bank Loan expires on June 30, 2003, and is secured by a
pledge of certain assets of CCC. BCLP anticipates that approximately $30 million
will be advanced under the Bank Loan for the purpose of purchasing investment
assets to be transferred to Castle Creek and that amounts advanced under the
Bank Loan will be repaid by BCLP out of operating cash flow.
ALLOCATION OF INTERESTS IN THE REORGANIZATION
Ownership of BCLP II and Castle Creek after the Reorganization. The former
public holders of BCLP Units will hold either BCLP II Units and Subordinated
Debentures plus $1 in cash or Castle Creek Interests, or a combination thereof,
immediately after the Reorganization. Holders who elect to receive Subordinated
Debentures in the Distribution will receive $20 in principal amount of
Subordinated Debentures for each BCLP Unit and will have each of their BCLP
Units converted into one BCLP II Unit in the Merger. Holders who elect to
receive Castle Creek Interests in the Distribution will receive one Castle Creek
Interest for each 100 BCLP Units and will have their BCLP Units canceled in the
Merger.
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<PAGE> 50
The post-Reorganization relative ownership percentages of former public
holders of BCLP in BCLP II and Castle Creek, and the relative values of the
post-Reorganization net assets of BCLP II and Castle Creek, will vary depending
on the Proportionate Election (the percentage of BCLP Unit Holders electing to
receive Castle Creek Interests in the Distribution as compared to those electing
to receive Subordinated Debentures). The following table compares the equity
ownership of BCLP before the Reorganization to the equity ownership of BCLP II
and Castle Creek following the Reorganization, based on various possible
Proportionate Elections.
<TABLE>
<CAPTION>
PRE-REORGANIZATION POST-REORGANIZATION POST-REORGANIZATION
PERCENTAGE OWNERSHIP IN PERCENTAGE OWNERSHIP IN PERCENTAGE OWNERSHIP IN
BCLP(3)(4) BCLP II(3) CASTLE CREEK(3)
---------------------------- ---------------------------- ----------------------------
PROPORTIONATE GASTON OTHER GASTON OTHER GASTON OTHER
ELECTION(5) AFFILIATES(1) INVESTORS(2) AFFILIATES(1) INVESTORS(2) AFFILIATES(1) INVESTORS(2)
- ------------- ------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
50.11647% 50.12183% 49.87817% 0.01075% 99.98925% 100% 0%
62.61647 50.12183 49.87817 0.01434 99.98566 80.03720 19.96280
75.11647 50.12183 49.87817 0.02154 99.97846 66.71835 33.28165
</TABLE>
- ---------------
(1) Includes Units presently held by Gaston Affiliates, and Units subject to the
Option Exercise Agreement. See "Special Factors -- Voting Arrangements."
Does not include Celtics, Inc.'s 1% general partnership interest or Castle
Creek GP's 1% general partner interest.
(2) Other than Gaston Affiliates. See footnote (1).
(3) Gaston Affiliate post-Reorganization ownership of BCLP II reflects 300 BCLP
Units presently held by Gaston Affiliates with respect to which the holders
will elect to receive Subordinated Debentures in the Distribution and,
accordingly, will receive BCLP II Units in the Merger.
(4) As of May 21, 1998, prior to consummation of the Reorganization.
(5) Minimum Proportionate Election equal to the Assumed Castle Creek Election
Percentage (50.116473%) assumes that Gaston Affiliates will elect to receive
Castle Creek Interests in the Distribution with respect to substantially all
of their BCLP Units.
Allocation of Assets Between BCLP II and Castle Creek. The portion of
those assets held directly or indirectly by BCLP (including the Team) that will
be owned directly or indirectly by BCLP II and Castle Creek, respectively, after
the Reorganization will be in exact proportion to the Proportionate Election.
After the Reorganization, the Team will be owned by Celtics Basketball, the
limited partnership interests of which will be held indirectly by BCLP II and
Castle Creek, respectively, in exact proportion to the Proportionate Election.
ACCOUNTING TREATMENT
For financial accounting purposes, the Reorganization will be accounted for
as a series of business combinations and similar transactions among affiliated
entities, with the assets and liabilities recorded at their historical cost.
DETERMINATIONS OF THE BOARD OF DIRECTORS OF CELTICS, INC.
Background. In anticipation of the Tax Change, the Board of Directors of
Celtics, Inc. began consideration of appropriate courses of action in 1995. The
Board engaged tax and legal advisors, reviewed a number of strategic options,
including a variety of Reorganization Alternatives, and formulated a recommended
reorganization proposal (the "Initial Recommendation").
Appointment of the Special Committee and its Independent Advisors. In
September 1997, the Board of Directors of Celtics, Inc. appointed the Special
Committee to evaluate alternative organizational approaches as a result of the
anticipated impact of the Tax Change, including the Initial Recommendation, to
select a Reorganization Alternative and to direct implementation of such
Reorganization Alternative under such terms and conditions as the Special
Committee determined to be in the best interests of BCLP and its Unit holders.
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<PAGE> 51
In fulfilling its mandate, the Special Committee was authorized to take all
actions deemed necessary, advisable or appropriate, including retaining, at the
expense of BCLP, legal and financial advisors.
John B. Marsh, III and John H.M. Leithead were appointed to serve on the
Special Committee and Mr. Marsh was elected to be the chairman of the Special
Committee. Except for their directorship in BCLP, the members of the Special
Committee were not otherwise affiliated with BCLP or Celtics, Inc. Between
September 1997 and the date hereof, Mr. Marsh beneficially owned 500 BCLP Units
and Mr. Leithead did not beneficially own any BCLP Units. The members of the
Special Committee were compensated for service on the Special Committee pursuant
to the established director compensation policy of BCLP, which provides for
payment of $2,500 for each committee meeting attended. On November 24, 1997, due
to the pressing nature of other business and personal obligations, Mr. Leithead
resigned his position with the Special Committee; after such date, the Special
Committee was comprised of Mr. Marsh.
On September 23, 1997, the Special Committee selected Kavanagh, Maloney &
Osnato LLP as its legal counsel to advise the Special Committee regarding its
fiduciary duties and the legal aspects of the Reorganization and other matters
related to the purpose of the Special Committee. On October 9, 1997, after
receiving and reviewing materials regarding the terms of the Initial
Recommendation and the fiduciary duties of the Special Committee, the Special
Committee and its legal counsel met with management of Celtics, Inc. and its
legal counsel to discuss the Initial Recommendation and possible alternatives.
The Special Committee also engaged Houlihan Lokey Howard & Zukin ("Houlihan
Lokey") as its financial advisor to assist the Committee in conducting a
preliminary analysis of the Initial Recommendation.
Due Diligence, Evaluation and Preliminary Analysis of Initial
Recommendation. In October and November 1997, the Board of Directors of
Celtics, Inc. reviewed certain financial information relating to BCLP and its
business, operations and prospects and met with BCLP senior management (Paul E.
Gaston and Richard G. Pond) and counsel to BCLP to discuss the Initial
Recommendation and the financial information.
Beginning in October 1997, Houlihan Lokey reviewed certain financial and
legal information relating to BCLP and its operations. At the Special
Committee's request, Richard G. Pond and BCLP's legal counsel met with
representatives of Houlihan Lokey, the Special Committee and counsel for the
Special Committee, Kavanagh, Maloney & Osnato LLP, to explain the proposed
transaction, to discuss the business, operations and prospects of BCLP and to
respond to questions. Houlihan Lokey did not meet separately with management of
BCLP and did not engage in any negotiations with respect to the terms of the
Reorganization. Subsequently, the Special Committee conferred further with
Houlihan Lokey to discuss that firm's preliminary views as to the Initial
Proposal and as to the estimated franchise value of the Team and the application
of such value in assessing the fairness of the Initial Proposal to the public
Unit holders of BCLP. Houlihan, Lokey also reviewed the debt capacity of BCLP
and the anticipated market value of the Subordinated Debentures to be issued in
the Initial Proposal, but reached no conclusions as to such matters. Houlihan
Lokey did not render any final opinion with respect to the Initial Proposal, but
did furnish members of the Special Committee a preliminary draft report focusing
on their initial assessment of valuation approaches. The preliminary Houlihan
Lokey materials were not furnished to other Board members and were not relied
upon because the Initial Proposal was not pursued.
Following this consultation with Houlihan Lokey, and based on its
preliminary review, the Special Committee determined not to ask Houlihan Lokey
to proceed further as to its analysis and consulted on an informal basis with
another major investment banking firm regarding the Initial Recommendation. Such
other investment banking firm was not engaged and did not perform or receive
payment for any services rendered to the Special Committee or BCLP or in
connection with the Reorganization.
Based upon its consultations with Houlihan Lokey and informal consultations
with the other investment banker, the Special Committee concluded that due to
uncertainties relating to the franchise value of the Team (resulting, among
other things, from market uncertainties involving labor negotiations, player
salaries and the possibility of a player strike, the lack of comparable
transactions and changes in the Team's future prospects due to recent changes in
coaching staff), a reliable estimate of the fair value of the Team would be
difficult to obtain. As a result, the Board of Directors determined that any
transaction requiring a valuation of the Team
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would not be feasible if the transaction was to be completed prior to June 30,
1998, the effective date of the Tax Change, and would not be in the Unit
holders' best interest because a reliable estimate of value would, in the
Board's view, be extremely difficult to obtain in light of the uncertainties
involved in valuing the Team. Accordingly, Celtics, Inc.'s management withdrew
the Initial Recommendation. In March 1998, the Special Committee delivered its
final report to management.
Reevaluation by the General Partner. Following receipt of the Special
Committee's final report with respect to the Initial Recommendation, management
of Celtics, Inc. continued to review the benefits of a structural change in
light of the prospective impacts of the Tax Change. Management continued to
examine and consider the financial outlook of BCLP and the financial impact of
the Tax Change as well as alternative strategic options.
As a result, Mr. Paul E. Gaston substantially revised the Initial
Recommendation and proposed the Reorganization to the Board of Celtics, Inc. In
contrast to the Initial Recommendation, which required an allocation of value
among various entities, the Reorganization preserves the proportionate economic
rights of holders of BCLP Units in the net assets of BCLP. Mr. Gaston also
determined the rate at which interest would be paid on the Subordinated
Debentures, which is intended to fall within the range of historical
distributions of BCLP but not impose an undue financial burden on BCLP. The
Reorganization differs from the Initial Recommendation in the following
principal respects:
- Under the Initial Recommendation, BCLP II would have held primarily the
Team and Team-associated assets, while Castle Creek would have held only
investment assets and a 20% limited partnership interest in BCLP II. The
Reorganization provides for a pro-rata allocation of all of BCLP's assets
between BCLP II and Castle Creek in exact proportion to the Proportionate
Election, thus eliminating the need to make a market value determination
as to the Team.
- Under the Initial Recommendation, BCLP would have incurred substantial
debt to fund its contribution to Castle Creek. The Reorganization
requires substantially less borrowing.
- Under the Initial Recommendation, Castle Creek would have owned a 20%
limited partnership interest in BCLP II and would have had preemptive
rights with respect to BCLP II's issuance of additional BCLP II Units.
Under the Reorganization, Castle Creek has no ownership interest in BCLP
II.
- Under the Initial Recommendation, the number of BCLP Units upon which
Castle Creek Interests could be distributed was limited. The
Reorganization does not limit the number of BCLP Units upon which Castle
Creek Interests may be distributed or the number of Castle Creek
Interests so distributed.
- Under the Initial Recommendation, interest on the Subordinated Debentures
could, subject to certain limitations, be paid by the issuance of
additional Subordinated Debentures rather than in cash. Under the
Reorganization, interest on the Subordinated Debentures must be paid in
cash.
- Under the Initial Recommendation, the Distribution did not include any
cash. Under the Reorganization, holders who elect to receive Subordinated
Debentures also will receive cash.
Based on its analysis and because each holder of BCLP Units would receive
the same proportionate equity interest in the net assets of BCLP after the
Reorganization as such holder held in BCLP immediately prior to the
Reorganization, the Board of Directors of Celtics, Inc., by a unanimous vote of
all Board members, determined that the Reorganization was fair to the
unaffiliated holders of BCLP Units. (Each member of the Board of Directors of
Celtics, Inc. herein is referred to collectively as the "GP Affiliates.") No
opinions, valuations or reports from outside parties concerning the fairness of
the Reorganization were obtained. The Special Committee did not consider the
Reorganization as presently proposed by Celtics, Inc. Once the Board of
Directors of BCLP determined that any transaction requiring a valuation of the
Team would not be feasible and that a pro rata-based transaction would be
recommended, Special Committee review of valuation-related issues was deemed not
to be necessary. The Board determined that, in the context of a pro rata
transaction, a fairness opinion would not provide significant additional comfort
to Unit holders and, therefore, that the expense of obtaining a fairness opinion
was not justified. The lack of consideration by the Special Committee
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therefore had no impact on the Board's fairness determination and recommendation
of the Reorganization. The decision to proceed with the Reorganization was made
by the Board at its meeting on April 10, 1998.
Factors Considered by the Board of Directors and GP Affiliates. In
reaching their respective determinations, the Board of Directors of Celtics,
Inc. and each of the GP Affiliates considered a number of factors. The
respective decisions of the Board and each of the GP Affiliates were made after
considering all of the factors as a whole with respect to their conclusions, and
was not based upon any single factor. In view of the wide variety of factors
considered in connection with its evaluation of the Reorganization, the Board of
Directors and each of the GP Affiliates found it impractical to, and therefore
did not, quantify or otherwise attempt to assign relative weights to the factors
considered in reaching a decision. The Board and each of the GP Affiliates was
aware of, but did not consider significant in the context of a pro rata
transaction, factors such as the current and historical market prices of BCLP
Units and net book value of BCLP, and did not endeavor to determine the going
concern or liquidation values of BCLP. In reaching its decision, the Board
exercised its independent business judgment assisted by its legal advisors. No
unaffiliated representative was retained to act on behalf of the public
securityholders for the purpose of negotiating the terms of any proposed
transactions, nor is the transaction conditioned upon approval by a majority
vote of the unaffiliated Unit holders. It was the determination of the Board of
Directors of Celtics, Inc. and each of the GP Affiliates that because the
Reorganization involves a proportionate distribution of assets, the
Reorganization, in their view, did not raise questions that required review and
consideration by an unaffiliated representative. The Board and the GP Affiliates
noted, based on the advice of counsel, that neither the Partnership Agreement
nor applicable Delaware law require approval by unaffiliated Unit holders.
The material factors considered by the Board and the GP Affiliates included
the following:
- Analysis of Financial Information. The Board and the GP Affiliates
reviewed, considered and analyzed information provided by management of
BCLP, including information as to the financial performance of BCLP,
related federal income tax implications (as a result of the Tax Change,
the Toll Tax and operations as a privately held entity) and the pro forma
effects of the Reorganization, the terms of BCLP II Units, Castle Creek
Interests, the Subordinated Debentures and the governance arrangements of
BCLP II and Castle Creek. The Board and the GP Affiliates reviewed
prospective Team and other revenues, based on various assumptions as to
the Team's success, total sales and media-related revenues, reviewed
anticipated future player and other costs and, based on such information,
determined likely tax burdens and funds available for distribution to
Unit holders under (i) the current structure of BCLP, with corporate
taxation, (ii) the current structure of BCLP, with payment of the Toll
Tax, and (iii) the proposed Reorganization, including issuance of the
Subordinated Debentures by BCLP. The Board concluded that the
Reorganization would be likely, over the next several years, to provide a
greater amount of funds for distribution to Unit holders than would
continuance of the current structure and payment of the Toll Tax in that
holders of BCLP II Units, who also retain Subordinated Debentures, will
receive a relatively fixed stream of income, based on deductible
interest, as well as retain the possibility of other discretionary
distributions from BCLP II, and the holders of Castle Creek Interests
will receive the distributions from available cash, which will not be
reduced by federal taxes at the partnership level.
- Pro Rata-Based Allocation of Values. The Board and the GP Affiliates
took into consideration the pro rata allocation of value to BCLP II and
Castle Creek in connection with the Reorganization, concluding that the
Reorganization would not result in any material change in the relative
economic interests of the existing public holders of BCLP Units.
- Certain Federal Income Tax Consequences of the Reorganization. The Board
and the GP Affiliates considered the applicable federal income tax
consequences of the Reorganization, including the tax consequences noted
below:
S "Pass-through" tax treatment for Castle Creek. The Board and the GP
Affiliates took into account Castle Creek's retention of pass-through
partnership tax treatment, which will have the effect of sheltering
from federal income taxation at the partnership level the income
generated by the
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former BCLP investment assets transferred to Castle Creek and Castle
Creek's portion of the income generated by the Team.
S Tax advantages of Subordinated Debentures. The Board and the GP
Affiliates considered the tax benefits of the deductibility of
interest on the Subordinated Debentures, which will have the effect of
reducing BCLP II's taxable income and mitigating the impact of the Tax
Change on BCLP II. The Board's recommendation as to the fairness of
the Reorganization was based upon existing tax laws.
S Tax impact on BCLP Unit holders and BCLP. The Board and the GP
Affiliates considered the potential tax consequences of the
Reorganization to holders of BCLP Units and BCLP. The Distribution is
a tax-free transaction, and the Merger will generally qualify for
tax-free treatment under Section 351(a) of the Code. However, the tax
consequences of the Merger to BCLP Unit holders are complex and, to
some extent, variable and may depend, among other things, upon the
basis of a holder in BCLP Units.
- Election Between Private Entity and Public Entity Depending on Investment
Objectives. The Board and the GP Affiliates considered the benefits of
allowing BCLP's current Unit holders to continue their investment in the
Team and to choose between participating in BCLP II and Castle Creek
based on their own tax considerations and investment objectives.
- Predictable Payments on Subordinated Debentures. The Board and the GP
Affiliates also noted that the amount of interest payments on the
Subordinated Debentures falls in the range of historical distributions
paid by BCLP, and would be contractually required and predictable, in
contrast to current and historical distributions, which are made in the
discretion of Celtics, Inc.
- Adverse Consequences of Alternatives. The Board and the GP Affiliates
considered the adverse consequences to existing holders of BCLP Units of
alternative strategies, including the consequences of the illiquidity and
reduction in market value which would likely result from delisting BCLP
Units from the NYSE and BSE and the adverse financial implications of
either payment of the Toll Tax or taxation of BCLP as a corporation by
operation of law.
- No Appraisal Rights. The Board and the GP Affiliates were aware of the
absence of appraisal or dissenters' rights for the benefit of holders of
BCLP Units. The Board and the GP Affiliates believed that this factor was
mitigated by the pro rata nature of the Reorganization. See "Voting
Information -- Vote Required; Written Consent in Lieu of Meeting" and
"-- No Appraisal Rights."
- Certain Corporate Governance Matters. The Board and the GP Affiliates
recognized that the Reorganization altered, or could potentially alter,
the existing governance relationships among BCLP Unit holders who elect
to participate in Castle Creek and those who receive BCLP II Units. For
instance, because Gaston Affiliates are expected to elect to participate
almost entirely in Castle Creek, regardless of how many other BCLP Unit
holders likewise participate in Castle Creek, Gaston Affiliates will
control Castle Creek GP and, together with the Additional Units, will own
a substantial majority of the Castle Creek Interests. The Board noted,
however, that Gaston Affiliates presently control Celtics, Inc. BCLP does
not, and is not required to, hold annual meetings of BCLP Unit holders,
and BCLP Unit holders have no right to participate in the election of
directors of Celtics, Inc. Similarly, neither BCLP II nor Castle Creek
will be required to hold annual meetings of their respective investors
and such investors will have no right to participate in the election of
directors of the respective general partners.
- Disadvantages of the Reorganization. The Board of Directors and the GP
Affiliates also considered the disadvantages of the Reorganization, which
the Board and each of the GP Affiliates believes include: (i) the
corporate taxation of BCLP II and the additional layer of taxation
applicable to distributions from BCLP II, (ii) the additional borrowing
required by the Reorganization, and (iii) the financial implications for
BCLP of contractually mandated interest payments on the Subordinated
Debentures.
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- Conflicts of Interest. The Board and the GP Affiliates noted that
several of its members have conflicts of interest in connection with the
Reorganization because such members (and, in some cases, affiliates and
family members) will have a continuing equity interest in BCLP II and/or
Castle Creek, as the case may be, and will serve on the boards of
directors of the general partners of Castle Creek, BCLP II, BCLP, CLP,
Celtics Pride, Celtics Basketball Holdings and Celtics Basketball,
respectively. In reaching its conclusion that the Reorganization is fair
to the holders of BCLP Units, the Board of Directors of Celtics, Inc. and
the GP Affiliates did not consider any of the benefits that would accrue
to them or to their affiliates as a result of the Reorganization other
than those benefits that all holders of BCLP Units would enjoy,
specifically the ability to elect to participate in Castle Creek or BCLP
II. The Board and the GP Affiliates concluded that the Reorganization is
fair to all holders of BCLP Units, whether or not they are Gaston
Affiliates.
To summarize, the Board of Directors of Celtics, Inc. believes and each of
the GP Affiliates believes that the following factors support the determination
of the Board and the GP Affiliates that the Reorganization is fair to
unaffiliated holders of BCLP Units: (i) the Reorganization involves a pro rata
split of net assets, (ii) investors may elect either alternative, and (iii)
those who elect to continue their investment in the public entity will receive a
more predictable income stream than previously, yet will retain the liquidity of
their investment.
The determination of the Board of Directors did not involve a valuation of
BCLP or the Team since the proportion of equity interests in the
pre-Reorganization net assets of BCLP (including the Team) held by the BCLP Unit
holders would be preserved in the Reorganization. Also, because the
Reorganization involves a pro rata division of BCLP's net assets, the Board did
not make any determination concerning the respective or comparative values of an
investment in Castle Creek as compared to an investment in BCLP II and
Subordinated Debentures.
Holders of BCLP Units should be aware that their interests in the
Reorganization were not specially represented. For additional information
regarding certain risks relating to the Reorganization, see "Risk Factors and
Other Important Considerations."
CONSEQUENCES IF REORGANIZATION IS NOT CONSUMMATED
If the Reorganization is not consummated for any reason, BCLP presently
intends to continue to operate as an ongoing business in its current partnership
form. As a result, BCLP would either be taxed as a corporation pursuant to the
Tax Change or would instead elect to pay the Toll Tax. In either event, BCLP
will be subject to increased federal income tax liability and, as a result, may
have less cash available for distribution to holders of BCLP Units.
Alternatively, BCLP may impose certain transfer restrictions on and delist its
Units from the NYSE and BSE, as contemplated in the BCLP Partnership Agreement.
If the Reorganization is not consummated, the Restructuring Transactions
will, to the extent possible, be reversed. Any borrowings undertaken as part of
the Restructuring Transactions, including the Bank Loan, may be repaid,
depending on market conditions and other considerations. No other transaction
currently is being considered by BCLP as an alternative to the Reorganization.
See "Risk Factors and Other Important Considerations -- Risks Relating to the
Reorganization -- Consequences if Reorganization is Not Consummated."
COMPARISON OF INTERESTS AND SECURITIES TO BE ISSUED
The following is a summary of the material differences between the rights
of holders of BCLP II Units and Castle Creek Interests, as compared to the
rights of holders of BCLP Units. This discussion is not, and does not purport to
be, complete and does not identify all differences that may, under given fact
situations, be material to holders of BCLP II Units and Castle Creek Interests
after the Reorganization is consummated. Investors should note that holders of
BCLP Units who elect to receive Subordinated Debentures and cash in the
Distribution will hold, upon consummation of the Reorganization, both BCLP II
Units and Subordinated Debentures in respect of their BCLP Units. The BCLP II
Units and the Subordinated Debentures will be
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separately transferable and will trade separately on the NYSE. For more complete
description of the Subordinated Debentures, see "Description of Subordinated
Debentures."
The discussion below is qualified in its entirety by the more complete
descriptions set forth in "Description of BCLP II Units" and "Description of
Castle Creek Interests." For information concerning availability of copies of
the BCLP Partnership Agreement, the BCLP II Partnership Agreement and the Castle
Creek Partnership Agreement, see "Additional Information."
BCLP II UNITS
In General. Like BCLP, BCLP II is a limited partnership organized under
Delaware law. As such, the rights and other characteristics of BCLP II Units
will be determined by the Boston Celtics Limited Partnership II Agreement of
Limited Partnership (the "BCLP II Partnership Agreement").
Under the terms of the BCLP II Partnership Agreement, BCLP II Units will
share nearly all of the characteristics of BCLP Units prior to the
Reorganization. BCLP II Units will be the only form of limited partnership
interest in BCLP II after the Reorganization, and all BCLP II Units will have
identical distribution and voting rights.
Distributions. BCLP II's distribution provisions are substantially
identical to those of BCLP. Under the terms of the BCLP II Partnership
Agreement, distributions on BCLP II Units are in the sole discretion of BCLP II
GP. Distributions are required to be made to the Unit holders of BCLP II pro
rata in accordance with their proportionate interests in BCLP II. BCLP II GP has
the power to declare and make distributions out of BCLP II's operating cash
flow, or may make such distributions out of partnership reserves or borrowings,
in its discretion.
Because the payment of interest on the Subordinated Debentures will be made
by BCLP, a 99%-owned subsidiary partnership of BCLP II, interest paid on the
Subordinated Debentures will reduce the amount of operating cash flow and
reserves available to pay distributions on the BCLP II Units. Interest paid on
Subordinated Debentures, however, will be deductible to BCLP, unlike
distributions to Unit holders by BCLP II. See "Description of Subordinated
Debentures."
Public Market. Like BCLP Units, BCLP II Units will be listed on the NYSE
and the BSE. BCLP anticipates that following the Reorganization, there will be
fewer BCLP II Units outstanding than BCLP Units presently outstanding. The
average daily trading volume of BCLP II Units may be lower than that of BCLP
Units.
Voting Rights. BCLP II Units will carry voting rights substantially
identical to those of BCLP Units. Each BCLP II Unit entitles the holder to one
vote under the BCLP II Partnership Agreement. Holders of BCLP II Units will have
the right to vote on certain amendments to the BCLP II Partnership Agreement,
certain extraordinary transactions such as certain mergers and sales of assets,
and on other matters brought before meetings of limited partners. BCLP II GP has
the right to submit any matter on which limited partners of BCLP II are entitled
to vote to holders of BCLP II Units for a vote by written consent without a
meeting. See "Description of BCLP II Units -- Voting Rights."
Splits and Combinations. BCLP II GP, like Celtics, Inc., has the right to
cause BCLP II to make distributions in units or limited partnership interests,
or to subdivide outstanding units or limited partnership interests, so long as
the split or combination is made on a pro rata basis among all holders of BCLP
II Units and limited partners. A majority vote of holders of BCLP II Units is
required for any split or combination that changes the rights of any Unit holder
to distributions, or of the distributive share of the Unit holder to the profits
and losses of BCLP II.
General Partner. BCLP II GP will have all the authority with respect to
BCLP II that Celtics, Inc. currently has with respect to BCLP. BCLP II GP has
exclusive authority over all BCLP II affairs, other than those for which
specific voting rights are given to Unit holders, or specific restrictions
imposed, under the BCLP II Partnership Agreement. This authority extends to all
aspects of the day-to-day management, operation and control of BCLP II. See
"Description of BCLP II Units -- General Partner."
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Future Dilution. Like Celtics, Inc., BCLP II GP is authorized to issue
additional units, as well as additional classes of equity or other securities,
without any approval of holders of BCLP II Units. Those securities could have
rights and preferences greater than those of BCLP II Units, and accordingly,
issuance of those securities could reduce the distributions payable in respect
of, and the market price of, BCLP II Units. BCLP II GP currently has no plans to
issue any additional classes of securities following the Reorganization. See
"Description of BCLP II Units -- Issuance of Additional Securities."
Liability of General Partner. BCLP II affords similar protections to its
general partner as BCLP currently provides. BCLP II GP will not be liable to
BCLP II for any losses or liabilities caused by acts or omissions of BCLP II GP
or its affiliates, as long as its conduct does not constitute actual fraud,
gross negligence, willful misconduct or a breach of fiduciary duty, and it acted
in good faith and in a manner it believed to be in, or not opposed to, the
interests of BCLP II.
Indemnification. Like BCLP, BCLP II provides indemnification to its
general partner, and its affiliates, officers, directors, employees and agents,
for liabilities arising out of the Reorganization and the operation of BCLP II,
so long as the conduct of the indemnified person did not constitute actual
fraud, gross negligence, willful misconduct or a breach of fiduciary duty, and
the indemnified person acted in good faith and in a manner it believed to be in,
or not opposed to, the interests of BCLP II. See "Description of BCLP II
Units -- Indemnification."
Audit Committee. BCLP II has the same Audit Committee requirements as
BCLP. In accordance with NYSE requirements, BCLP II requires its general partner
to maintain an audit committee of the board of directors composed solely of
independent directors. The audit committee must approve the appointment of BCLP
II's independent auditing firm, review BCLP II's annual financial statements,
and approve transactions with related parties of BCLP II. If the NYSE changes
its requirements, or if BCLP II Units become listed on another national
securities exchange with different requirements, BCLP II may change its audit
committee requirements in accordance with the rules of the relevant exchange.
Transactions with Related Parties. BCLP II, like BCLP, is permitted to
enter into transactions with its general partner and the affiliates of the
general partner and BCLP II, so long as such transactions are on terms no less
favorable to BCLP II than would be obtained in a comparable transaction between
unrelated parties, and the transactions are approved by BCLP II's audit
committee. Like BCLP, BCLP II may not make loans to its general partner and any
of its affiliates.
Conflicts of Interest. The BCLP II Partnership Agreement contains similar
provisions regarding resolutions of conflicts of interest to the partnership
agreement of BCLP. BCLP II GP is authorized to resolve any potential conflict of
interest between BCLP II GP and its affiliates, on one hand, and BCLP II and its
limited partners and Unit holders, on the other. In the absence of bad faith on
the part of BCLP II GP, its determination is conclusively deemed to be fair and
reasonable to BCLP II, and not a breach of the BCLP II Partnership Agreement.
The conflicts of interest described herein are deemed waived. See "Description
of BCLP II Units -- Conflicts of Interest."
Fees to General Partner. The BCLP II Partnership Agreement provides that
management fees may be paid by BCLP II to BCLP II GP. BCLP II GP does not
currently intend to collect management fees from BCLP II after the
Reorganization, but may begin to collect such fees at any time. BCLP II
reimburses the stockholders of BCLP II GP only for out-of-pocket expenses
incurred in their capacities as officers of BCLP II or BCLP II GP, or in
connection for their services on the National Basketball Association's Board of
Governors.
CASTLE CREEK INTERESTS
In General. Like BCLP, Castle Creek is a limited partnership organized
under Delaware law. As such, the rights and other characteristics of the Castle
Creek Interests will be determined by the Castle Creek Agreement of Limited
Partnership (the "Castle Creek Partnership Agreement"). Castle Creek Interests
will be the only form of limited partnership interest in Castle Creek after the
Reorganization, and all Castle Creek Interests will have identical distribution
and voting rights.
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Under the terms of the Castle Creek Partnership Agreement, Castle Creek
Interests will have certain different characteristics from BCLP Units prior to
the Reorganization.
Distributions. Castle Creek's distribution provisions are similar to those
of BCLP. Under the terms of the Castle Creek Partnership Agreement,
distributions on Castle Creek Interests are in the sole discretion of the
general partner. Distributions are made to the holders of Castle Creek Interests
pro rata in accordance with their proportionate interests in Castle Creek.
Castle Creek GP has the power to make distributions out of Castle Creek's
operating cash flow, or may make such distributions out of partnership reserves
or borrowings, in its discretion.
Because it will be subject to substantial restrictions on the transfer of
limited partnership interests of Castle Creek, Castle Creek will be treated as a
pass-through entity for tax purposes. Accordingly, the partners of Castle Creek
will be responsible for payment of taxes on their share of Castle Creek's
income. Under the Castle Creek Partnership Agreement, there is no requirement
for Castle Creek GP to declare distributions. Accordingly, it is possible that
holders of Castle Creek Interests will be subject to taxation based on Castle
Creek income, without receiving distributions to cover payment of such taxes.
See "Description of Castle Creek Interests -- Distributions."
No Public Market; Restrictions on Transfer. A primary difference between
BCLP Units and the Castle Creek Interests is that, in order to assure
pass-through tax treatment of Castle Creek, Castle Creek Interests will be
subject to severe transfer restrictions and will have little liquidity. Castle
Creek Interests will not be listed on any national securities exchange, and will
be subject to substantial restrictions on transfer. Under the Castle Creek
Partnership Agreement, Castle Creek Interests may only be transferred once a
year on a prescribed date or with the prior approval of Castle Creek GP. Castle
Creek may effect one or more reverse splits to reduce the number of holders of
Castle Creek Interests. Depending on the number of holders of Castle Creek
Interests at the end of its first fiscal year, Castle Creek may not be required
to register under the Exchange Act. See "Description of Castle Creek
Interests -- Restrictions on Transfer."
Voting Rights. Castle Creek Interests will have voting rights similar to
those of BCLP Units. Each Castle Creek Interest entitles the holder to one vote
under the Castle Creek Partnership Agreement. Holders of Castle Creek Interests
will have the right to vote on certain amendments to the Castle Creek
Partnership Agreement, major company transactions such as certain mergers and
sales of assets, and on other matters brought before meetings of limited
partners. Castle Creek GP has the right to submit any matter on which limited
partners of Castle Creek are entitled to vote, to holders of Castle Creek
Interests for a vote by written consent without a meeting. See "Description of
Castle Creek Interests -- Voting Rights."
Splits and Combinations. Castle Creek GP, like Celtics, Inc., has the
right to cause Castle Creek to make distributions in units or limited
partnership interests, or to subdivide or combine outstanding units or limited
partnership interests, so long as the split or combination is made on a pro rata
basis among all holders of Castle Creek Interests. Castle Creek GP will be
authorized to subdivide or combine outstanding Castle Creek Interests without
issuing fractional units or other interests, and holders of Castle Creek
Interests who would otherwise be eligible to receive a fractional interest will
instead be paid a certain price per Castle Creek Interest.
Castle Creek GP will have the right to effect one or more reverse splits of
Castle Creek Interests for a limited time period for the sole purpose of
remaining exempt from regulation as an investment company under the Investment
Company Act. See "Description of Castle Creek Interests -- Splits and
Combinations."
General Partner. Castle Creek GP will have all the authority with respect
to Castle Creek that Celtics, Inc. currently has with respect to BCLP. Castle
Creek GP has exclusive authority over all Castle Creek affairs, other than those
for which specific voting rights are given to holders of Castle Creek Interests,
or specific restrictions imposed, under the Castle Creek Partnership Agreement.
This authority extends to all aspects of the day-to-day management, operation
and control of Castle Creek. Castle Creek GP may only be removed by a majority
vote of holders of Castle Creek Interests for cause, as defined in the Castle
Creek Partnership Agreement. See "Description of Castle Creek
Interests -- General Partner."
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Future Dilution. Like BCLP, Castle Creek authorizes its general partner to
issue additional units, as well as additional classes of equity or other
securities, without any approval of holders of Castle Creek Interests. Those
securities could have rights and preferences greater than those of Castle Creek
Interests, and accordingly, issuance of those securities could reduce the
distributions payable in respect of, and the market price of, Castle Creek
Interests. Castle Creek GP currently has no plans to issue any additional
classes of securities following the Reorganization. See "Description of Castle
Creek Interests -- Issuance of Additional Securities."
Liability of General Partner. Castle Creek affords somewhat different
protections to its general partner from those BCLP currently provides. Castle
Creek GP will not be liable to Castle Creek for any losses or liabilities caused
by acts or omissions of Castle Creek GP or its affiliates, as long as its
conduct did not constitute negligence or misconduct, and it acted in good faith
and in a manner it believed to be in, or not opposed to, the interests of Castle
Creek.
Indemnification. Castle Creek provides indemnification to its general
partner, and its affiliates, officers, directors, employees and agents, for
liabilities arising out of the Reorganization and the operation of Castle Creek,
so long as the conduct of the indemnified person did not constitute negligence
or misconduct, and the indemnified person acted in good faith and in a manner it
believed to be in, or not opposed to, the interests of Castle Creek. See
"Description of Castle Creek Interests -- Indemnification."
Audit Committee. Unlike BCLP, no provision is made in the Castle Creek
Partnership Agreement for the establishment or maintenance of an audit committee
for Castle Creek GP.
Transactions with Related Parties. Castle Creek, like BCLP, is permitted
to enter into transactions with its general partner and the affiliates of the
general partner and Castle Creek, so long as such transactions are on terms no
less favorable to Castle Creek than would be obtained in a comparable
transaction between unrelated parties. Unlike BCLP, Castle Creek may make loans
to its general partner.
Conflicts of Interest. The Castle Creek Partnership Agreement contains
identical provisions regarding resolutions of conflicts of interest to the
partnership agreement of BCLP. Castle Creek GP is authorized to resolve any
potential conflict of interest between Castle Creek GP and its affiliates, on
one hand, and Castle Creek and its limited partners and Unit holders, on the
other. In the absence of bad faith on the part of Castle Creek GP, its
determination is conclusively deemed to be fair and reasonable to Castle Creek,
and not a breach of the Castle Creek Partnership Agreement. The conflicts of
interest described herein are deemed waived. See "Description of Castle Creek
Interests -- Conflicts of Interest."
Fees to General Partner. The Castle Creek Partnership Agreement provides
that management fees may be paid by Castle Creek to Castle Creek GP. Castle
Creek GP does not currently intend to collect management fees from Castle Creek
after the Reorganization, but may begin to collect such fees at any time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes certain Federal income tax
considerations relating to the Reorganization. These summaries do not discuss
all aspects of Federal income taxation that may be relevant to a particular
taxpayer in light of the taxpayer's personal tax circumstances, to certain types
of taxpayers subject to special treatment under the Federal income tax laws, to
Celtics, Inc., to any affiliate thereof, to any holder of BCLP who has
contributed property other than cash to BCLP, to any holder of BCLP Units owning
an interest of more than 5% in the capital or profits of BCLP, or to any person
owning (or considered as owning) at any time more than 5% in value of the
interests issued by BCLP II (or owning interests in BCLP II considered to be
owned by another person owning (or considered as owning) more than 5% in value
of the interests issued by BCLP II), or to "Foreign Holders" (as hereinafter
defined). These summaries also do not discuss all tax issues that may be
relevant to the taxation of the entities involved in the Reorganization
following consummation of the Reorganization.
BCLP has received a ruling from the Internal Revenue Service ("IRS") on
only one question of Federal tax law relevant to the Reorganization. As set
forth in Roberts & Holland LLP's opinion and except as set
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forth in such ruling, statements of law and conclusions of law relating to tax
consequences reflect the opinions of Roberts & Holland LLP, counsel for Celtics,
Inc. A copy of Roberts & Holland LLP's opinion has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part and a copy of
the opinion may be obtained by written request addressed to Boston Celtics
Limited Partnership, 151 Merrimac Street, Boston, MA 02114 (617) 523-6050. An
opinion of counsel is not binding on the IRS or the courts. No assurance can be
given that the IRS will not challenge the tax treatment of certain matters
discussed herein or, if it does, that it will be unsuccessful. Moreover, no
other legal opinion regarding the Federal income tax considerations relating to
the Reorganization is being rendered to the holders of BCLP Units. Accordingly,
each holder of BCLP Units should consult the holder's own tax advisor as to the
specific tax consequences to the holder, including the application and effect of
state or local income and other tax laws.
The following discussion is based on existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury
Regulations, and existing administrative interpretations and court decisions.
Future legislation, regulations, administrative interpretations, or court
decisions could significantly change such authorities, either prospectively or
retroactively.
The following discussion is based on the specific provisions of the Code
relating to partnership and corporate transactions. The IRS asserts that it has
authority to determine that the claimed tax treatment of transactions should be
adjusted or modified, so as to achieve tax results that are consistent with the
Code's intent that, in order for taxpayers to be permitted to conduct joint
business activities through a flexible economic arrangement without incurring an
entity-level tax, it is requisite that the partnership be bona fide and each
partnership transaction or series of related transactions be entered into for a
substantial business purpose, the form of each partnership transaction be
respected under substance over form principles, and the tax consequences
generally properly reflect income. The IRS also asserts that it has authority to
treat a partnership as an aggregate of its partners in whole or in part as
appropriate to carry out the purpose of any provision of the Code. There is no
case law and there are no published rulings of the IRS relating to the
application of the foregoing assertions of authority to transactions such as
those involved in the Restructuring Transactions and the Reorganization, nor do
the Income Tax Regulations under which such assertions of authority are made
(Treasury Regulation section 1.701-2) make specific reference to transactions
and circumstances such as those involved in the Restructuring Transactions and
the Reorganization, except as discussed below. Notwithstanding the uncertainty
created by such assertions of authority, counsel believes that the tax
consequences set forth below should govern the Restructuring Transactions and
the Reorganization, and that such tax consequences should not be altered by
reason of the authority claimed by the IRS.
PARTNERSHIP STATUS AND TAXATION OF ENTITIES
BCLP. BCLP is properly classified for Federal income tax purposes as a
"partnership," rather than as an association taxable as a corporation and, as
such, is not itself subject to Federal income tax. Rather, each holder of BCLP
Units is subject to income tax based on the holder's allocable share of
Partnership taxable income, gain, loss deduction, and credits, whether or not
any cash is actually distributed to such holder.
The Revenue Act of 1987 amended the Code to treat certain publicly traded
partnerships ("PTPs") as corporations, rather than as partnerships, for federal
income tax purposes. BCLP is a PTP for this purpose. Under a transition rule,
however, a PTP in existence prior to December 17, 1987, such as BCLP, continues
to be classified as a partnership, but only until the earlier of (i) the PTP's
first taxable year beginning after December 31, 1997, or (ii) the time at which
the PTP adds a substantial new line of business. Assuming that BCLP continued to
be a PTP and did not elect to be subject to a 3.5% tax on its gross income (as
described below), under the above-described transition rule, BCLP would be taxed
as a corporation for periods commencing with its taxable year beginning on July
1, 1998 (or earlier, if BCLP added a substantial new line of business before
that date). On the date that BCLP was first treated as a corporation under this
provision, BCLP would be treated as having transferred all of its assets
(subject to its liabilities) to a newly formed corporation in exchange for the
stock of that corporation and as having distributed such stock to its partners
in liquidation of their interests in BCLP.
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The Taxpayer Relief Act of 1997 grants to BCLP, if it continues to be a PTP
and does not add a substantial new line of business, the option, in lieu of
being taxed as a corporation for periods commencing on July 1, 1998, of being
subject to tax at the rate of 3.5% on its gross income from the active conduct
of trades or businesses (but otherwise being taxed as a partnership). BCLP has
determined that it is not advantageous for it to elect to be subject to this
3.5% tax.
BCLP has received from the IRS a ruling that the Subordinated Debentures
will not be considered an "interest" in BCLP for purposes of the provisions of
the Code and Treasury Regulations which determine whether a partnership is a
PTP.
Because BCLP, upon consummation of the Merger, will cease to be a PTP, it
will not be treated as a corporation under the Code.
Castle Creek. Castle Creek will be formed as a Delaware limited
partnership and will not elect under Treasury Regulation section 301.7701-3 to
be classified as an "association" taxable as a corporation. Castle Creek will
not participate in the establishment of any established securities market or
secondary market or the substantial equivalent thereof (as such terms are used
in Code section 7704 and the Treasury Regulations thereunder; collectively, a
"Market") for any interests in Castle Creek or in the inclusion of any interests
in Castle Creek thereon, nor will Castle Creek recognize any transfers made on
any Market by redeeming the transferor partner or admitting the transferee as a
partner or otherwise recognizing any rights of the transferee. Accordingly,
Castle Creek will be classified as a partnership for Federal income tax
purposes.
Celtics Basketball. Celtics Basketball will be formed as a Delaware
limited partnership and will not elect under Treasury Regulation section
301.7701-3 to be classified as an "association" taxable as a corporation.
Celtics Basketball will not participate in the establishment of any Market for
any interests in Hoops or in the inclusion of any interests in Celtics
Basketball thereon, nor will Celtics Basketball recognize any transfers made on
any Market by redeeming the transferor partner or admitting the transferee as a
partner or otherwise recognizing any rights of the transferee. Accordingly,
Celtics Basketball will be classified as a partnership for Federal income tax
purposes.
Celtics Basketball Holdings. Celtics Basketball Holdings will be formed as
a Delaware limited partnership and will not elect under Treasury Regulation
section 301.7701-3 to be classified as an "association" taxable as a
corporation. Celtics Basketball Holdings will not participate in the
establishment of any Market for any interests in Celtics Basketball Holdings or
in the inclusion of any interests in Celtics Basketball thereon, nor will Hoops
Holdings recognize any transfers made on any Market by redeeming the transferor
partner or admitting the transferee as a partner or otherwise recognizing any
rights of the transferee. Accordingly, Celtics Basketball Holdings will be
classified as a partnership for Federal income tax purposes.
Celtics Pride. Celtics Pride will be formed as a Delaware partnership and
will not elect under Treasury Regulation section 301.7701-3 to be classified as
an "association" taxable as a corporation. Celtics Pride will not participate in
the establishment of any Market for any interests in Celtics Pride or in the
inclusion of any interests in Celtics Pride thereon, nor will Parquet recognize
any transfers made on any Market by redeeming the transferor partner or
admitting the transferee as a partner or otherwise recognizing any rights of the
transferee. Accordingly, Celtics Pride will be classified as a partnership for
Federal income tax purposes.
BCLP II. BCLP II will be a PTP and, to the extent it otherwise qualifies
therefor, will not elect to be subject to the 3.5% tax described above.
Moreover, BCLP II will not qualify for any other exception from the rule that a
PTP is treated as a corporation for Federal tax purposes. Accordingly, BCLP II
will be treated as a corporation for Federal tax purposes. BCLP II will elect
under Treasury Regulation section 301.7701-3 to be classified as an
"association" taxable as a corporation effective as of a date prior to the
effective date of the Reorganization.
FORMATION OF ENTITIES
CLP will contribute assets to Celtics Basketball, Celtics Basketball
Holdings, and Celtics Pride, in exchange for limited partnership interests in
Hoops and Celtics Basketball Holdings and a general partnership interest in
Celtics Pride, respectively. CLP will distribute a portion of its limited
partnership interests in
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Celtics Basketball Holdings to BCLP and BCC. BCLP will contribute investment
assets (other than marketable securities) and a portion of its interest in Hoops
Holdings to Castle Creek, in exchange for a limited partnership interest in
Castle Creek. BCLP will also contribute investment assets and a portion of
BCLP's interest in Celtics Basketball Holdings to Castle Creek GP, in exchange
for 100% of the stock of Castle Creek GP; Castle Creek GP will then contribute
such assets to Castle Creek, in exchange for a general partnership interest in
Castle Creek. BCC will contribute its interest in Celtics Basketball Holdings to
Castle Creek in exchange for a limited partnership interest in Castle Creek.
BCLP will distribute the stock of Castle Creek GP to Celtics, Inc. No
distribution by a partnership is being made of property contributed to such
partnership within the last five years, nor is any distribution being received
by a partner from a partnership to which such partner contributed property
within the last five years. No distribution is being made of money or marketable
securities. See Code sections 704(c)(1)(B), 731(a)(1), (c), 737. Accordingly, no
gain or loss should be recognized to any of the entities described above on such
contributions and distributions.
DISTRIBUTION OF SUBORDINATED DEBENTURES, CASH AND INTERESTS IN CASTLE CREEK
Under Code section 731(b), no gain or loss will be recognized to BCLP on
the distribution of the Subordinated Debentures and cash and of interests in
Castle Creek. The tax treatment of a holder of BCLP Units receiving such a
distribution will depend on whether the holder partner receives a distribution
of only Subordinated Debentures and cash a distribution of only a Castle Creek
Interest, or a distribution consisting in part of Debenture(s) and cash and in
part of a Castle Creek Interest. It should be noted that any holder of BCLP
Units who receives a distribution of only a Castle Creek Interest will thereby
have surrendered such holder's entire interest in BCLP and, following the
receipt of such distribution, will not participate in the Merger.
Holders of BCLP Units Receiving Only Subordinated Debentures and
Cash. Consistent with the ruling from the IRS, BCLP intends to treat the
distribution of the Subordinated Debentures as though it had distributed to each
holder of BCLP Units receiving Subordinated Debentures an amount of cash equal
to the "issue price" of the Subordinated Debentures distributed to such holder
(which, as discussed below, should be equal to the fair market value of the
Subordinated Debentures on the date of their distribution) and such holder had
immediately used the cash proceeds of such distribution to purchase the
Subordinated Debentures from BCLP. Code section 731(a) provides that, in the
case of a distribution of cash from a partnership to a partner, gain is
recognized to the partner to the extent that the cash distributed exceeds the
adjusted basis of such partner's interest in BCLP immediately before the
distribution and (except in the case of certain distributions in liquidation of
the partner's interest) loss is not recognized to such partner. Although BCLP
lacks sufficient information to determine the adjusted basis of each holder of
BCLP Units in such holder's interest in BCLP, BCLP believes that any holder who
purchased such holder's Units on the NYSE or the BSE and who has not been
subject to any basis adjustments other than those described in Code sections
705(a) and 733, for such holder's share of the income and losses of BCLP and for
distributions to such holder from BCLP, has an adjusted basis in such holder's
Units that is greater than the fair market value of the Subordinated Debentures
and the cash to be distributed to such holder. Accordingly, any such holder of
BCLP Units should not recognize gain on receipt of a distribution of
Subordinated Debentures and cash.
Under Code section 733 and in accordance with BCLP's view of the
distribution of Subordinated Debentures as a distribution of cash, followed by a
reinvestment by the distributee partner of the cash proceeds, a holder of BCLP
Units receiving a distribution of Subordinated Debentures and cash will
initially reduce the basis in such holder's Units by the fair market value of
the Subordinated Debentures and the cash distributed. However, Code section
752(a) provides that any increase in a partner's share of the liabilities of a
partnership shall be considered a contribution of money by such partner to BCLP,
which has the effect of increasing the partner's basis in the partner's
partnership interest. The general partner of BCLP will be explicitly exculpated
from any liability with respect to the Subordinated Debentures and, thus, a
partner to whom Subordinated Debentures are distributed will "bear the economic
risk of loss" for such Subordinated Debentures within the meaning of Treasury
Regulation section 1.752-2. The Debenture distributed to a holder of BCLP Units
will therefore increase both such holder's share of the liabilities of BCLP and
the holder's basis in the holder's BCLP Units. Accordingly, the distribution of
the Subordinated Debentures should not have
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any net effect on the basis of any holder of BCLP Units, and there will be a net
decrease in the basis of such BCLP Units in the amount of the cash distributed;
however, such holder's share of the liabilities of BCLP will have been
increased, which may be relevant in determining the consequences to such holder
of the formation of BCLP II and the transfer of such holder's BCLP Units to BCLP
II in exchange for BCLP II Units. (To the extent that a holder of BCLP Units
receiving a distribution of Subordinated Debentures is a Federal, state, or
local government, an instrumentality thereof, or a person actively and regularly
engaged in the business of lending money, such holder's basis in its Units may
be reduced as a result of the distribution of Subordinated Debentures, and the
other partners' bases in their Units would be increased; any such holder should
consult its own tax advisor regarding the tax treatment to it of the
Reorganization and related transactions.) The initial tax basis of a holder of
BCLP Units in any Subordinated Debentures distributed to such holder will equal
the fair market value on the date of distribution of the Subordinated Debentures
distributed to such holder. The holding period for the Subordinated Debentures
will begin on the day after the date of distribution.
Holders of BCLP Units Receiving Only Castle Creek Interests. As stated
above, the general rule of Code section 731(a) is that gain is not recognized to
a partner on the receipt of a distribution, other than a distribution of
"money," from a partnership. Code section 731(c) contains a special rule,
however, under which the term "money" includes "marketable securities." The term
"marketable securities" includes "financial instruments which are, as of the
date of the distribution, actively traded (within the meaning of [Code] section
1092(d)(1))," "any financial instrument the value of which is determined
substantially by reference to marketable securities," "except as otherwise
provided in regulations , interests in an entity if substantially all of the
assets of such entity consist (directly or indirectly) of marketable securities,
money, or both," and "to the extent provided in regulations ['clause (vi)
authority'] , any interest in an entity not described [in the prior clause] but
only to the extent of the value of such interest which is attributable to
marketable securities, money, or both." The term "financial instrument" includes
stocks, other equity interests, and evidences of indebtedness. For purposes of
Code section 1092(d)(1), property is "actively traded" if there is an
"established financial market," including an "interbank market," an "interdealer
market" characterized by a system of general circulation that provides a
reasonable basis to determine fair market value, and, in the case of a debt
instrument, a "debt market" in which price quotations for the instrument are
readily available from brokers, dealers, or traders. Treasury Regulation section
1.1092(d)-1.
There will be no established financial market for interests in Castle
Creek. Management of BCLP has concluded that no established financial market
exists for the assets to be held by Castle Creek. Treasury Regulation section
1.731-2(c)(3)(ii) implements the clause (vi) authority and provides that an
interest in an entity is a marketable security to the extent that the value of
the interest is attributable to marketable securities, money, or both only if
20% or more of the assets of the entity consist of marketable securities money,
or both. Since less than 20% of the assets of Castle Creek will consist of
marketable securities, no portion of the distribution of interests in Castle
Creek will be considered a distribution of money by BCLP.
A holder of BCLP Units receiving only a Castle Creek Interest will not
recognize any gain or loss. Code section 731(a). The basis of a Castle Creek
Interest distributed to such a holder of BCLP Units shall be an amount equal to
the adjusted basis of such holder's interest in BCLP, determined without regard
to any increase thereto by reason of any borrowings of BCLP to effect the
Reorganization. Code section 732(b). In determining the period for which such
holder of BCLP Units has held the Castle Creek Interest, there shall be included
the holding period of BCLP with respect to such interest. Code section 735(b).
(This holding period will, in turn, generally include BCLP's holding period for
the property contributed by it to Castle Creek.)
Holders of BCLP Units Receiving Both Subordinated Debentures and Cash and
Castle Creek Interests. For the reasons stated above, BCLP believes that any
holder of BCLP Units who purchased such holder's Units on the NYSE or BSE and
who has not been subject to any basis adjustments other than those described in
Code sections 705(a) and 733 should not recognize gain on receipt of a
distribution of Subordinated Debentures and cash and interests in Castle Creek.
The basis of a Castle Creek Interest distributed to such holder of BCLP Units
would be equal to the adjusted basis of the distributed Castle Creek Interest to
BCLP, but not in excess of the adjusted basis of the holder's interest in BCLP
immediately before the distribution of Castle Creek Interests and Subordinated
Debentures and cash, reduced by the amount of cash distributed and any net
reduction in such holder's share of liabilities of BCLP. Code section 732(a).
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BCLP estimates that its basis in its Castle Creek interest with respect to each
BCLP Unit will be approximately $23.00. Under Code section 733, a holder of BCLP
Units receiving a distribution of a Castle Creek Interest will reduce such
holder's basis in such holder's interest in BCLP by the basis to such holder of
the Castle Creek Interest distributed to such holder. Moreover, the share of the
liabilities of BCLP of such holder of BCLP Units may have changed, thereby
causing a change in the basis of such holder's interest in BCLP, which may be
relevant in determining the consequences to such holder of the formation of BCLP
II and the transfer of such holder's BCLP Units to BCLP II in exchange for BCLP
II units. The initial tax basis of a holder of BCLP Units in any Subordinated
Debentures distributed to such holder will equal the fair market value of the
Subordinated Debentures distributed to such holder. The holding period for the
Subordinated Debentures will begin on the day after the date of distribution;
however, in determining the period for which such holder of BCLP Units has held
the Castle Creek Interest, there shall be included the holding period of BCLP
with respect to such interest (which, in turn, will generally include BCLP's
holding period for the property contributed by it to Castle Creek).
TAX CONSEQUENCES OF OWNERSHIP OF INTERESTS IN CASTLE CREEK
A complete description of the provisions of subchapter K of chapter 1 of
the Code, governing the taxation of partners and partnerships, and of section
469 of the Code and the Treasury Regulations thereunder, governing the treatment
of "passive activity losses," is beyond the scope of this discussion. These
provisions now generally govern the taxation of holders of Units in BCLP; see
"Partnership Status and Taxation of Entities -- BCLP" and "Other Tax Issues
Affecting Holders of BCLP Units -- Operations of BCLP" and "-- Pre-Merger Sale
of Interests," below. It is not anticipated that Castle Creek will qualify for
the "simplified flow-through for electing large partnerships" or the "simplified
audit procedures for electing large partnerships" added by the Taxpayer Relief
Act of 1997, nor is it intended that Castle Creek would elect for those new
provisions to apply if it were eligible to do so. The following paragraphs
summarize some selected tax rules that will be applicable to persons holding
interests in Castle Creek.
Castle Creek will generally be treated as a conduit for Federal income tax
purposes. Each partner in Castle Creek will take into account separately his
distributive share of Castle Creek's items of income, gain, loss, deduction, and
credit, regardless of whether Castle Creek makes any distributions to such
partner. The character of an item will be the same as if it had been directly
realized or incurred by the partner.
In the case of individuals, estates, trusts, closely held C corporations,
and personal service corporations, the passive loss rules generally disallow
deductions and credits from passive activities to the extent they exceed income
from passive activities. Passive activities include trade or business activities
in which the taxpayer does not materially participate. Portfolio income (such as
interest and dividends) and expenses allocable to such income are not treated as
income or loss from a passive activity. Accordingly, in the case of a limited
partner in Castle Creek that is subject to the passive loss rules, (1) the
limited partner will not be able to utilize losses from passive activities to
offset the taxpayer's share of the portfolio income of Castle Creek and (2) in
the event that Castle Creek incurs a loss in its trade or business activities
(including its distributive share of the income or loss of any lower-tier
partnership from its trade or business activities), the limited partner will not
be able to utilize its share of that loss to offset non-passive income from
other sources.
The bases of Castle Creek in the properties contributed to them by BCLP
will initially be equal to the respective adjusted bases of such properties to
BCLP at the time of the contribution, which, in some cases, may be substantially
less than the respective fair market values of such assets. Although it is
unclear whether any adjustments to the basis of Castle Creek property may be
required in the case of any holder of a Castle Creek Interest whose
proportionate share of the adjusted basis of Castle Creek's property differs
from such holder's basis in such holder's Castle Creek Interest, no reduction in
basis in such holders' Castle Creek property should be required in the case of
any asset the fair market value of which equals or exceeds its adjusted basis;
since it is believed that no asset of Castle Creek, Celtics Basketball Holdings
or Celtics Basketball will have a fair market value materially below its
adjusted basis, no material reductions to basis should be required under this
rule. It is not certain that a holder of BCLP Units with respect to whom BCLP
and CLP have made basis adjustments under Code section 743 would retain the
benefit of those adjustments
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with respect to such holder's indirect interest (through Castle Creek and
Celtics Basketball Holdings) in Celtics Basketball, if such holder receives a
Castle Creek Interest in the Reorganization.
Although, as noted below (see "Tax Consequences to BCLP II and BCLP"),
receipt by BCLP of payments pursuant to Castle Creek's assumption of a portion
of certain tax liabilities of BCLP or its subsidiaries attributable to prior
periods may be taxable to BCLP II, some or all of such amount will be applied to
increase Castle Creek's basis in its assets and will not be deductible by Castle
Creek or its partners.
GENERAL TAX TREATMENT OF THE MERGER
A subsidiary of BCLP II will be merged into BCLP. In connection with this
merger, each BCLP Unit will be converted into one BCLP II Unit and BCLP will
become a 99%-owned subsidiary partnership of BCLP II. BCLP II, although
organized as a Delaware limited partnership, will be treated as a corporation
for Federal income tax purposes. Immediately after the merger of the subsidiary
of BCLP II into BCLP and as a result thereof, holders of BCLP Units, together
with the general partner in BCLP II (which will contribute property to BCLP II
in exchange for its interest) will hold at least 80% of each outstanding class
of units or other interests issued by BCLP II.
While there is no specific authority dealing with a substantially similar
transaction, counsel is of the opinion, based on authority dealing with
analogous transactions, that the transaction will be treated as an exchange of
BCLP Units for BCLP II Units in a transaction governed by Code section 351. In
such an exchange, gain would be recognized to a holder of BCLP Units only to the
extent that the sum of such holder's liabilities assumed by BCLP II, plus the
amount of the liabilities to which the holder's transferred BCLP Units were
subject, exceeded the total of the adjusted basis of the BCLP Units transferred
by the holder in the exchange. Such gain would be long-term capital gain if the
BCLP Units have been held for more than one year as of the date of the exchange
and if such Interests have been held as capital assets (and would not be
mid-term gain if the Units have been held for more than 18 months on such date),
except that a portion of this gain may be treated as ordinary income pursuant to
the rules of section 751 of the Code. No loss would be recognized to a holder of
BCLP Units. A holder of BCLP Units will have a tax basis in the BCLP II Units
received in the exchange equal to such holder's basis in the BCLP Units,
decreased by the amount of any liabilities assumed or taken subject to, and
increased by the amount of any gain recognized by such holder.
Counsel's opinion that holders of BCLP Units will be treated as exchanging
their Partnership interests for BCLP II Units is based on the Federal income tax
treatment of analogous transactions. It is well settled (and the IRS has issued
published rulings to the effect) that, if a parent corporation forms a
transitory subsidiary corporation and merges it into another corporation to
enable the parent to acquire the stock of such other corporation, the merger of
the transitory subsidiary corporation into such other corporation will be
ignored and the stockholders of the target corporation will be treated as
receiving directly from the parent corporation stock or other property of the
parent in exchange for their shares of the target. In addition, the Service has
issued private letter rulings addressing the treatment of transactions in which
a corporation forms a transitory entity and merges it into an existing
partnership as a means of transforming the partners of the existing partnership
into stockholders of the corporation. The conclusions expressed in the private
letter rulings are consistent with the treatment of the Merger expressed above.
Holders of BCLP Units should be aware that, unlike published rulings, private
letter rulings cannot be cited as authority and may be relied upon only by the
taxpayer requesting the ruling, although the conclusions expressed therein may
be indicative of the IRS's thinking on the particular matter addressed.
BCLP and BCLP II intend to treat the Merger in accordance with the
positions reflected in the foregoing description and to prepare reports and tax
information accordingly. Except as otherwise noted, the following discussion
assumes the correctness of such treatment.
CERTAIN TAX CONSEQUENCES OF THE MERGER TO HOLDERS OF UNITS
Nonrecognition of Gain or Loss. Section 351(a) of the Code provides, in
general, that no gain or loss is recognized upon the transfer by one or more
persons of property (such as partnership interests) to a corporation solely in
exchange for stock in such corporation, if, immediately after the exchange, such
person or
56
<PAGE> 66
persons are in control of the corporation to which the property was transferred.
Section 368(c) of the Code defines control as the ownership of stock possessing
at least 80% of the total combined voting power of all classes of stock entitled
to vote and at least 80% of the total number of shares of all other classes of
stock. Section 357(c) of the Code generally provides that, if the sum of the
liabilities assumed in a section 351 exchange exceeds the aggregate tax basis of
the assets transferred in the exchange, such excess is treated as gain from the
sale or exchange of the assets transferred. Section 752 of the Code and the
Regulations thereunder generally provide that a partner's tax basis in a
partnership interest includes the partner's share of the liabilities of the
partnership. A published ruling issued by the IRS holds that, upon the transfer
of a partnership interest to a corporation in a section 351 transaction, the
transferor's share of partnership liabilities is treated as assumed by the
corporation for purposes of section 357(c) of the Code.
Assuming the Merger is treated for Federal income tax purposes in the
manner described above under "General Tax Treatment of the Merger," it is
counsel's opinion that the exchange by holders of Units of their BCLP Units for
BCLP II Units will be treated as part of a transaction described in Code section
351(a), in which gain will be recognized only to the extent computed under Code
section 357(c). The precise amount, if any, of such gain to any holder will
depend on such holder's basis in such holder's BCLP Units and on such holder's
share of the liabilities of BCLP. Each of these amounts, in turn, will depend in
part on the fair market value of the Subordinated Debentures on the date of the
Distribution. In particular, as noted above, the share of liabilities of BCLP of
a holder of BCLP Units will be increased by the fair market value on the date of
the Distribution of any Subordinated Debentures issued to such holder and a
holder's basis in such holder's BCLP Units will be reduced by the basis of any
Castle Creek Interest distributed to such holder. BCLP lacks sufficient
information to determine the adjusted basis of each holder of BCLP Units in such
holder's BCLP Units; however, BCLP believes that certain holders who receive a
distribution of only Subordinated Debentures and cash may recognize some gain
under Code section 357(c). Moreover, a holder of BCLP Units who receives a
distribution consisting in part of Subordinated Debentures and cash and in part
of interests in Castle Creek may recognize a greater amount of gain than if such
holder received a distribution of only Subordinated Debentures and cash.
Counsel's conclusion regarding the application of Code section 351(a) is
based on the assumption that (i) holders of BCLP Units who receive BCLP II Units
in the Merger and the general partner in BCLP II which will transfer property
thereto as part of the Merger (together, the "Transferors") will own,
immediately after the Merger, more than 80% of each class of units or interests
issued by BCLP II and (ii) not more than 20% of any such class will, in the
aggregate, be subsequently disposed of pursuant to contracts or other formal or
informal binding agreements entered into prior to the Merger (the "Control
Assumption") or issued to persons who are not considered to be transferors of
property to BCLP II. If the Control Assumption were not correct, each holder of
BCLP Units could recognize gain on the Merger as if such holder had sold such
holder's BCLP Units in a taxable transaction for an amount equal to the value of
the BCLP II Units received in the Merger and the holder's share of the
liabilities of BCLP. Neither the Partnership nor the General Partner is aware of
any contracts or other formal or informal binding agreements entered into by
persons receiving BCLP II Units to dispose of such BCLP II Units.
Basis and Holding Period of BCLP II Units. A holder of BCLP Units will
have a tax basis in the BCLP II Units received in the Merger equal to such
holder's basis in the BCLP Units, decreased by the amount of any liabilities
assumed or taken subject to, and increased by the amount of any gain recognized
by such holder.
The holding period for BCLP II Units received in the Merger will include
the exchanging holder's holding period for the BCLP Units, provided such holder
held such BCLP Units as capital assets at the time of the Merger.
Sale of BCLP II Units. In general, any gain or loss from the sale or
exchange of BCLP II Units received in the Merger will be characterized as
capital gain or loss, provided such BCLP II Units are held as a capital asset.
Gain or loss will be measured by the difference between the amount realized and
the holder's adjusted tax basis in the BCLP II Units.
57
<PAGE> 67
Ownership of BCLP II Units. After the Merger a holder of BCLP II Units
generally will be taxed only on distributions of money or other property
received from BCLP II, if any, out of current or accumulated earnings and
profits. Such income will be characterized as a dividend and as investment or
portfolio income for purposes of certain tax rules, e.g., those regarding
deductibility of interest expense, under section 163 of the Code. To the extent
that BCLP II has no accumulated earnings and profits at the time of a
distribution or current earnings and profits for the year of distribution, the
amount of the distribution will first reduce a stockholder's adjusted basis in
the BCLP II Units and, thereafter, will be taxed as an amount received from the
sale or exchange of the BCLP II Units. BCLP II will have no accumulated earnings
and profits as it begins operations following consummation of the Merger.
Distributions in connection with a complete liquidation of BCLP II will be
treated as amounts received from the sale or exchange of BCLP II Units.
Distributions received in connection with a redemption will be treated as
dividends or as amounts received from the sale or exchange of the stock
depending upon the redeeming BCLP II Unit holder's actual or constructive
ownership of interests in BCLP II before and after such redemption.
TAX CONSEQUENCES OF OWNERSHIP OF SUBORDINATED DEBENTURES
Accrual of Original Issue Discount and Premium. This discussion assumes
that the Subordinated Debentures will be issued on or after June 30, 1998.
If the issue price of the Subordinated Debentures is less than their face
amount (i.e., the Subordinated Debentures are issued with "original issue
discount"), each holder thereof, including a taxpayer who otherwise uses the
cash receipts and disbursements method of accounting, will be required to
include the holder's pro rata share of original issue discount on the
Subordinated Debentures in income as it accrues, in accordance with a constant
yield method based on a compounding of interest. This method of accounting will
generally require the annual inclusion of income even in the absence of the
receipt of (and/or in amounts greater than) cash payments with respect to the
Subordinated Debentures.
The total amount of "original issue discount" on the Subordinated
Debentures will equal the difference between the issue price of the Subordinated
Debentures and their "stated redemption price at maturity." The issue price of
each Debenture will be equal to the fair market value of such Debenture on the
date of the Distribution.
Section 163(e)(5) of the Code restricts the deductibility of original issue
discount on "high yield discount obligations" ("HYDO's") issued by corporations.
Treasury Regulation section 1.701-2 applies this rule to HYDO's issued by a
partnership with corporate partners. Therefore, if the Subordinated Debentures
constitute HYDO's, BCLP II's distributive share of the original issue discount
on the Subordinated Debentures may not be deductible by BCLP II until actually
paid by BCLP and, depending upon the instrument's yield as computed under the
original issue discount rules, a portion of such original issue discount (the
"Disqualified Portion") may not be deductible by BCLP II at any time. Such
Disqualified Portion, if any, will be eligible for the dividends received
deduction for corporate holders of Subordinated Debentures, however, if BCLP II
has sufficient earnings and profits. Except as provided in the HYDO rules, cash
interest payments will generally be deductible to BCLP, and original issue
discount on the Subordinated Debentures will generally be deductible to BCLP as
it accrues, in accordance with a constant yield method based on a compounding of
interest.
The question whether the Subordinated Debentures will constitute HYDO's
cannot be determined at the time of this writing, because the issue depends, in
part, on factors that will not be determined until the date of issuance of the
Subordinated Debentures (including their "issue price" and the prevailing
"applicable federal rate" under the Code). In order to constitute HYDO's, the
yield to maturity on the Subordinated Debentures must equal or exceed five
percentage points over the applicable long-term federal rate (the "AFR") in
effect for the month during which the Subordinated Debentures are issued. A
Disqualified Portion will exist if the yield on the Subordinated Debentures
exceeds six percentage points over the AFR. The AFR changes every month based on
the average market yield, during the one-month period ending on the 14th day of
the prior month, on outstanding marketable obligations of the United States with
remaining periods to maturity of over 9 years. For June 1998, the AFR is 6.02%,
compounded annually. No portion of the amounts received on the Subordinated
Debentures will be eligible for the dividends received deduction applicable to
holders that are
58
<PAGE> 68
domestic corporations, unless the Subordinated Debentures constitute HYDO's, and
then only to the extent discussed above with respect to the Disqualified
Portion.
Market Discount and Bond Premium. Holders other than initial holders may
be considered to have acquired Subordinated Debentures with market discount,
acquisition premium, or amortizable bond premium. Such holders are advised to
consult their tax advisors as to the income tax consequences of the acquisition,
ownership, and disposition of Subordinated Debentures.
Disposition of Subordinated Debentures. Upon a sale, exchange, or other
disposition of Subordinated Debentures, a holder will recognize gain or loss
equal to the difference between the amount realized and the holder's adjusted
tax basis in the holder's Subordinated Debentures. Gain or loss will be capital
gain or loss (except to the extent of any accrued market discount with respect
to such holder's Subordinated Debentures not previously included in income)
provided the Subordinated Debentures are a capital asset in a holder's hands.
See " -- Market Discount and Bond Premium," above. Such gain or loss will be
long-term capital gain or loss if the Subordinated Debentures have been held for
more than one year (and will not be mid-term gain if the Subordinated Debentures
have been held for more than 18 months).
PERSONS OTHER THAN UNITED STATES PERSONS
For purposes of this discussion, a "Foreign Holder" is any corporation,
individual, partnership, estate, or trust that is, as to the United States, a
foreign corporation, a nonresident alien individual, a foreign partnership, or a
nonresident fiduciary of a foreign estate or trust. This discussion does not
generally cover the income or withholding tax rules that may be applicable to
Foreign Holders in connection with the Reorganization or the holding of
Subordinated Debentures, BCLP II Units, or Castle Creek Interests. Foreign
Holders should consult their own tax advisers regarding such rules.
INFORMATION REPORTING TO HOLDERS
BCLP will report any interest paid and original issue discount accrued
during any year with respect to the Subordinated Debentures, and BCLP II will
report distributions made with respect to the BCLP II Units, to the holders of
record of the Subordinated Debentures and BCLP II Units and to the IRS. Each
partner in Castle Creek will receive a Schedule K-1 reflecting the items of
income and deduction allocated to such partner. It is anticipated that persons
who hold Subordinated Debentures or BCLP II Units as nominees for beneficial
owners will report the required tax information to beneficial owners. Nominee
ownership will not be permitted for Castle Creek Interests. Under Code section
6050K(c), transferors of certain partnership interests are required to inform
the partnership of the transfer; BCLP will undertake to send any required
notices.
WITHHOLDING
In connection with the Reorganization, holders of BCLP Units may be
required to comply with certain identification requirements and to certify that
they are not Foreign Holders; BCLP may withhold from holders who do not comply
with such requirements or do not so certify all or a portion of the amounts that
would otherwise be received by them in the form of Castle Creek Interests,
Subordinated Debentures, or cash.
After the Reorganization, payments made on, and proceeds from the sale of,
Subordinated Debentures or BCLP II Units may be subject to "backup" withholding
at the rate of 31% of the amount paid, unless the holder complies with certain
identification requirements. Foreign Holders of Subordinated Debentures or BCLP
II Units may also be subject to additional withholding requirements. A partner's
share of Castle Creek's income may be subject to a withholding tax under Code
section 1446, unless such partner certifies to Castle Creek that such partner is
not a Foreign Holder.
Any withheld amounts will generally be allowed as a credit against the
holder's Federal income tax, provided the required information is timely filed
with the IRS.
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<PAGE> 69
OTHER TAX ISSUES AFFECTING HOLDERS OF BCLP UNITS
Operations of BCLP. The income and deductions of BCLP incurred prior to
the Reorganization will be allocated among the partners, and the basis of each
holder of BCLP Units in its Units will be adjusted by such allocations, in
essentially the same manner they would have been allocated and adjusted apart
from the Reorganization. Each partner will receive a Schedule K-1 reflecting the
income and deductions allocated to the partner during the period prior to the
Reorganization in which the partner owned such partner's BCLP Units, even if the
partner sells the BCLP Units prior to the Reorganization.
Pre-Merger Sale of Interests. The tax consequences to a holder of BCLP
Units who sells a BCLP Unit prior to the Reorganization are not affected by the
Reorganization. The holder of BCLP Units may recognize both ordinary income and
capital gain or loss. The ordinary income amount will be approximately the
amount of ordinary income, including depreciation recapture and other unrealized
receivables as defined in section 751 of the Code, that would have been
allocated to the holder of BCLP Units if BCLP had sold all its assets. Such
amount will vary depending on the amount paid for the BCLP Unit, the date
acquired, and other factors. The capital gain or loss amount will normally be
the difference between the adjusted tax basis of the holder of BCLP Units and
the amount realized from the sale of the BCLP Unit (reduced by the portion
treated as ordinary income).
Reporting Requirements. Each holder of BCLP Units who receives BCLP II
Units in the Merger will be required to file with the holder's Federal income
tax return a statement that provides details relating to the property
transferred and the BCLP II Units received in the Merger.
TAX CONSEQUENCES TO BCLP II AND BCLP
The following discussion assumes that the Merger will be treated for
Federal income tax purposes in the manner described above under "-- Tax
Treatment of the Merger." The acquisition of BCLP Units by BCLP II will not give
rise to the recognition of gain or loss by BCLP II or BCLP and the basis of BCLP
Units received by BCLP II from a holder of such BCLP Units will be determined by
reference to the tax basis of the BCLP Units in the hands of such holder
immediately prior to the Merger, increased by the amount of gain recognized to
such holder in the Merger.
The acquisition of Units by BCLP II will result in a constructive
termination of BCLP for Federal income tax purposes under section 708 of the
Code. This section provides that a "sale or exchange" (which includes a transfer
in connection within a Code section 351 transaction) of 50% or more of the total
interest in a partnership's capital and profits within a 12-month period
terminates a partnership for tax purposes. Upon such termination, the following
is deemed to occur: The partnership contributes all of its assets and
liabilities to a new partnership in exchange for an interest in the new
partnership; and, immediately thereafter, the terminated partnership distributes
interests in the new partnership to the transferees of the partnership interests
and the other remaining partners in proportion to their respective interests in
the terminated partnership in liquidation of the terminated partnership.
Castle Creek, BCLP, CLP, Celtics Pride, Celtics Basketball Holdings and/or
Celtics Basketball may be required to commence new recovery periods for some or
all of their assets as a result of the proposed transactions. If the basis of a
distributed Castle Creek Interest to the distributee thereof exceeds the
adjusted basis of such Castle Creek Interest to BCLP immediately before the
distribution thereof, BCLP may be required to reduce its basis in its assets,
but not below the fair market value thereof, by the amount of the excess. It is
not expected that the proposed transaction will result in any other material
adverse tax consequences to BCLP II or BCLP.
Receipt by BCLP of any payments pursuant to Castle Creek's assumption of a
portion of certain tax liabilities of BCLP or its subsidiaries attributable to
prior periods may be taxable to BCLP II as a partner in BCLP.
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<PAGE> 70
UNRELATED BUSINESS TAXABLE INCOME
Certain persons otherwise generally exempt from Federal income taxes (such
as pension plans and other exempt organizations) are taxed under section 511 of
the Code on unrelated business taxable income ("UBTI"). Currently, a substantial
portion of the taxable income generated by BCLP is considered UBTI for
tax-exempt organizations. Distributions by BCLP II and interest on the
Subordinated Debentures will not constitute UBTI, except to the extent that BCLP
II Units and Subordinated Debentures, respectively, are debt-financed property
as that term is defined in section 514 of the Code. However, a substantial
portion of the taxable income generated by Castle Creek will be considered UBTI.
OTHER TAX ASPECTS
Apart from Federal income taxes, no attempt has been made to determine any
tax that may be imposed on a holder of BCLP Units by the country, state, or
jurisdiction in which such holder resides or is a citizen. In addition to
Federal income taxes, holders of interests in Castle Creek may be subject to
other taxes, such as state or local income taxes that may be imposed by various
jurisdictions, and may be required to file tax returns through the date of
consummation of the Reorganization in those states in which BCLP does business.
Holders of BCLP Units may also be subject to income, intangible property,
estate, and inheritance taxes in their respective states of domicile. Holders of
BCLP Units should consult their own tax advisors with regard to state income,
inheritance, and estate taxes.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INTENDED TO PROVIDE
ONLY A GENERAL SUMMARY AND DOES NOT ADDRESS TAX CONSEQUENCES WHICH MAY VARY
WITH, OR ARE CONTINGENT ON, INDIVIDUAL CIRCUMSTANCES. MOREOVER, THIS DISCUSSION
DOES NOT ADDRESS ANY FOREIGN, STATE, OR LOCAL TAX CONSEQUENCES OF THE
DISTRIBUTION OR THE MERGER. ACCORDINGLY, EACH HOLDER OF BCLP UNITS IS STRONGLY
URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO SUCH HOLDER OF THE REORGANIZATION, INCLUDING THE APPLICABILITY
AND EFFECT OF FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS.
MARKET PRICES AND DISTRIBUTIONS
BCLP Units are listed on the NYSE and the BSE under the symbol "BOS." As of
April 15, 1998, there were 5,346,164 BCLP Units outstanding, and, as of April 3,
1998, BCLP had approximately 64,453 registered Unit holders. The following table
sets forth the high and low sales prices of BCLP's units on the NYSE and cash
distributions for each of the calendar quarters indicated.
61
<PAGE> 71
<TABLE>
<CAPTION>
CASH
DISTRIBUTIONS
PERIOD HIGH LOW DECLARED
------ ---- --- -------------
<S> <C> <C> <C>
Year Ended June 30, 1996
First Quarter...................................... $27.0000 $20.1250
Second Quarter..................................... 28.3750 22.8750
Third Quarter...................................... 24.1250 21.3750
Fourth Quarter..................................... 25.1250 21.6250 $1.50
Year Ended June 30, 1997
First Quarter...................................... 22.5000 20.2500
Second Quarter..................................... 22.7500 20.6250 1.00
Third Quarter...................................... 24.3750 22.3750
Fourth Quarter..................................... 28.1250 23.2500
Year Ended June 30, 1998
First Quarter...................................... 25.5000 23.6250
Second Quarter..................................... 25.4375 20.1875 1.00
Third Quarter...................................... 20.8125 18.8125
Fourth Quarter (through May 20, 1998).............. 21.5000 19.2500
</TABLE>
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<PAGE> 72
CAPITALIZATION
The following table sets forth the capitalization of BCLP and its
subsidiaries as of March 31, 1998 and of BCLP II and Castle Creek as adjusted to
give effect to the Reorganization. This table should be read in conjunction with
the financial statements, the related notes and the other financial information
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------------------------
BCLP BCLP II CASTLE CREEK
ACTUAL PRO FORMA(3) PRO FORMA(3)
------ ------------ ------------
<S> <C> <C> <C>
Deferred compensation -- current................ $ 1,771,107 $ 1,771,107
Notes payable -- current........................ 17,256,489 $ 17,256,489
----------- ------------ -----------
$19,027,596 $ 17,256,489 $ 1,771,107
=========== ============ ===========
Other non-current liabilities................... $ 6,037,500 $ 3,100,000
Notes payable to bank -- noncurrent portion..... 50,000,000 $ 30,000,000 50,000,000
Subordinated debentures......................... 41,873,460
Deferred compensation -- noncurrent portion..... 9,174,365 9,174,365
Partners' capital (deficit)..................... 1,277,601 (41,849,152) 2,228,040
----------- ------------ -----------
Total capitalization............................ $66,489,466 $ 30,024,308 $64,502,405
=========== ============ ===========
Limited partnership units....................... 5,346,164(1) 2,791,564(2) 28,046(2)
=========== ============ ===========
</TABLE>
- ---------------
(1) Excludes options to purchase 250,000 BCLP Units outstanding at March 31,
1998, all of which were exercisable at March 31, 1998.
(2) Based upon the Assumed Castle Creek Election Percentage. Reflects exercise
of options to purchase 250,000 BCLP Units and the election by those Units to
receive Castle Creek Interests in the Distribution.
(3) The pro forma capitalization of BCLP II and Castle Creek reflects the
assumed election by holders of 2,804,600 Units of BCLP to receive Castle
Creek Interests in the Distribution, the assumed issuance of 2,791,564 BCLP
II Units to former holders of BCLP Units, a change in the method of BCLP
II's accounting for its investment in the Team from consolidation to the
equity method based on a reduction in BCLP II's ownership to less than 50%,
the consolidation of the Team at Castle Creek based on its ownership of over
50%, BCLP II's issuance of $56 million in aggregate principal amount of
Subordinated Debentures to such former BCLP Unit holders (recorded at their
estimated issue price of approximately $42 million) proceeds from BCLP II's
anticipated new bank borrowings of $30 million and transfer of certain
investment assets from BCLP to Castle Creek.
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<PAGE> 73
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial information set forth below
is qualified in its entirety by, and should be read in conjunction with, BCLP's
consolidated financial statements and notes thereto for the years ended June 30,
1993, 1994, 1995, 1996 and 1997, and the nine months ended March 31, 1997 and
1998. The selected historical consolidated financial data as of and for the
years ended June 30, 1993, 1994, 1995, 1996 and 1997 are derived from BCLP's
consolidated financial statements, which were audited by Ernst & Young LLP,
independent auditors. The selected historical consolidated financial data as of
and for the nine months ended March 31, 1997 and 1998 are unaudited, but in the
opinion of Celtics, Inc.'s management, reflect all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
information set forth therein. Amounts in thousands, except per unit and ratio
amounts.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
MARCH 31, YEAR ENDED JUNE 30,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues:
Basketball regular season --
Ticket sales..................................... $ 32,906 $ 27,523 $ 31,813 $ 35,249 $ 22,037 $ 20,238 $ 20,197
Television and radio broadcast rights fees....... 24,030 19,369 23,269 22,072 20,956 19,168 21,862
Other, principally promotional advertising....... 8,009 7,603 7,916 7,459 7,419 5,177 3,597
Basketball playoffs................................ 1,913 1,903
-------- -------- -------- -------- -------- -------- --------
64,945 54,495 62,998 64,780 52,325 44,583 47,559
Costs and expenses
Basketball regular season --
Team............................................. 35,803 28,175 40,941 27,891 31,204 22,468 24,743
Game............................................. 2,344 2,153 2,386 2,606 2,880 2,762 2,969
Basketball playoffs................................ 697 609
General and administrative......................... 8,177 9,115 13,914 15,053 14,086 11,304 6,575
Selling and promotional............................ 2,974 3,309 4,680 2,974 2,692 1,396 1,152
Depreciation....................................... 155 140 189 141 86 83 70
Amortization of National Basketball Association
franchise and other intangible assets............ 122 123 165 165 165 165 160
-------- -------- -------- -------- -------- -------- --------
49,575 43,015 62,275 48,830 51,810 38,178 36,278
-------- -------- -------- -------- -------- -------- --------
15,370 11,480 723 15,950 515 6,405 11,281
Interest income (expense), net...................... 459 462 736 1,788 (2,567) (1,665) (982)
Net revenue from league expansion................... 7,114
Net proceeds from life insurance.................... 5,592
Net realized gains (losses) on disposition of
marketable securities and other short-term
investments........................................ (9) 400 361 (101) 110 (3,595) 79
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations before income
taxes.............................................. 15,820 12,342 1,820 17,637 5,172 6,737 10,378
Provision for (benefit from) income taxes........... 1,400 1,000 1,400 1,850 (345) (600)
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations................... 14,420 11,342 420 15,787 5,517 7,337 10,378
Income (loss) from discontinued operations, net of
taxes.............................................. 83 10,639 2,145 (5,150)
Gain from disposal of discontinued operations, net
of taxes........................................... 38,331 14,284
-------- -------- -------- -------- -------- -------- --------
Net income.......................................... $ 14,420 $ 11,342 $ 420 $ 54,201 $ 16,156 $ 23,766 $ 5,228
======== ======== ======== ======== ======== ======== ========
Income from continuing operations applicable to
limited partners................................... $ 14,098 $ 11,084 $ 358 $ 15,437 $ 5,396 $ 7,124 $ 10,214
Net income applicable to limited partners........... $ 14,098 $ 11,084 $ 358 $ 52,910 $ 15,545 $ 23,126 $ 5,157
Per limited partnership unit:
Income from continuing operations -- basic(1)...... $ 2.90 $ 2.09 $ 0.07 $ 2.68 $ 0.84 $ 1.11 $ 1.59
Income from continuing operations -- diluted(1).... $ 2.56 $ 1.92 $ 0.06 $ 2.59 $ 0.84 $ 1.11 $ 1.59
Net income -- basic(1)............................. $ 2.90 $ 2.09 $ 0.07 $ 9.18 $ 2.43 $ 3.61 $ 0.80
Net income -- diluted(1)........................... $ 2.56 $ 1.92 $ 0.06 $ 8.89 $ 2.43 $ 3.61 $ 0.80
Distributions declared............................. $ 1.00 $ 1.00 $ 1.00 $ 1.50 $ 3.00 $ 1.25 $ 1.25
Cash distributions to BCCLP........................
Book value (deficit) per unit at end of period..... $ 0.24 $ (0.23) $ (1.46) $ 2.81 $ (2.46) $ (2.00) $ (4.39)
Ratio of earnings to fixed charges................. 4.53 3.73 1.30 3.72 1.54 2.49 5.62
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995(2) 1994(2) 1993(2)
---- ---- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED BALANCE SHEET DATA:
Current assets...................................... $105,593 $101,938 $103,801 $135,903 $186,101 $ 79,492 $ 50,976
Current liabilities................................. 34,315 28,222 39,139 40,289 126,010 23,289 18,809
Total assets........................................ 120,905 115,721 119,200 145,233 210,655 102,933 73,347
Deferred taxes -- noncurrent........................ 20,100 20,100 20,100 20,100 6,000 2,900
Notes payable -- noncurrent......................... 50,000 50,000 47,500 50,000 60,000 60,000 69,560
Deferred compensation -- noncurrent................. 9,174 10,788 10,380 11,750 14,850 18,248 9,670
Other noncurrent liabilities........................ 6,038 7,784 9,870 6,575 19,515 11,325 3,434
Partners' capital (deficit)......................... 1,278 (1,173) (7,790) 16,520 (15,720) (12,829) (28,126)
</TABLE>
- ---------------
(1) In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share ("Statement 128"). BCLP adopted Statement 128 on
December 31, 1997. All prior period earnings per unit amounts have been
restated to conform with the provisions of Statement 128.
(2) Balance sheet captions at June 30, 1995, 1994, and 1993 include amounts
pertaining to discontinued operations. Total assets as shown in the table
above include assets from discontinued operations of $52,893 in 1995,
$39,855 in 1994, and $36,524 in 1993. Long-term obligations, which include
program broadcast rights payable -- noncurrent portion and notes payable to
bank -- noncurrent portion as shown in the table above, include amounts
pertaining to discontinued operations of $19,062 in 1995, $18,566 in 1994,
and $22,994 in 1993.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATION
GENERAL
Certain statements and information included herein are "forward-looking
statements" within the meaning of the federal Private Securities Litigation
Reform Act of 1995, including statements relating to prospective revenues,
expenses (including player and other team costs), capital expenditures, tax
burdens, earnings and distributions, and expectations, intentions and strategies
regarding the future. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of BCLP to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Factors that could cause BCLP's financial condition,
results of operation, liquidity and capital resources to differ materially
include the Team's competitive success, uncertainties as to increases in
players' salaries, the Team's ability to attract and retain talented players,
uncertainties relating to labor relations involving players, the risk of
injuries to key players and uncertainties regarding media contracts.
BCLP derives revenues principally from the sale of tickets to the Team's
home games and the licensing of television, cable network and radio rights. A
large portion of the Team's annual revenues and operating expense is
determinable at the commencement of each basketball season based on season
ticket sales and the Team's multi-year contracts with its players and broadcast
organizations.
The operations and financial results of the Team are seasonal. On a cash
flow basis, the Team receives a substantial portion of its receipts from the
advance sale of season tickets during the months of June through October, prior
to the commencement of the NBA regular season. Cash receipts from playoff ticket
sales are received in March of any year for which the Team qualifies for league
playoffs. Most of the Team's operating expenses are incurred and paid during the
regular season, which extends from late October or early November through late
April.
For financial reporting purposes the Team recognizes revenues and expenses
on a game-by-game basis. Because the NBA regular season begins in late October
or early November, the first fiscal quarter, which ends on September 30, will
generally include limited or no revenue and will reflect a net loss attributable
to general and administrative expenses incurred in the quarter. Based on the
present NBA game schedule, the Team will generally recognize approximately
one-third of its annual regular season revenue in the second fiscal quarter,
approximately one-half of such revenue in the third fiscal quarter and the
remainder in the fourth fiscal quarter, and it will recognize its playoff
revenue, if any, in the fourth fiscal quarter.
The consolidated statements of income for fiscal 1996 and 1995 include the
results of operations of the television station sold on July 7, 1995 as
discontinued operations. The gain on its disposal was also included in
discontinued operations.
RESULTS OF OPERATIONS
The following discussion compares consolidated net income and results of
continuing operations of BCLP and its subsidiaries for the year ended June 30,
1997 compared with the year ended June 30, 1996, for the year ended June 30,
1996 compared with the year ended June 30, 1995, and for the nine months ended
March 31, 1998 compared with the nine months ended March 31, 1997.
Years ended June 30, 1997, 1996 and 1995
Consolidated income from continuing operations and consolidated net income
of BCLP and its subsidiaries for the year ended June 30, 1997 was $420,000, or
$0.07 per unit ($0.06 assuming dilution), on revenues of $62,998,000 compared
with consolidated income from continuing operations of $15,787,000, or $2.68 per
unit ($2.59 assuming dilution), on revenues of $64,780,000 and consolidated net
income of $54,201,000, or $9.18 per unit ($8.89 assuming dilution), during the
year ended June 30, 1996, and consolidated income from continuing operations of
$5,517,000 or $0.84 per unit, on revenues of $52,325,000
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<PAGE> 75
and consolidated net income of $16,156,000 or $2.43 per unit, during the year
ended June 30, 1995. Consolidated net income for the year ended June 30, 1996
included a gain on the sale of Boston Celtics Broadcasting Limited Partnership
("BCBLP") in the amount of $38,331,000 and income from this discontinued
operation of $83,000. Factors contributing to the 1997 decline in consolidated
income from operations include a decrease in regular season ticket sales in 1997
and an increase in Team expenses in 1997 resulting primarily from increased
player compensation and certain charges relating to personnel changes in the
basketball operations. The increase in 1996 over 1995 was primarily attributable
to increased revenues from regular ticket sales resulting from the Team's move
to the Fleet Center and a decrease in Team expenses.
Revenues from regular season ticket sales decreased by $3,437,000, or 10%,
in fiscal 1997 compared to 1996 and increased by $13,213,000, or 60%, in fiscal
1996 compared to 1995. The decrease in 1997 was a result of reduced ticket
sales, believed to be primarily caused by the performance of the Team. Ticket
prices were not increased for the 1996-97 season. Increased ticket sales in 1996
resulted primarily from the move to the Fleet Center arena, which has an
increased seating capacity of approximately 4,400 seats as compared to the
Boston Garden.
Regular season television and radio rights fees revenues increased by
$1,197,000, or 5%, in fiscal 1997 compared to 1996 and $1,116,000, or 5%, in
fiscal 1996 compared to 1995. The increases were primarily the result of
increases in the NBA's national broadcasting contracts.
Other revenues, principally promotional advertising revenues, increased
$457,000, or 6%, in 1997 as compared to 1996 and were relatively flat in fiscal
1996 as compared to 1995. The increase in fiscal 1997 is principally due to
increased revenues from promotional activities ($1,252,000), partially offset by
a decrease in proceeds received from NBA properties from the licensing of
novelty type products ($787,000).
The Team played no playoff games in the 1996-97 or the 1995-96 seasons,
accordingly, there were no playoff revenues or expenses in fiscal 1997 or 1996.
The Team played two home playoff games in fiscal 1995, which resulted in
$1,913,000 of playoff revenue. Playoff revenues vary from year to year depending
on the number of home games played and the availability of such games for local
television broadcast, and playoff expenses vary depending on the number of games
played.
Team expenses increased by $13,050,000, or 47%, in fiscal 1997 compared to
fiscal 1996 primarily due to increased player compensation as a result of
changes in Team player personnel ($4,492,000). In addition, the increase is a
result of certain charges recorded in the three months ended June 30, 1997
related to personnel changes in the basketball operations, including player
contract termination costs ($4,580,000), bonuses and relocation costs
($1,715,000), severance costs ($878,000) and salaries for the new coaching staff
($879,000). Team expenses decreased by $3,312,000, or 11%, in fiscal 1996
compared to fiscal 1995 primarily due to decreased player compensation as a
result of changes in Team player personnel ($3,311,000).
Game expenses, primarily NBA assessments on gate receipts, decreased by
$220,000, or 8%, in fiscal 1997 compared to 1996 primarily as a result of the
decrease in revenues from ticket sales. Game expenses decreased by $274,000, or
10%, in fiscal 1996 as compared to 1995 primarily as a result of the elimination
of arena rental expense (a reduction of $1,146,000 from fiscal 1995) partially
offset by an increase in NBA assessments due to the increased ticket revenues
($635,000).
Basketball playoff expense was $697,000 in fiscal 1995, consisting
primarily of expenses related to the two home games played. There were no
playoff games played in fiscal 1997 or 1996.
General and administrative expenses decreased $1,139,000, or 8%, in fiscal
1997 compared to 1996, primarily as a result of decreases in personnel costs
($1,081,000), management fees ($735,000) and professional, consulting and legal
expenses ($198,000), partially offset by increased expense related to options to
acquire units of partnership interest ($875,000). General and administrative
expenses increased $967,000 or 7% in fiscal 1996 compared to 1995, primarily as
a result of increased professional, consulting and legal expenses ($1,076,000),
increased administrative salaries ($1,184,000) and increased management fees
($219,000), partially offset by reduced expense related to options to acquire
units of partnership interest ($1,322,000).
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<PAGE> 76
Selling and promotional expenses increased $1,707,000, or 57%, in fiscal
1997 compared to 1996 and $281,000, or 10%, in fiscal 1996 compared to 1995. The
increase in 1997 compared to 1996 is primarily attributable to increases in net
sponsorship costs and promotional events ($713,000), personnel costs ($476,000),
and advertising and production costs ($381,000). The increase in fiscal 1996
compared to 1995 is primarily attributable to increased net sponsorship costs.
Total depreciation increased $48,000, or 34%, in fiscal 1997 compared to
1996 and $55,000, or 63%, in fiscal 1996 compared to 1995. The increases in 1997
and 1996 are primarily attributable to additional depreciation related to
additions to property and equipment and leasehold improvements in leased office
space and at the Fleet Center.
Interest expense decreased $515,000, or 8%, in fiscal 1997 compared to 1996
and $2,687,000, or 30%, in fiscal 1996 compared to 1995. The decrease in 1997 is
a result of the payment of an $85,000,000 borrowing in July 1995 as well as a
decrease in the deferred compensation liability. The decrease in 1996 is a
result of the payment of the $85,000,000 borrowing in July 1995, partially
offset by the interest expense on the notes issued on the redemption of
partnership units.
BCLP earned interest income from its marketable securities and other
short-term investments of $6,610,000 and $8,175,000 in fiscal 1997 and 1996,
respectively. The decrease of $1,566,000, or 19%, in fiscal 1997 compared to
1996 is attributable to a reduced amount of available funds for short-term
investment. The increase in interest income of $1,667,000, or 26%, in fiscal
1996 compared to 1995 is attributable to interest earned on the short-term
investment of larger amounts of available funds.
Nine Months Ended March 31, 1998 and 1997
BCLP had consolidated net income of $14,420,000 or $2.90 per unit ($2.56
assuming dilution), on revenues of $64,945,000 in the nine months ended March
31, 1998, compared with consolidated net income of $11,342,000, or $2.09 per
unit ($1.92 assuming dilution), on revenues of $54,495,000 in the nine months
ended March 31, 1997. This increase is primarily attributable to increased
revenues from ticket sales and increased television and radio revenues,
partially offset by increased Team expenses. BCLP had consolidated cash flows
from operating activities of $12,443,000 in the nine months ended March 31, 1998
compared with consolidated cash flows used in operating activities of $1,984,000
in the nine months ended March 31, 1997.
Revenues from ticket sales recognized in income increased $5,383,000 or 20%
in the nine-month period ended March 31, 1998, compared to the same period in
1997, primarily as a result of increased ticket sales.
Television and radio revenues increased $4,661,000 or 24% in the nine-month
period ended March 31, 1998, compared to the same period in 1997 as a result of
an increase in revenue from the national network and cable television rights
agreements.
Other regular season revenues increased $406,000 or 5% in the nine-month
period ended March 31, 1998 compared to the same period in 1997 as a result of
increased promotional and novelty income.
Team expenses increased $7,628,000 or 27% in the nine-month period ended
March 31, 1998 compared to the same period in 1997 primarily as a result of net
increases in player and coaching staff compensation ($7,285,000) and other Team
expenses ($343,000).
Game expenses increased $191,000 or 9% in the nine-month period ended March
31, 1998 compared to the same period in 1997, primarily as a result of an
increase in league assessments on ticket sales.
General and administrative expenses decreased $938,000 or 10% in the
nine-month period ended March 31, 1998 as compared to the same period in 1997
primarily as a result of a decrease in option expense ($2,107,000). This
decrease was partially offset by increases in professional expenses ($792,000)
and personnel costs ($459,000).
Selling and promotional expenses decreased $335,000 or 10% in the
nine-month period ended March 31, 1998 as compared to the same period in 1997
due to decreases in promotional and other general marketing
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<PAGE> 77
expenses ($338,000) and decreases in sponsorship expenses ($438,000), partially
offset by increases in salaries and other costs related to marketing and ticket
sales ($365,000).
Depreciation and amortization expenses increased $15,000 or 11% in the
nine-month period ended March 31, 1998 as compared to the same period in 1997 as
a result of additions to property and equipment and leasehold improvements in
leased office space and at the Fleet Center.
Interest expense decreased $71,000 or 2% in the nine-months ended March 31,
1998 as compared to the same period in 1997. The decrease is primarily a result
of a decrease in the deferred compensation liability.
Interest income decreased $75,000 or 2% in the nine-month period ended
March 31, 1998 as compared to the same period in 1997. The decrease is
attributable to a reduced amount of available funds for short-term investment,
partially offset by an increase in the interest rate earned on those invested
funds.
LIQUIDITY AND CAPITAL RESOURCES
BCLP generated approximately $2,462,000, $15,359,000 and $6,784,000 in cash
from continuing operations in 1997, 1996 and 1995, respectively. Capital
expenditures amounted to approximately $136,000, $796,000 and $769,000 in 1997,
1996 and 1995, respectively.
BCLP generated approximately $12,443,000 in cash from operating activities
in the nine months ended March 31, 1998 and used approximately $1,984,000 in
cash in operating activities in the nine months ended March 31, 1997. Capital
expenditures amounted to approximately $364,000 and $52,000 in the nine months
ended March 31, 1998 and 1997, respectively. At March 31, 1998, BCLP had
approximately $24,365,000 of available cash, $6,133,000 of marketable securities
and $74,502,000 of other short-term investments. In addition to these amounts,
sources of funds available to BCLP include funds generated by operations and
capital contributions from partners. These resources will be used to repay
commercial bank borrowings and notes payable related to redeemed BCLP Units and
for general partnership purposes, working capital needs or for possible
investments or acquisitions.
The management of Celtics, Inc. from time to time reviews and evaluates
investment and acquisition opportunities on behalf of BCLP and investments
and/or acquisitions may be made or consummated by Celtics Inc., on behalf of
BCLP, at such times and upon such prices and other terms as the Celtics, Inc.
deems to be in the best interests of BCLP and all of its Unit holders.
On January 14, 1998, a cash distribution of $1.00 per Unit was paid to BCLP
Unit holders (declared December 11, 1997 to Unit holders of record on December
26, 1997). During the year ended June 30, 1997, a cash distribution of $1.00 per
unit was paid to holders of BCLP Units on December 16, 1996 (declared November
18, 1996 to BCLP Unit holders of record on November 29, 1996).
On December 15, 1997, CLP entered into a $60,000,000 credit facility with
its commercial bank, consisting of a $50,000,000 term loan and a $10,000,000
revolving line of credit. As of March 31, 1998, no borrowings were outstanding
against the $10,000,000 revolving line of credit. The proceeds from the
$50,000,000 term loan were used to repay a separate $50,000,000 loan from a
commercial bank. Principal payments on the term loan agreement are due in equal
quarterly installments of $2,500,000 commencing on January 1, 2003, with the
final payment due on December 15, 2007, the maturity date of the loan. The
$10,000,000 revolving line of credit agreement expires on December 15, 2000,
with two automatic one-year extensions cancelable at the option of the
commercial bank. Borrowings under the term loan and revolving line of credit are
secured by all of the assets of and are the liability of CLP. Interest on the
term loan accrues at 6.29%. Interest on any borrowings under the revolving line
of credit accrues at BCLP's option of either LIBOR plus 0.70% or the greater of
the bank's Base Rate or the Federal Funds Effective Rate plus 0.50%. The loan
agreement contains certain restrictions and various provisions and covenants
customary in lending arrangements of this type, including limitations on
distributions to partners of CLP.
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On May 20, BCLP entered into a $60,000,000 revolving credit agreement with
its commercial bank, $20,000,000 of which is reserved until the repayment of
notes payable related to redeemed BCLP Units. Interest on advances under the
revolving credit agreement accrues at BCLP's option of either LIBOR plus 0.70%
or the greater of the bank's Base Rate or the Federal Funds Effective Rate plus
0.50%. The revolving credit agreement expires on June 30, 2003 and is secured by
a pledge of certain assets of CCC. BCLP anticipates that approximately $30
million will be advanced under the revolving credit agreement for the purpose of
purchasing investment assets to be transferred to Castle Creek and that amounts
advanced under the revolving credit agreement will be repaid by BCLP out of
operating cash flow.
YEAR 2000
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process certain
date-based information.
BCLP believes that its internal hardware and software applications are Year
2000 compliant. In addition, BCLP is communicating with external service
providers to ensure that the providers are taking the appropriate actions to
address Year 2000 issues. There can be no assurance, however, that the systems
of third parties on which BCLP's systems rely will convert, or that a conversion
that is incompatible with BCLP's systems, would not have an adverse effect on
BCLP's systems.
The estimated cost to address Year 2000 issues is not expected to have a
material impact on BCLP's business, operations or financial condition.
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BUSINESS
BASKETBALL OPERATIONS
BCLP, through CLP, owns and operates the Team. The following table
summarizes the Team's performance during the past 15 basketball seasons:
<TABLE>
<CAPTION>
REGULAR
REGULAR SEASON PLACE
SEASON OF FINISH IN
SEASON RECORD DIVISION PLAYOFF RESULTS
------ ------- ------------ -----------------------------------------------------
<S> <C> <C> <C>
1996-97.............. 15-67 Seventh --
1995-96.............. 33-49 Fifth --
1994-95.............. 35-47 Third Lost in First Round of Conference Playoffs
1993-94.............. 32-50 Fifth --
1992-93.............. 48-34 Second Lost in First Round of Conference Playoffs
1991-92.............. 51-31 First Lost in Conference Semifinals
1990-91.............. 56-26 First Lost in Conference Semifinals
1989-90.............. 52-30 Second Lost in First Round of Conference Playoffs
1988-89.............. 42-40 Third Lost in First Round of Conference Playoffs
1987-88.............. 57-25 First Lost in Conference Finals
1986-87.............. 59-23 First Lost in Championship Finals
1985-86.............. 67-15 First NBA Champions
1984-85.............. 63-19 First Lost in Championship Finals
1983-84.............. 62-20 First NBA Champions
1982-83.............. 56-26 Second Lost in Conference Semifinals
</TABLE>
SOURCES OF REVENUE
BCLP derives its revenues principally from the sale of tickets to home
games and the licensing of television, cable network and radio rights. The
operations and financial results of the Team are seasonal. The following table
shows the contribution to revenues of the basketball operations from these
sources and from miscellaneous other sources for each of the last three fiscal
years:
CONTRIBUTION TO REVENUES
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR
ENDED OTHER TOTAL
JUNE 30, TICKET SALES TELEVISION, CABLE AND RADIO SOURCES REVENUES
- --------------------- ----------------------- --------------------------- ------- --------
REGULAR REGULAR
SEASON(1) PLAYOFFS SEASON(2) PLAYOFFS
--------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1997................. $31,813 -- $23,269 -- $7,916 $62,998
1996................. 35,249 -- 22,072 -- 7,459 64,780
1995................. 22,037 $1,518 20,956 $395 7,419 52,325
</TABLE>
- ---------------
(1) Includes proceeds from exhibition games.
(2) Includes the Teams' share of revenues under the NBA national television
contracts.
TICKET SALES
The Team plays an equal number of home games and away games during the
82-game NBA regular season. In addition, the Team plays eight exhibition games
prior to the commencement of the regular season. Under the NBA Constitution and
By-laws, the Team receives all revenues from the sale of tickets to regular
season home games (subject to the NBA gate assessment) and no revenue from the
sale of tickets to regular season away games. Generally, the Team retains all
revenues from the sale of tickets to home exhibition games played in Boston as
well as certain ticket revenues from home exhibition games played at neutral
sites. Under certain circumstances, the Team pays appearance fees to the
visiting team for exhibition games, and likewise the Team may receive appearance
fees for exhibition games played elsewhere.
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Effective with the 1995-1996 season, all of the Team's regular season home
games are played in the Fleet Center, an arena located in downtown Boston. The
seating capacity of the Fleet Center is approximately 19,300 as compared to a
seating capacity of 14,890 at the Team's prior home arena, the Boston Garden.
The policy of the Team during the last several years has been to limit the
number of season tickets so that some tickets are available on a per game basis.
During the 1997-1998 season, approximately 14,000 season tickets were sold
through March 31, 1998, as compared to 13,000 in the 1996-97 season, 15,000 in
the 1995-96 season and 12,700 in 1994-95 season.
TELEVISION, CABLE AND RADIO BROADCASTING
BCLP and the NBA license the television and radio broadcast rights to the
Team's basketball games. The NBA, as agent for its members, licenses the
national and international broadcast of the games under agreements with NBC
Sports, a division of the National Broadcasting Company (the "NBC agreement"),
and Turner Network Television, Inc., an affiliate of Turner Broadcasting (the
"TNT agreement"). Each of the NBA member teams units equally in these license
fees. In addition, BCLP licenses the local over the air rights to broadcast away
games under an agreement with Gillett Communications of Boston, Inc.
(subsequently assigned to Paramount Communications), licensee of Television
Station UPN 38, WSBK-TV (the "WSBK agreement") and licenses the cable rights to
broadcast home games to Fox Sports New England (formerly Sportschannel New
England Limited Partnership) (the "Fox Sports New England agreement"). BCLP
licenses the rights to broadcast all games on radio under an agreement with
American Radio Systems, Inc., licensee of Radio Station WEEI -- 850AM (the "ARS
agreement"). The NBC and TNT agreements extend through the 2001-02 season. The
WSBK agreement extends through the 1997-98 season. The Fox Sports New England
agreement extends through the 1998-99 season, with a right to an additional
extension by Fox Sports New England through the 2000-01 season. The ARS
agreement extends through the 1999-2000 season. There can be no assurance that
BCLP or the NBA, upon expiration of the aforementioned agreements, will be able
to enter into new agreements on terms as favorable as those in the current
agreements.
Generally, these agreements provide for the broadcast of a specified number
of games (pre-season, regular season and playoff games) at specified rights
fees, which in some cases increase over the term of the contract and in some
cases provide for revenue sharing, per game. The national agreements provide
that the licensee identify the games that it wishes to broadcast and the local
rights agreements provide for the preemption of games broadcast under the
national license agreements.
The NBC agreement accounted for approximately 11% ($6,896,552) and 10%
($6,552,000) of BCLP's total revenues for the years ended June 30, 1997 and
1996, respectively. No other agreement accounted for as much as 10% of BCLP's
total revenues for the years ended June 30, 1997, 1996 and 1995.
OTHER SOURCES
Other sources of revenues for the basketball operations include promotional
and novelty revenues, including royalties from NBA Properties, Inc. ("NBA
Properties"). NBA Properties is a corporation organized in 1967 to which each
NBA member has assigned the exclusive rights to the merchandising of its team
name, insignia and other similar properties to the extent such rights were not
previously assigned to others prior to the formation of NBA Properties. NBA
Properties pays royalties to each NBA team in consideration of the receipt of
such rights. This assignment is subject to the Team's right to use its insignia
and symbols in connection with the promotion of the Team in its home territory
and retail sales in its home arena. NBA Properties licenses other companies to
manufacture and sell official NBA items such as sneakers, basketballs, warn-up
jackets and sweatshirts, as well as certain non-sports items.
BASKETBALL TEAM
Players
In general, the rules of the NBA permit each team to maintain an active
roster of 12 basketball players during each regular season and up to 20 players
in the off-season. The By-laws of the NBA require each
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<PAGE> 81
member team to enter into a uniform player contract with each of its players.
The following table sets forth certain information concerning the players under
contract with the Team as of March 15, 1998:
<TABLE>
<CAPTION>
LAST SEASON
NAME POSITION YEARS IN NBA UNDER CONTRACT
---- -------- ------------ --------------
<S> <C> <C> <C>
Kenny Anderson.................................... Guard 6 2002-03
Dana Barros....................................... Guard 8 2000-01
Bruce Bowen....................................... Forward 1 1998-99
Andrew DeClercq................................... Forward/Center 2 2001-02
Tyus Edney........................................ Guard 2 1998-99
Pervis Ellison.................................... Center 8 1999-00
Dontae' Jones..................................... Forward 1 1998-99
Popeye Jones...................................... Forward 4 1997-98
Travis Knight..................................... Center 1 2003-04
Walter McCarty.................................... Forward 1 1998-99
Ron Mercer........................................ Guard -- 1999-00
Greg Minor........................................ Forward 3 2000-01
Zan Tabak......................................... Center 3 1997-98
Antoine Walker.................................... Forward 1 1998-99
</TABLE>
Coaches, General Manager and Other Team Personnel
Rick Pitino, the Head Coach of the Team, was appointed Head Coach,
President and Director of Basketball Operations of CLP following the 1996-97
season. Mr. Pitino was most recently the Head Basketball Coach at the University
of Kentucky since 1989, and served as the Head Coach of the New York
Knickerbockers (1987-1989), Head Coach at Providence College (1985-1987),
assistant coach of the New York Knickerbockers (1983-1985) and Head Coach at
Boston University (1978-1983). Mr. Pitino is under contract as President and
Director of Basketball Operations of CLP through May 6, 2007, and as Head Coach
of the Team for the first six full NBA seasons of the agreement (through the
2002-03 Season).
James O'Brien is an Associate Coach of the Team. Mr. O'Brien was most
recently an assistant coach at the University of Kentucky (1994-1997), the Head
Coach at the University of Dayton (1989-1994), and an assistant coach of the New
York Knickerbockers (1987-1989), prior to which he held a variety of coaching
positions from 1974 through 1987. Mr. O'Brien is under contract through the end
of the 1999-2000 season.
John Carroll is also an Assistant Coach of the Team. Mr. Carroll was most
recently the Advance Pro Scout for the Orlando Magic of the NBA (1996-1997) and
for the Portland Trail Blazers of the NBA (1995-1996). Previously, Mr. Carroll
was the Head Coach at Duquesne University (1989-1995) and an assistant coach at
Seton Hall University (1982-1989). Mr. Carroll is under contract through the end
of the 1998-99 season.
Shaun Brown is the Strength and Conditioning Coach of the Team. Mr. Brown
was most recently the Strength and Conditioning Coach at the University of
Kentucky (1992-1997), the Strength and Conditioning Coach at Providence College
(1989-1992) and the Assistant Strength and Conditioning Coach at Rutgers
University (1987-1988). Mr. Brown is under contract through the end of the
1998-99 season.
Chris Wallace is the General Manager of the Team. Mr. Wallace was most
recently the Director of Player Personnel (1996-1997) and a scout (1992-1996)
for the Miami Heat of the NBA. Previously, Mr. Wallace worked in various
scouting capacities for the Portland Trail Blazers, Denver Nuggets, Los Angeles
Clippers and New York Knickerbockers of the NBA. Mr. Wallace is under contract
through the end of the 1999-2000 season.
Ed Lacerte is the Head Athletic Trainer and Physical Therapist of the Team
and has served in that capacity since September 1987. Mr. Lacerte is under
contract through the end of the 1999-00 season.
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Under its contracts with its coaches, general manager and other Team
personnel (including individuals formerly employed in these positions), the Team
had compensation expense totaling $5,441,000 during the 1996-97 season. During
the 1997-98 season, the Team is required to make salary payments to its coaches,
general manager and other Team personnel (including individuals formerly
employed in these positions) totaling $10,940,000.
Collective Bargaining Agreement
A collective bargaining agreement (the "Collective Bargaining Agreement")
was ratified by the NBA and the National Basketball Players' Association
("NBPA") on September 15, 1995 and executed by the parties on July 11, 1996. The
previous Collective Bargaining Agreement expired on June 23, 1994. The
Collective Bargaining Agreement provides for maximum and minimum total team
salaries to be paid to players. Both maximum and minimum team salaries are
determined based on estimates prior to the start of each season. The maximum
team salary (the "Salary Cap") for each team for a particular season, subject to
certain exceptions, is the greater of a predetermined dollar amount or 48.04% of
the projected Basketball-Related Income (as defined in the Collective Bargaining
Agreement) of all NBA teams, divided by the number of NBA teams. The NBA has the
right to terminate the Collective Bargaining Agreement after the 1997-98 season
if it is determined that the aggregate salaries and benefits paid by all NBA
teams for the 1997-98 season exceed 51.8% of Basketball-Related Income as
defined in the Collective Bargaining Agreement.
There are various exceptions to the Salary Cap limitations, including
exceptions relating to a team's re-signing its own veteran free agent players,
replacing injured players, and signing rookies up to 120% of the rookie salary
scale amount. These exceptions permit teams to have aggregate player
compensation exceeding the specified Salary Cap. For example, subject to certain
limitations, a team could re-sign its veteran free agents at any salary, and
could sign a new player to replace an injured player at a salary equal to up to
the lesser of 50% of the salary of such injured player or 108% of the average
player salary for the prior season, even if such new salaries caused the team to
exceed the Salary Cap. Teams in excess of the Salary Cap face certain
restrictions with respect to signing new players. The Salary Cap for the 1997-98
season has been set at $26.9 million and as of September 19, 1997, the Team's
total team compensation is above the Salary Cap.
The minimum team salary is designed to result in payments by NBA teams of
total player salaries and benefits for a given season aggregating at least 75%
of the Salary Cap each season. There is also a provision for minimum individual
player salaries.
Since the adoption of the Salary Cap limitations under a predecessor
collective bargaining agreement, there have been various disputes among NBA
members and between the NBA and its members and the NBPA relating to the
interpretation and application of the limitations in specific situations. Such
disputes are resolved by an arbitrator or by a court appointed special master
whose decision is subject to judicial review.
The Collective Bargaining Agreement also governs the rights of veteran free
agents, certain aspects of uniform player contracts, player pension and other
benefits, the NBA draft of college players and other matters affecting the
players.
On March 23, 1998, the NBA Board of Governors voted to exercise the
league's right to re-open the Collective Bargaining Agreement. As a result, the
Agreement will now expire on June 30, 1998.
There can be no assurance that NBA and the NBPA, upon the expiration of the
current Collective Bargaining Agreement on June 30, 1998 will reach agreement on
a new collective bargaining agreement with terms as favorable as those in the
current agreement. Further, there can be no assurance that the NBA will not
experience labor relations difficulties in the future or significantly increased
player salaries which could have a material adverse effect on BCLP's financial
condition or results of operations.
BASKETBALL FACILITIES
Effective with the start of the 1995-96 basketball season, the Team plays
all of its home games at the Fleet Center located in Boston, Massachusetts. On
April 4, 1990, BCLP entered into a License/Lease
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Agreement and an Office Lease Agreement (collectively, the "Lease Agreement")
with New Boston Garden Corporation ("NBGC"). The Lease Agreement was amended in
certain respects and restated as of April 14, 1993. NBGC, which is unaffiliated
with BCLP, developed the new building and sports entertainment facility which
has a seating capacity of approximately 19,300 spectators to replace the Boston
Garden. The Fleet Center, which is located on a site adjacent to the Boston
Garden, was opened on September 30, 1995.
Under the terms of the Lease Agreement, NBGC has granted to BCLP a license
to use the basketball facilities at the Fleet Center and provides to BCLP
approximately 10,000 square feet of office space. NBGC is responsible for
maintaining the Fleet Center and providing administrative personnel such as
ushers, ticket takers, police and security personnel, announcers, scorers and
statisticians. At the Team's request, NBGC is responsible for making all box
office ticket sales and remitting the proceeds to the BCLP. In general, NBGC
receives only premium fee revenues generated from preferred seating and
executive boxes in the Fleet Center. Under the terms of the Lease Agreement,
BCLP does not share in revenue from food and beverage concessions at the Fleet
Center, but may sell programs at each game subject to the payment of a
commission to NBGC's concessionaires. NBGC is also licensed by BCLP to sell
merchandise bearing the Team's name, trademark and/or logo, subject to prior
approval by, and payment of a commission to, BCLP.
The Lease Agreement provides that it commenced on the day that the Fleet
Center was substantially completed and operational and extends for 10 full
basketball seasons (from the 1995-96 season to the 2004-2005 season). NBGC may,
at its option, extend the term of the Lease Agreement for five additional
basketball seasons (the "Extended Term"), provided NBGC notifies BCLP during a
specified period following the fifth anniversary of the commencement of the term
of the Lease Agreement of its intention to exercise its option and subject to
the NBGC making certain payments, based on its revenues, to BCLP during the
Extended Term.
Prior to the 1995-96 season, the Team played most of its home games in the
Boston Garden, a 14,890 seating capacity indoor sports arena located in downtown
Boston. The Boston Garden was also owned by NBGC, and was made available to the
Team under a License and Lease Agreement which ended at the conclusion of the
1994-95 season.
BCLP also leases approximately 16,000 square feet of space at 151 Merrimac
Street, Boston, Massachusetts. This facility houses BCLP's administrative
offices. The term of this lease extends through December 2005, with an option to
extend for one five-year renewal period. Under the provisions of the Lease
Agreement with NBGC, BCLP is reimbursed for the cost of 10,000 square feet of
office space during the 10-year term of the Lease Agreement with NBGC.
COMPETITION
The Team is the only professional basketball team in the Boston area.
However, the Team competes for spectator interest with all forms of professional
and amateur sports conducted in and near Boston. During parts of the basketball
season the Team experiences competition from professional hockey (the Boston
Bruins), professional football (the New England Patriots), and professional
baseball (the Boston Red Sox). In addition, the colleges and universities in the
Boston area, as well as public and private schools, offer a full schedule of
athletic events throughout the year. The Team also competes for attendance with
the wide range of other entertainment and recreational activities available in
New England.
The Team also competes with other United States and foreign basketball
teams, professional and otherwise, for available players.
INSURANCE
BCLP maintains accidental death and dismemberment, disability and life
insurance policies on most of the Team's key players and on its head coach.
These disability policies cover injuries which result in permanent and total
disability, as well as temporary disability on injuries which cause less severe
damage, but loss of player services for more than half a playing season. These
policies would generally reimburse BCLP for a substantial percentage of the
payments that it would be required to make to such player under his contract.
The waiting period for reimbursement under most temporary disability policies is
41 games. This Key Man
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<PAGE> 84
Disability Insurance Plan is maintained by the NBA through a Master Policy
Program, and underwritten by a leading national insurance company.
BCLP participates in a workers' compensation policy and a high limit
comprehensive general liability and umbrella policy maintained by the NBA.
Included under that plan is protection for team sports participant's liability
covering claims which may result from, among other things, certain injuries
which may be incurred during player contests or exhibitions sponsored by the
Team.
The NBA has established a Disaster Plan which permits a team suffering an
air or similar disaster to draft players from the other NBA teams subject to
specified procedures. The NBA maintains an insurance policy that provides
compensation to the team suffering the disaster, as well as those teams whose
players are selected in such special draft.
In addition to basketball-related insurance, BCLP maintains various types
of business insurance, including general liability insurance and umbrella
insurance.
EMPLOYEES
In addition to the players and coaches, as of March 31, 1998, BCLP had 41
full-time employees engaged in operating, marketing, advertising and
administrative activities. None of BCLP's employees other than its players are
covered by collective bargaining agreements. BCLP considers its relations with
its employees to be good.
LEGAL PROCEEDINGS
As a member of the NBA, BCLP is a defendant along with the other NBA
members in various lawsuits incidental to the NBA's basketball operations. BCLP
will generally be liable, jointly and severally, with all other members of the
NBA for the costs of defending such lawsuits and any liabilities of the NBA
which might result from such lawsuits. BCLP is not involved in any material
legal proceedings. From time to time, however, BCLP may become a party to legal
proceedings arising in the ordinary course of business.
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<PAGE> 85
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age as of March 31, 1998 and
position of each current director and executive officer of Celtics, Inc. and
certain executive officers of CLP.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Paul E. Gaston.................... 41 Chairman of the Board
Richard G. Pond................... 38 Executive Vice President, Chief Operating Officer,
Chief Financial Officer, Treasurer and Secretary
Don F. Gaston..................... 63 Director
Paula B. Gaston................... 63 Director
John H.M. Leithead................ 40 Director
John B. Marsh, III................ 40 Director
Arnold "Red" Auerbach............. 80 Vice Chairman of the Board -- CLP
Rick Pitino....................... 45 President and Director of Basketball
Operations -- CLP
Michael L. "M.L." Carr............ 47 Executive Vice President of Corporate
Development -- CLP
Stuart Layne...................... 44 Executive Vice President of Marketing and
Sales -- CLP
William J. Reissfelder............ 34 Vice President and Controller
</TABLE>
Celtics, Inc.'s Board of Directors has an Audit Committee comprised of
Messrs. Leithead and Marsh (the "Non-Management Directors") and Mr. Paul Gaston.
The Non-Management Directors are reimbursed for their Board-related expenses and
receive directors' fees of $1,000 per month and $2,500 per meeting attended.
During the year ended June 30, 1997, the Non-Management Directors received a
total of $27,000 each in directors' fees.
Celtics, Inc.'s directors are named by Celtics, Inc.'s stockholders and
serve until their successors are named. BCLP Unit holders do not vote for
directors of Celtics, Inc. Celtics, Inc.'s officers are appointed by and serve
at the discretion of Celtics, Inc.'s Board of Directors. Celtics, Inc.'s sole
stockholder is Walcott, a Gaston Affiliate. Walcott's general partners are
Draycott, Inc. ("Draycott") and Paul E. Gaston. Paul E. Gaston is Draycott's
sole shareholder.
The following is a brief account of the business experience of each of the
directors and officers listed above.
Paul E. Gaston became Chairman of the Board of Celtics, Inc. in December
1992 and had been a Director since September 1992. Mr. Gaston has been Chairman
of the Board of BCC since September 1993. He became Managing Director of Walcott
upon its formation in November 1992. From inception in 1990 to June 1992 he was
Co-Chairman, and since June 1992 has been Chairman of the Board of Directors, of
CCI. Mr. Paul E. Gaston is the son of Don F. Gaston and Paula B. Gaston.
Richard G. Pond was named Vice President, Controller and Secretary of
Celtics, Inc. in December 1992. He has been employed by BCLP since July 1992.
From July 1981 to June 1992, he was with the international accounting firm of
Ernst & Young LLP, most recently as a senior audit manager. Effective July 1,
1996, Mr. Pond assumed his responsibilities as Executive Vice President, Chief
Financial Officer and Treasurer, and effective July 1, 1997, Mr. Pond assumed
his responsibilities as Chief Operating Officer.
Don F. Gaston has served as a Director of Celtics, Inc. and BCC since his
resignation as Chairman of the Board of BCLP in December 1992 and CLP in
September 1993. He was succeeded in each of these positions by his son, Paul E.
Gaston. He became Chairman of the Board of Directors of Boston Celtics
Incorporated in September 1983. He has served as a Director of the CCI since its
inception in 1990. Mr. Gaston was Chairman of the Board of Providence Capitol,
Ltd. from July 1982 until its liquidation in December 1986. From 1962 to June
1982, he was associated with Gulf & Western Industries, Inc. in various
capacities,
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including Executive Vice President, director and member of the Executive
Committee. Mr. Gaston is the husband and father respectively of Paula B. Gaston
and Paul E. Gaston.
Paula B. Gaston became a Director of Celtics, Inc. in September 1992 and a
Director of BCC in October 1992. She is a private investor and is the wife of
Don F. Gaston and the mother of Paul E. Gaston.
John H.M. Leithead became a Director of Celtics, Inc. in October 1992.
Since September 1993, Mr. Leithead has been employed as an executive at Arandell
Schmidt. From 1985 to 1993, he was an executive of R.R. Donnelley & Sons
Company, and from 1979 to 1985 he was an executive in the National Marketing
Division of International Business Machines Corporation.
John B. Marsh, III became a Director of Celtics, Inc. in September 1992.
Mr. Marsh is currently a Director of Trading and Sales with ABSA Securities,
Inc., where he is an investment banker specializing in emerging markets. From
1991 to 1995, he was Chief Executive Officer and President of Saicor Ltd., an
investment banking firm specializing in emerging markets. From 1988 to 1991 he
was a Vice President at Deutsche Bank Capital Corporation where he headed an
international arbitrage securities trading group. From 1985 to 1988 Mr. Marsh
was a Vice President in the international arbitrage department of Merrill Lynch
Pierce Fenner and Smith.
William J. Reissfelder was named Vice President and Controller of Celtics,
Inc. in October 1996. From November 1994 to October 1996 he was the Controller
of Open Environment Corporation, and from August 1985 to November 1994 he was
with the international accounting firm of Ernst & Young LLP, most recently as a
senior audit manager.
The following individuals are not officers or directors of Celtics, Inc.
Arnold "Red" Auerbach was named Vice Chairman of the Board of BCC on May 6,
1997, prior to which he served as President of the Team's basketball operations
beginning in 1981. From 1950 to 1966, Mr. Auerbach was head coach of the Team
and, during that period, the Team won the NBA championship 11 times. Mr.
Auerbach was General Manager of Boston Celtics Incorporated, or its
predecessors, from 1966 to 1983. Mr. Auerbach is a member of the Basketball Hall
of Fame.
Rick Pitino was named Head Coach, President and Director of Basketball
Operations of CLP and BCC on May 6, 1997. Previously, Mr. Pitino was the head
basketball coach at the University of Kentucky since 1989.
Michael L. "M.L." Carr was named Executive Vice President of Corporate
Development of CLP effective July 1, 1997. Previously, Mr. Carr was the
Executive Vice President of Basketball Operations of CLP since June 1994 and
coach of the Team since June 1995. Since 1987 he has owned and operated various
businesses. In 1992 he was named Executive Director of Community Affairs for the
Team. Mr. Carr played professional basketball from 1973 to 1985. From 1979
through 1985 he played for the Team.
Stuart Layne has been associated with the Team's basketball operations
since March 1994. He was named Executive Vice President of Marketing and Sales
in May 1995. From March 1994 to May 1995 Mr. Layne was Vice President of
Planning and Special Events. Prior to joining the Team, Mr. Layne was with the
Seattle Mariners professional baseball team as its Vice President of Marketing
for four years, and he previously worked in broadcasting with CBS and Emmis
Broadcasting for eleven years.
DIRECTORS AND EXECUTIVE OFFICERS AFTER THE REORGANIZATION
After the Reorganization, the existing directors of Celtics, Inc. will
remain directors of Celtics, Inc. and will also become directors of BCLP GP and
BCLP II GP. The existing directors of Celtics, Inc., except for Messrs. Leithead
and Marsh, will become directors of Castle Creek GP. The existing directors of
BCC will remain directors of BCC, which will be the general partner of Celtics
Basketball and Celtics Basketball Holdings. The executive officers of BCLP II
and Castle Creek will be: Paul E. Gaston, Chief Executive Officer; Richard G.
Pond, Executive Vice President, Chief Operating Officer, Chief Financial
Officer, Treasurer and Secretary; and William J. Reissfelder, Vice President and
Controller. Messrs. Auerbach, Pitino, Carr and Layne are not currently officers
or directors of Celtics, Inc. and will not be officers or directors of
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<PAGE> 87
BCLP II GP or Castle Creek GP after the Reorganization. It is anticipated that
the duties and responsibilities of various current officers of BCLP and its
affiliates will change in anticipation of and after the Reorganization.
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation of
BCLP's Chief Executive Officer and BCLP's four other most highly compensated
executive officers serving as executive officers as of June 30, 1997 whose total
compensation during that year exceeded $100,000 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL -----------------------------
FISCAL COMPENSATION(2) RESTRICTED SECURITIES
YEAR ----------------------- OTHER ANNUAL STOCK UNDERLYING
NAME AND PRINCIPAL POSITION(1) ENDED SALARY($) BONUS($) COMPENSATION(1) AWARDS($) OPTIONS/SARS(#)
- ------------------------------ ------ --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul E. Gaston.............. 1997 $ 400,000 $518,750(1) (1) --
Chief Executive Officer 1996 400,000 $3,658,363(2) --
and Chairman of the Board 1995 400,000 $ 828,112 --
Stephen C. Schram(3)........ 1997 400,000 -- -- --
President and Director 1996 400,000 3,658,363(2) -- --
(Resigned as of 1995 400,000 828,112 -- --
February 28, 1998)
Arnold "Red" Auerbach....... 1997 250,000 600,000 -- --
Vice Chairman of the 1996 250,000 100,000 -- --
Board -- CLP 1995 250,000 100,000 -- --
Rick Pitino(4).............. 1997 750,000 600,000(5) -- --
President and Director 1996 -- -- -- --
of Basketball Operations -- 1995 -- -- -- --
CLP
Michael L. "M.L." Carr...... 1997 1,000,000 1,000,000 -- --
Executive Vice President of 1996 1,000,000 -- -- --
Corporate Development -- 1995 500,000 -- -- --
CLP
</TABLE>
- ---------------
(1) On June 27, 1997, the Audit Committee Celtics, Inc.'s Board voted to offer
BCLP's three option holders the right to exchange their options to purchase
BCLP Units for an equal number of Units of BCLP that vest after ten years
and contain certain significant restrictions as to transferability, but are
entitled to receive distributions with respect of such units (hereinafter
the "1997 Restricted Units"). The exchange ratio was determined based on a
written report received from an independent employee benefits consultant
regarding the respective values of the 1997 Restricted Units and the options
to purchase BCLP Units, and the option holders were required to make this
election on or before July 7, 1997. On June 30, 1997, Mr. Gaston elected to
exchange his options to purchase 250,000 BCLP Units for 250,000 1997
Restricted Units. Mr. Gaston, who is a member of the Audit Committee, was
recused from and did not participate in any of the Audit Committee's
deliberations pertaining to this matter. As a result of this exchange,
$518,750 was charged to compensation expense in 1997, representing the
difference between the fair market value of the 1997 Restricted Units and
the in-the-money value of the optioned Units.
(2) On June 28, 1996, the annual incentive payment arrangements between BCLP and
Messrs. Gaston and Schram were modified to permit each of them to elect to
acquire Units of BCLP that vest after ten years and contain certain
significant restrictions as to transferability, but are entitled to receive
distributions with respect to such Units (hereinafter the "1996 Restricted
Units") in lieu of cash payment. Mr. Gaston elected to receive the 1996
Restricted Units in lieu of the $3,658,363 cash incentive compensation
payment to which he was entitled. Mr. Gaston did not receive a cash bonus
for the year ended June 30, 1996. Mr. Schram elected to receive his payment
in cash. Based upon a written report received from an independent employee
benefits consultant regarding the appropriate discount to be applied, the
Audit Committee of Celtics, Inc.'s Board awarded 234,886 1996 Restricted
Units to Mr. Gaston. Mr. Gaston,
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<PAGE> 88
who is a member of the Audit Committee, was recused from and did not
participate in any of the Audit Committee's deliberations pertaining to this
matter.
(3) Mr. Schram resigned from each of these positions effective February 28,
1998.
(4) Mr. Pitino's employment commenced on May 6, 1997.
(5) Represents a deferred bonus payable to Mr. Pitino upon the earlier of May 6,
2003, the termination of his employment agreement or a change in control as
defined in the employment agreement.
BCLP did not grant any options or appreciation rights relating to BCLP
Units during the year ended June 30, 1997. The following table sets forth
information concerning BCLP Unit option exercises during the year ended June 30,
1997.
AGGREGATE OPTION EXERCISES AND OPTION VALUES
AT AND FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
UNITS UNDERLYING UNEXERCISED AT FY-END(1)
ACQUIRED OPTIONS AT FY-END EXERCISABLE
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul E. Gaston......... 250,000 $518,750 0 0 0 0
Restricted
Units(1)
Stephen C. Schram...... 0 0 250,000(2) 0 $3,812,500(3) 0
</TABLE>
- ---------------
(1) See Note 1 to Summary Compensation Table.
(2)Pursuant to the Option Exercise Agreement, Mr. Schram has agreed to exercise
these options on June 1, 1998.
(3) Represents the difference between the market price on June 30, 1997 and the
exercise price on that date.
EMPLOYMENT AND CONSULTING AGREEMENTS
BCLP
In August 1993, Celtics, Inc.'s Board approved compensation arrangements
and incentive plans for Mr. Paul Gaston and Mr. Stephen Schram. The arrangements
provide that Mr. Gaston and Mr. Schram will each be employed on an at will basis
with compensation at the rate of $400,000 per annum. In June 1997, Celtics,
Inc.'s Board approved an increase in Mr. Gaston's compensation to $1,000,000 per
annum. The incentive plan, which is subject to annual review, provides that each
of Mr. Gaston and Mr. Schram will receive annual incentive payments, commencing
with the fiscal year ending June 30, 1994, of 5% of the amount by which BCLP's
Consolidated Net Income before taxes on income for the related fiscal year
exceeds $8,000,000, payable not later than 10 days after the issuance of BCLP's
audited financial statements. During the year ended June 30, 1997, no annual
incentive compensation payments were made to Messrs. Gaston and Schram, and
during the year ended June 30, 1995, annual incentive compensation payments in
the amount of $828,000 were made to each of Messrs. Gaston and Schram. Mr.
Gaston did not receive a cash incentive compensation payment for the year ended
June 30, 1996, but rather elected to receive an aggregate award of 234,866
Restricted Units of BCLP. Mr. Schram elected to receive his $3,658,363 incentive
compensation payment for the year ended June 30, 1996 in cash.
Under an agreement dated July 1, 1996, Thomas M. Bartlett, Jr. agreed to
served as a consultant to BCLP from July 1, 1996 through June 30, 2001. In
return for Mr. Bartlett's services, he will receive an annual retainer of
$200,000 payable in equal quarterly installments commencing July 1, 1996.
On January 8, 1998, BCLP entered into an Agreement and Release with Stephen
C. Schram, pursuant to which Mr. Schram resigned from his various executive
positions with BCLP and its affiliates effective
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<PAGE> 89
January 31, 1998. In consideration for Mr. Schram's performance under this
agreement, certain of Mr. Schram's options to acquire BCLP Units were amended to
extend their term and to allow Mr. Schram to pledge them or transfer them to an
entity wholly owned by Mr. Schram or members of his immediate family.
CLP/THE TEAM
Under an agreement dated as of March 13, 1981, Red Auerbach has been
retained to serve as a consultant to the Team for the remainder of his life. For
these services, Mr. Auerbach will receive compensation totaling $250,000 per
year for his lifetime. In the year ended June 30, 1997, Mr. Auerbach received
bonus payments totaling $600,000 and in each of 1996 and 1995, Mr. Auerbach
received bonus payments of $100,000. In the event of Mr. Auerbach's death, his
wife will be entitled to receive monthly payments equal to those that would have
otherwise been paid to Mr. Auerbach for the remainder of her life. Mr. Auerbach
will advise the Team with respect to, among other things, the Team's selections
in the NBA college draft, evaluation of college and professional players and the
performance of the Team and the players for as long as he is physically able to
perform these services.
Under an agreement dated May 6, 1997, Rick Pitino agreed to serve as
President and Director of Basketball Operations of CLP through May 6, 2007, and
as Head Coach of the Team for the first six full NBA seasons of the agreement
(through the 2002-03 season). Under the agreement, Mr. Pitino will receive
annual salaries of $6,750,000 through May 6, 2003 and $2,000,000 through May 6,
2007. Mr. Pitino was also granted a bonus in the amount of $600,000, payable on
the earlier of May 6, 2003 or upon a change in control of CLP. In addition, in
the event of a Change in Control as defined in the agreement, Mr. Pitino will
receive the lesser of $22,000,000 or any unpaid amounts for the remainder of the
term of the agreement. The Reorganization is not a Change in Control as defined
in Mr. Pitino's employment agreement.
Under an agreement dated June 1, 1990, as amended September 21, 1994, David
R. Gavitt agreed to serve as a consultant to CLP through May 31, 1998. In return
for Mr. Gavitt's services, he will receive an annual salary at the rate of
$300,000 through June 1997, $200,000 through June 1998, $100,000 through June
2000 and $50,000 through June 2001.
Under the terms of an agreement dated August 30, 1995, Alan Cohen agreed to
serve as a consultant to CLP through August 30, 1998 at an annual retainer fee
of $260,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Non-Management Directors of the Audit Committee of Celtics, Inc.'s
Board perform the functions of a compensation committee. Neither of the
Non-Management Directors was, during the year ended June 30, 1997 or previously,
an officer or employee of BCLP or any of its subsidiaries or had any affiliated
relationship requiring disclosure.
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<PAGE> 90
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 31, 1998
concerning beneficial ownership of BCLP's Units by (i) each person known by BCLP
to own beneficially more than five percent of the outstanding Units, (ii) each
director of Celtics, Inc., (iii) each Named Executive Officer, and (iv) all
directors of Celtics, Inc. and executive officers of BCLP as a group. Unless
otherwise indicated, all amounts reflected in the table represent shares in
which the beneficial owners have sole voting and investment power.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENT(1)
---- ------------------ ----------
<S> <C> <C>
Don F. Gaston and Paula B. Gaston.......................... 723,885 13.4%
33 East 63rd Street
New York, NY 10021
Paul E. Gaston............................................. 1,812,886 34.6
33 East 63rd Street
New York, NY 10021
Stephen C. Schram.......................................... 250,900(2) 4.4
33 East 63rd Street
New York, NY 10021
John H.M. Leithead......................................... 0 --
33 East 63rd Street
New York, NY 10021
John B. Marsh, III......................................... 500 --
33 East 63rd Street
New York, NY 10021
Arnold "Red" Auerbach...................................... 5,000 --
151 Merrimac Street
Boston, MA 02114
David R. Murphey, III...................................... 517,500 9.6(3)
Murphey Capital, Inc.
P.O. Box 18065
Tampa, FL 33681-8065
All directors and executive officers as a group (7
people).................................................. 2,542,271 48.1
</TABLE>
- ---------------
(1) Percentage of outstanding Units for a particular Unit holder will be
greater than that Unit holder's percentage interest in BCLP because
Celtics, Inc. holds a 1% interest in BCLP.
(2) Includes 250,000 Units issuable upon exercise of options that are
currently exercisable.
(3) Based on information provided by Mr. Murphey.
For information regarding the effect of the Reorganization on
Gaston-related entities (including Don F. Gaston, Paula B. Gaston and Paul E.
Gaston), see the table on page 40 of this Prospectus. The effect of the
Reorganization upon other BCLP officers and directors and beneficial holders of
greater than 5% of the outstanding BCLP Units will depend upon the Proportionate
Election and the election of each such person in the Distribution, and therefore
cannot be predicted.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended June 30, 1997, BCLP reimbursed Conanicut Aircraft,
Inc., a company wholly owned by Paul E. Gaston and of which Mr. Gaston is the
only officer and director, a total of $100,869 for the business use of an
aircraft. The reimbursement was based on standard charter rates for comparable
aircraft and was reviewed and approved by the Audit Committee of Celtics, Inc.'s
Board. Mr. Gaston, who is a member of the Audit Committee, was recused from and
did not participate in any of the Audit Committee's deliberations pertaining to
this matter.
Walcott has entered into an agreement (the "Option Exercise Agreement")
Stephen C. Schram, pursuant to which Mr. Schram has agreed to (i) exercise the
Unit Option and (ii) execute a consent with respect to the Additional Units in
favor of the Reorganization. BCLP Unit holders holding greater than a
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<PAGE> 91
majority of all outstanding BCLP Units have executed or agreed to execute
consents approving the Reorganization. See "Voting Information -- Vote Required;
Written Consent in Lieu of Meeting."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, and the rules and regulations
promulgated thereunder, require executive officers and directors of Celtics,
Inc. to file reports pertaining to their beneficial ownership of BCLP Units with
the Commission and the NYSE when they are first elected, and to report (with
certain exceptions) subsequent changes in their beneficial ownership of Units.
In February 1996, Don F. Gaston and Paula B. Gaston transferred 20,000
jointly-held BCLP Units to Walcott Partners L.P., a Gaston affiliate. Mr. and
Mrs. Gaston, Walcott Partners L.P. and Draycott, Inc. (the general partner of
Walcott Partners L.P.) filed late four Forms 4 and two Schedules 13D reporting
this transfer. In January 1995, John B. Marsh, III purchased 500 BCLP Units. Mr.
Marsh failed to file timely two forms reporting this purchase. Messrs. Marsh and
Leithead each failed to timely file one Form 3 reporting their initial statement
of beneficial ownership at the time of their respective elections to Celtics,
Inc.'s Board of Directors. In each case, the failure to make the required
filings on a timely basis was inadvertent.
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DESCRIPTION OF BCLP II UNITS
BCLP II Units will have rights, preferences and other characteristics
determined by the BCLP II Partnership Agreement. The following information is
summarized from the BCLP II Partnership Agreement. The summaries are qualified
in their entirety by the provisions of the BCLP II Partnership Agreement, which
is included as an exhibit to the Registration Statement of which this Prospectus
is a part.
In General. BCLP II is a limited partnership organized under Delaware law.
Under the terms of the BCLP II Partnership Agreement, BCLP II Units will be the
only form of limited partnership interest in BCLP II after the Reorganization,
and all BCLP II Units will have identical distribution and voting rights.
Distributions. Under the terms of the BCLP II Partnership Agreement,
distributions on BCLP II Units are in the sole discretion of the general
partner. Distributions are required to be made to the holders of BCLP II Units
pro rata in accordance with their proportionate interests in BCLP II. BCLP II GP
has the power to declare and make distributions out of BCLP II's operating cash
flow, or may make such distributions out of partnership reserves or borrowings,
in its discretion.
While the BCLP II Units will be traded on the NYSE, BCLP II GP will be
required to announce the amount and date of the distribution, and the record
date, at least ten days before the record date. BCLP II GP may withhold tax
payments from the amount of distributions paid, and the withheld amounts will
also be considered a distribution for purposes of the BCLP II Partnership
Agreement.
Because the payment of interest on the Subordinated Debentures will be made
by BCLP, which will be a 99%-owned subsidiary partnership of BCLP II, the
interest paid on the Subordinated Debentures will reduce the amount of operating
cash flow and reserves available to pay distributions on the BCLP II Units.
Interest paid on Subordinated Debentures, however, will be deductible to BCLP,
unlike distributions to Unit holders by BCLP II. See "Description of
Subordinated Debentures."
Public Market. The BCLP II Units will be listed on the NYSE and BSE,
although there is no requirement for such listing in the BCLP II Partnership
Agreement. BCLP anticipates that following the Reorganization, there will be
fewer BCLP II Units outstanding than BCLP Units currently outstanding. The
average daily trading volume of BCLP II Units may be lower than that of BCLP
Units.
Voting Rights. BCLP II Units will carry voting rights similar to those of
BCLP Units. Each BCLP II Unit entitles the holder to one vote under the BCLP II
Partnership Agreement. As long as no other class of security has been issued by
BCLP II, holders of BCLP II Units will vote as a single class. Holders of BCLP
II Units will only have the right to vote on certain specified transactions and
certain extraordinary matters. Since BCLP II is a limited partnership, BCLP II
will not be required to hold annual meetings or elections of directors.
Holders of BCLP II Units will have the right to vote on certain amendments
to the BCLP II Partnership Agreement, as follows. BCLP II GP has the right,
without a Unit holder vote, to amend the BCLP II Partnership Agreement in ways
that do not affect the Unit holders' fundamental interests in the partnership.
These discretionary amendment matters include changing the name or address of
BCLP II, changing the BCLP II Partnership Agreement to conform with changes in
law, regulation, rules of the NYSE or other exchange on which the Units are
traded, and correcting errors. Other amendments to the BCLP II Partnership
Agreement generally must be proposed by either BCLP II GP or Unit holders owning
50% or more of the BCLP II Units, and approved by a supermajority of outstanding
BCLP II Units. Where an amendment would alter the interests of holders of BCLP
II Units in allocations of partnership income or loss or in distributions of
operating cash flow, or increase the compensation payable to BCLP II GP, then a
supermajority of Unit holders is required to approve the amendment. An 80%
supermajority vote of Unit holders would be required to approve an amendment
that would more likely than not cause the Unit holders to lose their limited
liability under the Delaware Act. In each case, an amendment that would alter
the voting requirements under the BCLP II Partnership Agreement requires the
requisite vote originally required to approve the matter. For instance, an
amendment that would remove an 80% supermajority voting provision must be
approved by an 80% supermajority.
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Further, an 80% supermajority is required to approve certain extraordinary
transactions such as mergers in which BCLP II is not the survivor, and sales of
all or substantially all its assets. Holders of BCLP II Units have no right to
vote on transactions involving the Team. An 80% supermajority is also required
to approve the appointment of a general partner in addition to BCLP II GP.
Meetings of the holders of BCLP II Units may be called by BCLP II GP or by
the holders of 50% of outstanding BCLP II Units, and the person calling the
meeting determines its location. A quorum at any meeting shall consist of 50% of
the outstanding Units of which the vote is to be taken. Holders of BCLP II Units
may vote in person or by proxy, in accordance with the laws of Delaware and the
United States. BCLP II GP has the right to submit any matter on which limited
partners of BCLP II are entitled to vote, to holders of BCLP II Units for a vote
by written consent without a meeting. Any matter brought before a meeting of
holders of BCLP II Units for which there is no voting percentage specified in
the BCLP II Partnership Agreement requires a majority vote of holders of BCLP II
Units.
Splits and Combinations. BCLP II GP has the right to cause BCLP II to make
distributions in Units or limited partnership interests, or to subdivide
outstanding Units or limited partnership interests, so long as the split or
combination is made on a pro rata basis among all holders of BCLP II Units and
limited partners. A supermajority vote of holders of BCLP II Units is required
for any split or combination that changes the rights of any Unit holder to
distributions, or of the distributive share of the Unit holder to the profits
and losses of BCLP II, or that results in the holders of BCLP II Units losing
their limited liability under the Delaware Act.
General Partner. BCLP II GP has exclusive authority over all BCLP II
affairs, other than those for which specific voting rights are given to holders
of BCLP II Units, or specific restrictions imposed, under the BCLP II
Partnership Agreement. This authority extends to all aspects of the day-to-day
management, operation and control of BCLP II.
The power and authority of BCLP II GP under the BCLP II Partnership
Agreement is to be liberally construed to encompass BCLP II GP's undertaking, on
behalf of BCLP II, all acts and activities in which a limited partnership may
engage under the Delaware Act. The power and authority of BCLP II GP shall
include without limitation the power and authority on behalf of, and at the
expense of, BCLP II:
(i) To cause BCLP II to acquire all the limited partnership interests
of BCLP pursuant to the Reorganization, and to take all other actions and
make all decisions in connection with the reorganization of BCLP as BCLP II
GP, in its sole discretion, shall deem necessary or appropriate;
(ii) To make all operating decisions concerning the business of BCLP
II, including without limitation, decisions on draft choices, acquisition
and disposition of player contracts, negotiation and execution of all
radio, television and other media contracts, negotiation and execution of
agreements relating to the use of facilities for playing basketball games,
selection of suppliers and determination of any promotional considerations
granted to such suppliers, selection of equipment and supplies, licensing
and granting other rights to use the Boston Celtics name for promotional
and other purposes, decisions concerning the development, acquisition or
operation of any other businesses, including negotiation and execution of
any and all agreements in connection therewith, and, in general, all
decisions concerning the businesses and activities to be carried on by BCLP
II and the manner of operation of all such businesses and activities;
(iii) To cause BCLP II to acquire, dispose of (subject to any prior
approval of limited partners which may be required by the BCLP II
Partnership Agreement), mortgage, pledge, encumber, hypothecate or exchange
any or all of the assets of BCLP II;
(iv) To use the assets of BCLP II (including without limitation, cash
on hand) for any purpose and on any terms it sees fit, including, without
limitation, the financing of partnership operations, the lending of funds
to other persons, the repayment of obligations of BCLP II, the conduct of
additional partnership operations and the purchase or acquisition of
interests in properties or other assets, including, without limitation,
such interests in real property as may be acquired in connection with
arrangements for the use of facilities in connection with BCLP II's
basketball operations or the acquisition of any other assets or
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interests in property as may be deemed appropriate in its sole discretion
in connection with partnership operations;
(v) To negotiate and execute on terms deemed desirable in its sole
discretion, and to cause BCLP II to perform, any contracts, conveyances or
other instruments that it considers useful or necessary to the conduct of
partnership operations or the implementation of its powers under the BCLP
II Partnership Agreement;
(vi) To select and dismiss employees and outside attorneys,
accountants, consultants and contractors and to determine compensation and
other terms of employment or hiring;
(vii) To make all decisions relating to BCLP II's participation as a
member of the NBA, including selection of BCLP II's representative on the
NBA Board of Governors, negotiation and determination of changes in the
arrangements between the NBA and BCLP II, execution of or participation in
such collective bargaining agreements as may be negotiated and executed by
the NBA and the National Basketball Players' Association and any other
decisions relating to BCLP II's relationship with the NBA;
(viii) Subject to certain limitations, to form any further limited or
general partnerships, joint ventures, corporations or other entities or
relationships that it deems desirable, and contribute to such partnerships,
ventures, corporations or other entities any or all of the assets and
properties of BCLP II;
(ix) To issue additional securities or additional limited partnership
interests or Units or additional classes or series of limited partnership
interests or Units, and to purchase, sell or otherwise acquire or dispose
of Limited Partnership Interests or Units, at such times and on such terms
as it deems to be in the best interests of BCLP II and the Unit holders and
other partners;
(x) To maintain or cause to be maintained records of all rights and
interests acquired or disposed of by BCLP II, all correspondence relating
to the business of BCLP II and the original records (or copies on such
media as BCLP II GP may deem appropriate) of all statements, bills and
other instruments furnished BCLP II in connection with its business;
(xi) To maintain records and accounts of all operations and
expenditures, make all filings and reports required under applicable rules
and regulations of any governmental department, bureau, or agency, any
securities exchange, any automated quotation system of a registered
securities association, and any self-regulatory body, and furnish the
partners and Unit holders with all necessary United States Federal, state,
or local income tax reporting information or such information with respect
to any other jurisdiction;
(xii) To purchase and maintain, in its sole discretion and at the
expense of BCLP II, liability, indemnity, and any other insurance
(including without limitation errors and omissions insurance), sufficient
to protect BCLP II, BCLP II GP, its officers, directors, employees, agents,
partners and affiliates, or any other person, from those liabilities and
hazards which may be insured against in the conduct of the business and in
the management of the business and affairs of BCLP II;
(xiii) To make, execute, assign, acknowledge, and file on behalf of
BCLP II all documents or instruments of any kind which BCLP II GP may deem
necessary or appropriate in carrying out the purposes and business of BCLP
II, including without limitation powers of attorney, agreements of
indemnification, contracts, deeds, options, loan obligations, mortgages,
notes, documents, or instruments of any kind or character, and amendments
thereto, any of which may contain confessions of judgment against BCLP II.
Any person dealing with BCLP II GP shall not be required to determine or
inquire into the authority or power of BCLP II GP to bind BCLP II or to
execute, acknowledge or deliver any and all documents in connection
therewith;
(xiv) To borrow money and to obtain credit in such amounts, on such
terms and conditions, and at such rates of interest and upon such other
terms and conditions as BCLP II GP deems appropriate, from banks, other
lending institutions, or any other person, including the partners and Unit
holders, for any purpose of BCLP II, including without limitation to obtain
cash for distribution to partners and Unit holders, and to pledge, assign,
or otherwise encumber or alienate all or any portion of the Boston Celtics
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franchise or other partnership assets, including any income therefrom, to
secure or provide for the repayment thereof. As between any lender and BCLP
II, it shall be conclusively presumed that the proceeds of such loans are
to be and will be used for the purposes authorized herein and that BCLP II
GP has the full power and authority to borrow such money and to obtain such
credit;
(xv) To assume obligations, enter into contracts, including contracts
of guaranty or suretyship, incur liabilities, lend money and otherwise use
the credit of BCLP II, to secure any of the obligations, contracts, or
liabilities of BCLP II by mortgage, pledge or other encumbrance of all or
any part of the property and income of BCLP II;
(xvi) To invest funds of BCLP II in interest-bearing and
non-interest-bearing accounts and short-term investments including without
limitation obligations of Federal, state and local governments and their
agencies, mutual funds (including money market funds), mortgage-backed
securities, commercial paper, repurchase agreements, time deposits,
certificates of deposit of commercial banks, savings banks or savings and
loan associations and equity or debt securities of any type, provided that
BCLP II GP shall not invest partnership funds in such a manner that BCLP II
will be considered to be holding itself out as being engaged primarily in
the business of investing, reinvesting, or trading in securities or will
otherwise be deemed to be an investment company under the Investment
Company Act of 1940, as amended;
(xvii) To make any election on behalf of BCLP II as is or may be
permitted under the Internal Revenue Code of 1986, as amended, or under the
taxing statutes or rules of any state, local, foreign or other
jurisdiction, and to supervise the preparation and filing of all tax and
information returns which BCLP II may be required to file;
(xviii) To employ and engage suitable agents, employees, advisers,
consultants and counsel (including any custodian, investment adviser,
accountant, attorney, corporate fiduciary, bank or other reputable
financial institution, or any other agents, employees or persons who may
serve in such capacity for BCLP II GP or any affiliate) to carry out any
activities which BCLP II GP is authorized or required to carry out or
conduct under the BCLP II Partnership Agreement, including without
limitation a person who may be engaged to undertake some or all of the
general management, property management, financial accounting and record
keeping or other duties of BCLP II GP, to indemnify such persons on behalf
of BCLP II against liabilities incurred by them in acting in such
capacities and to rely on the advice given by such Persons, it being agreed
and understood that BCLP II GP shall not be responsible for any acts or
omissions of any such persons and shall assume no obligations in connection
therewith other than the obligation to use due care in the selection
thereof;
(xix) To pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend, or compromise, upon such terms as it may determine and
upon such evidence as it may deem sufficient, any obligation, suit,
liability, cause of action, or claim, including taxes, either in favor of
or against BCLP II;
(xx) To register, qualify, list or report, or cause to be registered,
qualified, listed or reported, the Units of BCLP II pursuant to the
Securities Act of 1933, the Securities Exchange Act of 1934, any other
securities laws of the United States, the securities laws of any state of
the United States, the laws of any other jurisdiction, with the NYSE or
other securities exchange, or pursuant to an automated quotation system of
a registered securities association, as BCLP II GP deems appropriate;
(xxi) To qualify BCLP II to do business in any state, territory,
dependency or foreign country;
(xxii) To distribute cash or partnership assets to partners and Unit
holders;
(xxiii) To elect, appoint, engage or employ officers of BCLP II, such
officers to have such powers and duties, to serve such terms and to have
such authority to bind BCLP II, as BCLP II GP shall determine in its sole
discretion;
(xxiv) To take such action with respect to the manner in which the
Units are being or may be transferred or traded as BCLP II GP deems
necessary or appropriate in accordance with the BCLP II Partnership
Agreement;
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(xxv) To adopt and use a seal (but the use of a seal shall not be
required for the execution of any instruments, obligations or other
documents by BCLP II);
(xxvi) To possess and exercise any additional rights and powers of a
general partner under the partnership laws of Delaware (including without
limitation the Delaware Act) and any other applicable laws, to the extent
not inconsistent with the BCLP II Partnership Agreement; and
(xxvii) In general, to exercise in full all of the powers of the
partnership and to do any and all acts and conduct all proceedings and
execute all rights and privileges, contracts and agreements of any kind
whatsoever, although not specifically mentioned in the BCLP II Partnership
Agreement, that BCLP II GP in its sole discretion may deem necessary or
appropriate to the conduct of the business and affairs of BCLP II or to
carry out the purposes of BCLP II. The expression of any power or authority
of BCLP II GP shall not in any way limit or exclude any other power or
authority which is not specifically or expressly set forth in the BCLP II
Partnership Agreement.
BCLP II GP or its affiliates may, but are not obligated to, lend to BCLP II
funds for such periods of time as BCLP II GP may determine; as long as (a)
interest payable on such indebtedness will not exceed the lesser of a major
bank's "base rate" plus one percent or the highest interest rate allowed by law,
and (b) in no event shall such indebtedness be on terms and conditions less
favorable to BCLP II than it could obtain from unaffiliated third parties or
banks for the same purpose. No loans shall be made by BCLP II to BCLP II GP or
any of its affiliates.
By accepting BCLP II Units, holders grant a broad power of attorney to BCLP
II GP and its officers and attorneys-in-fact, for the purposes of conducting
partnership business. The power of attorney is irrevocable and each Unit holder,
by accepting BCLP II Units, waives all defenses available to contest or negate
any action of BCLP II GP or its officers or attorneys-in-fact.
BCLP II GP may only withdraw as general partner under certain specified
circumstances. BCLP II GP may transfer its general partnership interest in BCLP
II at any time to an affiliate, to the survivor of a merger of BCLP II GP, or to
an entity to which all or substantially all of the assets of BCLP II GP have
been transferred. In order to elect an additional general partner, or to
transfer the general partner interest to a nonaffiliate of the general partner,
the vote of an 80% supermajority of Unit holders is required. In each case, the
successor or additional general partner must agree to be bound by the terms and
conditions of the BCLP II Partnership Agreement, must submit evidence of its
authority to be so bound, and must agree in writing to continue the business of
BCLP II in accordance with the BCLP II Partnership Agreement. There are no
restrictions with respect to the general partner's issuance, sale or transfer of
securities or ownership of the general partner.
BCLP II GP may be removed without cause by a vote of 80% of holders of BCLP
II Units. A majority vote is required to remove the general partner with cause.
Under the BCLP II Partnership Agreement, "cause" is defined as a finding by a
United States Federal or state court of competent jurisdiction (i) that BCLP II
GP has violated its fiduciary duty to the Partnership or the Limited Partners;
(ii) that BCLP II GP has breached a material provision of the BCLP II
Partnership Agreement and such breach has had a material adverse effect upon
BCLP II or its assets; or (iii) of actual fraud, gross negligence or willful
misconduct by BCLP II GP in the management of the affairs of BCLP II.
Future Dilution. BCLP II authorizes its general partner to issue
additional Units, as well as additional classes of equity or other securities,
without any approval of holders of BCLP II Units. The additional securities may
include, without limitation, secured and unsecured debt obligations of BCLP II,
debt obligations of BCLP II convertible into any class or series of Units or
limited partnership interests that may be issued by BCLP II, or options, rights,
warrants or appreciation rights relating to any class or series of Units or
limited partnership interests, any such debt obligations or any combination of
any of the foregoing. The additional securities may be issued from time to time
to partners or Unit holders or other persons on terms and conditions that BCLP
II GP in good faith determines to be in the best interests of BCLP II, all
without the approval of the Unit holders or any other persons who may acquire an
interest in Units. There is no limit on the number of Units or other securities
that may be so issued, and such Units or other securities may be issued
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for such consideration and on such terms and conditions with respect to any
future issuance of Units or other securities as BCLP II GP in good faith
determines to be in the best interests of BCLP II.
Units and partnership interests to be issued by BCLP II will be issuable
from time to time in one or more classes or series, at such price, and with such
designations, preferences and relative participating, optional or other special
rights, powers and duties, including rights, powers and duties senior to
existing classes or series of Units and partnership interests, all as shall be
fixed by BCLP II GP in a manner that BCLP II GP determines in good faith to be
in the best interests of BCLP II, including without limitation: (a) the
allocation, for federal income and other tax purposes, to such class or series
of Units and partnership interests of items of partnership income, gain, loss,
deduction and credit; (b) the rights of such class or series of Units and
partnership interests to share in BCLP II distributions; (c) the rights of such
class or series of Units and partnership interests upon dissolution and
liquidation of BCLP II; (d) whether such class or series of Units and
partnership interests are redeemable by BCLP II and, if so, the price at which,
and the terms and conditions on which, such class or series of Units and
partnership interests may be redeemed by BCLP II; (e) whether such class or
series of Units and partnership interests is issued with the right of conversion
and, if so, the rate at and the terms and conditions upon which such class or
series of Units and partnership interests may be converted into any other class
or series of Units and/or partnership interests; (f) the terms and conditions of
the issuance of such class or series of Units and partnership interests, and all
other matters relating to the assignment thereof; and (g) the rights of such
class or series of Units and partnership interests to vote on matters relating
to BCLP II and the BCLP II Partnership Agreement. The total number of Units that
may be issued by BCLP II, including Units issued in connection with the
Reorganization, may not exceed 25,000,000.
BCLP II GP has no present plans to issue any additional classes of
securities following the Reorganization, but may determine to issue additional
classes from time to time in the future in accordance with the preceding
discussion.
Liability of General Partner. BCLP II GP will not be liable to BCLP II or
any Unit holder for any losses sustained or liabilities incurred as a result of
any act or omission of BCLP II GP or its affiliates, as long as the conduct did
not constitute actual fraud, gross negligence, willful misconduct or a breach of
fiduciary duty to BCLP II or the Unit holders, and BCLP II GP acted in good
faith and in a manner it believed to be in, or not opposed to, the interests of
BCLP II.
Indemnification. BCLP II provides indemnification to the general partner,
and its affiliates, officers, directors, employees and agents (each an
"Indemnitee"), for losses, claims, demands, costs, damages, liabilities, joint
and several, expenses of any nature (including attorneys' fees and
disbursements), judgments, fines, settlements, and other amounts arising from
any and all claims, demands, actions, suits, or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, arising out of the
Reorganization and the operation of BCLP II, whether or not the Indemnitee
continues to be associated with BCLP II, so long as the conduct of the
indemnified person did not constitute actual fraud, gross negligence, willful
misconduct or a breach of fiduciary duty to BCLP II or the Unit holders, and the
Indemnitee acted in good faith and in a manner it believed to be in, or not
opposed to, the interests of BCLP II. BCLP II may advance funds to an Indemnitee
to cover expenses incurred in defending a claim for which indemnification is
available under the BCLP II Partnership Agreement.
BCLP II may purchase and maintain, at its own expense, insurance for BCLP
II GP and its designees against any liability that may be asserted against or
expense that may be incurred by them, whether or not BCLP II would have the
power to indemnify the insured against that liability. The indemnification
provided will be paid out of partnership assets, and the Unit holders will have
no personal liability for any indemnification. An Indemnitee will not be denied
any indemnification simply because the Indemnitee had an interest in the
transaction giving rise to the indemnity, as long as the transaction was
otherwise authorized under the BCLP II Partnership Agreement.
Audit Committee. In accordance with NYSE requirements, BCLP II requires
its general partner to maintain an audit committee of the board of directors
composed solely of independent directors. The audit committee must approve the
appointment of BCLP II's independent auditing firm, review BCLP II's annual
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financial statements, and approve transactions with related parties of BCLP II.
If the NYSE changes its requirements, or if BCLP II Units become listed on
another national securities exchange with different requirements, BCLP II may
change its audit committee requirements in accordance with the rules of the
relevant exchange.
Transactions with Related Parties. BCLP II is permitted to enter into
transactions with its general partner and the affiliates of the general partner
and BCLP II, so long as such transactions are on terms no less favorable to BCLP
II than would be obtained in a comparable transaction between unrelated parties,
and the transactions are approved by BCLP II's audit committee. BCLP II may not
make loans to its general partners.
Conflicts of Interest. Except where the BCLP II Partnership Agreement
provides otherwise, BCLP II GP is authorized to resolve any potential conflict
of interest between BCLP II GP and its affiliates, on one hand, and BCLP II and
its limited partners and Unit holders, on the other. In the absence of bad faith
on the part of BCLP II GP, its determination is permitted and conclusively
deemed to be fair and reasonable to BCLP II and its present and future Unit
holders, and not a breach of the BCLP II Partnership Agreement, any other
agreement or any duty stated or implied by law or equity. The determination is
also deemed ratified, confirmed and approved by present and future Unit holders.
BCLP II GP is authorized in connection with its resolution of any conflict of
interest to consider (a) the relative interests of any party (including its own
interest) to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interest; (b) any customary or accepted industry
practices; (c) any applicable generally accepted accounting practices or
principles; and (d) such additional factors as BCLP II GP deems relevant,
reasonable or appropriate under the circumstances. However, BCLP II GP is not
required to consider the interests of any person other than BCLP II. Whenever
BCLP II GP, any of its affiliates or any Indemnitee is permitted or required to
make a decision (i) in its "discretion" or under a grant of similar authority or
latitude, BCLP II GP or the affiliate will be entitled to consider such
interests and factors as it desires and will have no duty or obligation to give
any consideration to any interest of or factors affecting BCLP II or any Unit
holder, or (ii) in its "good faith" or under another express standard, BCLP II
GP, the affiliate or the Indemnitee is only required to act under such express
standard and will not be subject to any thereby or applicable law. Whenever a
particular transaction, arrangement or resolution of a conflict of interest is
required under the BCLP II Partnership Agreement to be "fair and reasonable" to
any person, the fairness and reasonableness of such transaction, arrangement or
resolution will be considered as a whole in the context of all similar or
related transactions and in the context of all transactions, relationships and
arrangements between or among the relevant persons or their respective
affiliates.
The conflicts of interest described in this Prospectus are deemed waived
under the BCLP II Partnership Agreement.
Fees to General Partner. The BCLP II Partnership Agreement provides that
management fees may be paid by BCLP II to BCLP II GP. Although BCLP II's payment
of management fees to BCLP II GP after the Reorganization is not currently
contemplated, such fees may be paid at any time. BCLP II reimburses the
stockholders of BCLP II GP only for out-of-pocket expenses incurred in their
capacities as officers of BCLP II or BCLP II GP, or in connection for their
services on the National Basketball Association's Board of Governors.
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DESCRIPTION OF CASTLE CREEK INTERESTS
The Castle Creek Interests will have rights, preferences and other
characteristics determined by the Castle Creek Partnership Agreement. The
following information is summarized from the Castle Creek Partnership Agreement.
The summaries are qualified in their entireties by the provisions of the Castle
Creek Partnership Agreement, which is included as an exhibit to the Registration
Statement of which this Prospectus is a part.
In General. Castle Creek is a limited partnership organized under Delaware
law. Under the terms of the Castle Creek Partnership Agreement, Castle Creek
Interests will be the only form of limited partnership interests in Castle Creek
after the Reorganization, and all Castle Creek Interests will have identical
distribution and voting rights.
Distributions. Under the terms of the Castle Creek Partnership Agreement,
distributions on Castle Creek Interests are in the sole discretion of the
general partner. Distributions are made to the holders of Castle Creek Interests
pro rata in accordance with their proportionate interests in Castle Creek.
Castle Creek GP has the power to declare and make distributions out of Castle
Creek's operating cash flow, or may make such distributions out of partnership
reserves or borrowings, in its discretion. Castle Creek GP declares the amount
of any distribution and sets a record date for determining the partners eligible
to receive the distribution. Each distribution will be paid by Castle Creek
directly or through an agent or through any other person, only to the record
holder as of the record date set for such distribution, determined in accordance
with the provisions of the Castle Creek Partnership Agreement. That payment will
constitute full payment and satisfaction of Castle Creek's liability in respect
of such payment, regardless of any claim of any person who may have an interest
in or with respect to such payment by reason of any assignment or otherwise.
Castle Creek GP may withhold tax payments from the amount of distributions paid,
and the withheld amounts will also be considered a distribution for purposes of
the Castle Creek Partnership Agreement.
Because it will be subject to substantial restrictions on the transfer of
limited partnership interests of Castle Creek, Castle Creek will be eligible for
taxation as a pass-through entity. See "Certain Federal Income Tax
Consequences." Accordingly, the partners of Castle Creek will be responsible for
payment of taxes on Castle Creek's income. Under the Castle Creek Partnership
Agreement, there is no requirement for Castle Creek GP to declare distributions.
Accordingly, it is possible that holders of Castle Creek Interests will be
subject to taxation based on Castle Creek's income without receiving
distributions to cover payment of such taxes.
Restrictions on Transfer. Castle Creek Interests will not be listed on any
securities exchange and will be subject to substantial restrictions on transfer.
Under the Castle Creek Partnership Agreement, Castle Creek Interests may only be
transferred once a year on a prescribed date or as approved by Castle Creek GP,
which may withhold such approval in its absolute discretion. In considering the
approval of transfer applications, Castle Creek GP may, but is not required to,
give preference to requests from limited partners for odd-lot transfers (less
than 100 Castle Creek Interests), establish ceilings on the numbers of Castle
Creek Interests that may be transferred in any year, approve the transfer of
less than the total number of Castle Creek Interests requested to be transferred
by any limited partner and, in its sole discretion, use other means to apportion
its approval of proposed transfers including, but not limited to, a lottery
system. All transfers of Castle Creek Interests (except for those approved by
Castle Creek GP to be effective on another date) will be effective as of January
1 of the year immediately following the year in which the transfer application
was submitted to Castle Creek GP.
Until his successor is accepted as a substituted limited partner by Castle
Creek, a transferor of Castle Creek Interests retains the statutory rights of a
transferor of a limited partnership interest under the Delaware Act. The rights
of the transferee who is not a substituted limited partner are limited to
receipt of his share of distributions, net profits and net losses, and any
distributions on liquidation. In order to become a substituted limited partner,
in addition to completing a transfer application to Castle Creek GP, the
transferee must pay all reasonable legal fees and filing costs incurred by
Castle Creek in connection with his becoming a substituted limited partner.
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Voting Rights. Each Castle Creek Interest entitles the holder to one vote
under the Castle Creek Partnership Agreement. As long as no other class of
security has been issued by Castle Creek, the Castle Creek limited partners will
vote as a single class. Castle Creek limited partners will only have the right
to vote on certain specified transactions and company matters. Since Castle
Creek is a limited partnership, it will hold no annual meetings nor elections of
directors.
Holders of Castle Creek Interests will have the right to vote on certain
amendments to the Castle Creek Partnership Agreement, as follows. Castle Creek
GP has the right, without a limited partners' vote, to amend the Castle Creek
Partnership Agreement in ways that do not affect the limited partners'
fundamental interests in the partnership. These discretionary amendment matters
include changing the name or address of Castle Creek, changing the Castle Creek
Partnership Agreement to conform with changes in law or regulation, and
correcting errors. Most other amendments must be proposed by either Castle Creek
GP or limited partners owning % or more of the Castle Creek Interests, and
approved by a majority of outstanding Castle Creek Interests. Where an amendment
would alter the interests of Castle Creek limited partners in allocations of
partnership income or loss or in distributions of operating cash flow, then an
majority of limited partners is required to approve the amendment. An 80%
supermajority vote of limited partners would be required to approve an amendment
that would more likely than not cause the limited partners to lose their limited
liability under the Delaware Act. In each case, an amendment that would alter
the voting requirements under the Castle Creek Partnership Agreement requires
the requisite vote originally required to approve the matter. For instance, an
amendment that would remove an 80% supermajority voting provision must be
approved by an 80% supermajority.
Further, certain extraordinary transactions such as mergers in which Castle
Creek is not the survivor, and sales of all or substantially all its assets must
be either (i) proposed and approved by the general partner and a majority of the
limited partners or (ii) approved by an 80% supermajority. An 80% supermajority
is also required to approve the appointment of a general partner in addition to
Castle Creek GP.
Meetings of the Castle Creek limited partners may be called by Castle Creek
GP or by the owners of 50% of outstanding Castle Creek Interests, and the person
calling the meeting determines its location. A quorum at any meeting shall
consist of 50% of the outstanding Interests of which the vote is to be taken.
Limited Partners may vote in person or by proxy, in accordance with the laws of
Delaware and the United States. Castle Creek GP has the right to submit any
matter on which limited partners of Castle Creek are entitled to vote, to Castle
Creek limited partners for a vote by written consent without a meeting. Any
matter brought before a meeting of Castle Creek limited partners for which there
is no voting percentage specified in the Castle Creek Partnership Agreement
requires a majority vote.
Splits and Combinations. Castle Creek GP has the right to cause Castle
Creek to make distributions in limited partnership interests, or to subdivide or
combine outstanding limited partnership interests, so long as the split or
combination is made on a pro rata basis among all holders of Castle Creek
Interests. Castle Creek GP will be authorized to subdivide or combine
outstanding Castle Creek Interests without issuing fractional interests, and
holders of Castle Creek Interests who would otherwise be eligible to receive a
fractional interest will instead be paid a certain price per Castle Creek
Interest. A supermajority vote of Castle Creek limited partners is required for
any split or combination that changes the rights of any limited partner to
distributions, or of the distributive share of the limited partner to the
profits and losses of Castle Creek, or that results in the Castle Creek limited
partners' losing their limited liability under the Delaware Act.
In addition, Castle Creek GP has the right to effect one or more reverse
splits of Castle Creek Interests during the period ending on the first
anniversary of the date on which the Reorganization is consummated for the sole
purpose of reducing the number of holders of Castle Creek Interests in order to
allow Castle Creek to remain exempt from regulation under the Investment Company
Act. Any such reverse splits must be effected at a price (the "Split Price")
equal to the greater of (i) the average of the high and low prices of the BCLP
Units as reported on the NYSE on the five trading days immediately preceding
April 17, 1998 (the date on which the Reorganization was announced) and (ii) the
sum of (x) the average of the high and low prices of the BCLP II Units as
reported on the NYSE on the five trading days immediately preceding the date on
which the reverse split is announced and (y) average of the high and low prices
of the Subordinated
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Debentures as reported on the NYSE on the five trading days immediately
preceding the date on which the reverse split is announced. If any such reverse
split is effected, however, holders of Castle Creek Interests will be given the
opportunity to purchase, at the Split Price, a sufficient number of Castle Creek
Interests to enable each such holder to remain a holder of Castle Creek
Interests after the reverse split is effected.
General Partner. Castle Creek GP has exclusive authority over all Castle
Creek affairs, other than those for which specific voting rights are given to
holders of Castle Creek Interests, or specific restrictions imposed, under the
Castle Creek Partnership Agreement. This authority extends to all aspects of the
day-to-day management, operation and control of Castle Creek.
The power and authority of Castle Creek GP pursuant to the Castle Creek
Partnership Agreement is to be liberally construed to encompass Castle Creek
GP's undertaking, on behalf of Castle Creek, all acts and activities in which a
limited partnership may engage under the Delaware Act. The power and authority
of Castle Creek GP includes without limitation the power and authority on behalf
of, and at the expense of Castle Creek:
(i) To cause Castle Creek to acquire and own its assets and to take
all other actions and make all decisions in connection with the
acquisition, ownership and operation of all Castle Creek assets as Castle
Creek GP, in its sole discretion, deems necessary or appropriate;
(ii) To make all operating decisions concerning the business of Castle
Creek, including without limitation decisions on investments, negotiation
and execution of all necessary or desirable agreements in connection
therewith and selection of equipment and suppliers; decisions concerning
the development, acquisition and operation of any other businesses,
including negotiation and execution of any and all agreements in connection
therewith; and, in general, all decisions concerning the business and
activities to be carried on by Castle Creek and the manner of operation of
all such business and activities;
(iii) To cause Castle Creek's assets to be maintained and operated in
such manner as Castle Creek GP may determine, subject, however, to
obligations imposed with respect to such maintenance and operation by any
mortgage or security interest encumbering all or any portion of Castle
Creek's assets, and by lease, rental agreement or other agreement
pertaining thereto;
(iv) To cause Castle Creek to acquire, lease, dispose of (subject to
any required approval of limited partners), mortgage, pledge, encumber,
hypothecate or exchange any or all of Castle Creek's assets;
(v) To use the assets of Castle Creek (including without limitation,
cash on hand) for any purpose and on any terms it sees fit, including
without limitation the financing of partnership operations, the lending of
funds to other persons, the repayment of obligations of Castle Creek, the
conduct of additional partnership operations and the purchase or
acquisition of interests in properties or other assets, including, without
limitation, such interests in real property as may be acquired in
connection with arrangements for the use of facilities in connection with
Castle Creek's operations or the acquisition of any other assets or
interests in property as may be deemed appropriate in its sole discretion
in connection with partnership operations;
(vi) To negotiate and execute on terms deemed desirable in its sole
discretion, and to cause Castle Creek to perform, any contracts,
conveyances or other instruments that it considers useful or necessary to
the conduct of partnership operations or the implementation of its powers;
(vii) To select, hire and dismiss, and to cause Castle Creek to
select, hire and dismiss, employees and outside attorneys, accountants,
consultants and contractors and to determine compensation and other terms
of employment or hiring;
(viii) To form any further limited or general partnerships, joint
ventures, corporations or other entities or relationships that it deems
desirable, and contribute to such partnerships, ventures, corporations or
other entities any or all of the assets and properties of Castle Creek;
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(ix) To issue additional securities or additional classes or series of
securities, and to purchase, sell or otherwise acquire or dispose of
securities, at such time and on such terms as it deems desirable in its
sole discretion;
(x) To maintain or cause to be maintained records of all rights and
interests acquired or disposed of by Castle Creek, all correspondence
relating to the business of Castle Creek and the original records (or
copies on such media as Castle Creek GP may deem appropriate) of all
statements, bills, and other instruments furnished to Castle Creek in
connection with its business;
(xi) To maintain records and accounts of all operations and
expenditures, make all filings and reports required under applicable rules
and regulations of any governmental department, bureau, or agency, and
furnish the partners of Castle Creek with all necessary federal, state, or
local income tax reporting information or such information with respect to
any other jurisdiction;
(xii) To purchase and maintain, in its sole discretion and at the
expense of Castle Creek, liability, indemnity, and any other insurance
(including without limitation errors and omissions insurance), sufficient
to protect Castle Creek, Castle Creek GP, their officers, directors,
employees, agents, partners and affiliates, or any other person, from those
liabilities and hazards which may be insured against in the conduct of the
business and in the management of the business and affairs of Castle Creek;
(xiii) To make, execute, assign, acknowledge, and file on behalf of
Castle Creek all documents or instruments of any kind which Castle Creek GP
may deem necessary or appropriate in carrying out the purposes and business
of Castle Creek, including without limitation powers of attorney,
agreements of indemnification, contracts, deeds, options, loan obligations,
mortgages, notes, documents, or instruments of any kind or character, and
amendments thereto, any of which may contain confessions of judgment
against Castle Creek. No person dealing with Castle Creek GP shall be
required to determine or inquire into the authority or power of Castle
Creek GP to bind Castle Creek or to execute, acknowledge or deliver any and
all documents in connection therewith;
(xiv) To borrow money and to obtain credit in such amounts, on such
terms and conditions, and at such rates of interest and upon such other
terms and conditions as Castle Creek GP deems appropriate, from banks,
other lending institutions, or any other person, including the partners of
Castle Creek, for any purpose of Castle Creek, including without limitation
to obtain cash for distribution to partners, and to pledge, assign, or
otherwise encumber or alienate all or any portion of Castle Creek's assets,
including any income therefrom, to secure or provide for the repayment
thereof. As between any lender and Castle Creek, it shall be conclusively
presumed that the proceeds of such loans are to be and will be used for the
purposes authorized herein and that Castle Creek GP has the full power and
authority to borrow such money and to obtain such credit;
(xv) To assume obligations, enter into contracts, including contracts
of guaranty or suretyship, incur liabilities, lend money and otherwise use
the credit of Castle Creek, and to secure any of the obligations,
contracts, or liabilities of Castle Creek by mortgage, pledge or other
encumbrance of all or any part of its property and income;
(xvi) To invest funds of Castle Creek in interest-bearing and
non-interest-bearing accounts and other investments including without
limitation obligations of federal, state and local governments and their
agencies, mutual funds (including money market funds), mortgage-backed
securities, commercial paper, repurchase agreements, time deposits,
certificates of deposit of commercial banks, savings banks or savings and
loan associations and equity or debt securities of any type;
(xvii) To make any election on behalf of Castle Creek as is or may be
permitted under the Internal Revenue Code of 1986, as amended, or under the
taxing statutes or rules of any state, local, foreign or other
jurisdiction, and to supervise the preparation and filing of all tax and
information returns which Castle Creek may be required to file;
(xviii) To employ and engage suitable agents, employees, advisers,
consultants and counsel (including any custodian, investment adviser,
accountant, attorney, corporate fiduciary, bank or other
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reputable financial institution, or any other agents, employees or persons
who may serve in such capacity for Castle Creek GP or any affiliate) to
carry out any activities which Castle Creek GP is authorized or required to
carry out or conduct under the Castle Creek Partnership Agreement,
including without limitation a person who may be engaged to undertake some
or all of the general management, financial accounting and record keeping
or other duties of Castle Creek GP, to indemnify such persons on behalf of
Castle Creek against liabilities incurred by them in acting in such
capacities and to rely on the advice given by such persons, it being agreed
and understood that Castle Creek GP shall not be responsible for any acts
or omissions of any such persons and shall assume no obligations in that
connection other than the obligation to use due care in their selection;
(xix) To pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend, or compromise, upon such terms as it may determine and
upon such evidence as it may deem sufficient, any obligation, suit,
liability, cause of action, or claim, including taxes, either in favor of
or against Castle Creek, and to compromise the obligation of a partner to
make a contribution to the capital of Castle Creek or to return to it money
or other property paid or distributed to partner in violation of the
Delaware Act;
(xx) To register, qualify, list or report, or cause to be registered,
qualified, listed or reported, the Interests issued hereunder pursuant to
the Securities Act of 1933, the Securities Exchange Act of 1934, any other
securities laws of the United States, the securities laws of any state of
the United States, or the laws of any other jurisdiction, as Castle Creek
GP deems appropriate;
(xxi) To qualify Castle Creek to do business in any state, territory,
dependency or foreign country;
(xxii) To distribute cash or partnership assets to partners in
accordance with the Castle Creek Partnership Agreement;
(xxiii) To elect, appoint, engage or employ officers of Castle Creek,
such officers to have such powers and duties, to serve such terms and to
have such authority to bind Castle Creek, as Castle Creek GP shall
determine in its sole discretion;
(xxiv) To reconstitute and convert Castle Creek into a new entity as
Castle Creek GP shall determine under certain specified circumstances;
(xxv) To take such action with respect to the manner in which Castle
Creek Interests are being or may be transferred or traded as Castle Creek
GP deems necessary or appropriate;
(xxvi) To adopt and use one or more seals (but the a seal shall not be
required for the execution of any instruments, obligations or other
documents by Castle Creek);
(xxvii) To possess and exercise any additional rights and powers of a
general partner under the partnership laws of Delaware (including without
limitation the Delaware Act) and any other applicable laws, to the extent
not inconsistent with the Castle Creek Partnership Agreement;
(xxviii) To exercise in full all of the powers of Castle Creek as set
forth in the Castle Creek Partnership Agreement and to do any and all acts
and conduct all proceedings and execute all rights and privileges,
contracts and agreements of any kind whatsoever that Castle Creek GP in its
sole discretion may deem necessary or appropriate to the conduct of the
business and affairs of Castle Creek or to carry out the purposes of Castle
Creek. The expression of any power or authority of Castle Creek GP does not
in any way limit or exclude any other power or authority which is not
specifically or expressly set forth in the Castle Creek Partnership
Agreement; and
(xxix) In general, to exercise any of the foregoing powers and such
other powers that Castle Creek GP in its sole discretion may deem necessary
or appropriate to the conduct of any other business or activities which
Castle Creek is or may in the future be engaged in pursuant to the Castle
Creek Partnership Agreement.
Castle Creek GP or its affiliates may, but are not obligated to, lend to
Castle Creek funds for such periods of time as Castle Creek GP may determine; as
long as (a) interest payable on such indebtedness will not
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exceed the lesser of a major bank's "base rate" plus one percent or the highest
interest rate allowed by law, and (b) in no event shall such indebtedness be on
terms and conditions less favorable to Castle Creek than it could obtain from
unaffiliated third parties or banks for the same purpose. Castle Creek may make
loans to Castle Creek GP or any of its affiliates.
By accepting Castle Creek Interests, limited partners grant a broad power
of attorney to Castle Creek GP and its officers and attorneys-in-fact, for the
purposes of conducting partnership business. The power of attorney is
irrevocable and each limited partner, by accepting Castle Creek Interests,
waives all defenses available to contest or negate any action of Castle Creek GP
or its officers or attorneys-in-fact.
Castle Creek GP may only withdraw as general partner under certain
specified circumstances. Castle Creek GP may transfer its general partnership
interest in Castle Creek at any time to an affiliate, to the affiliated survivor
of a merger of Castle Creek GP, or to an affiliated entity to which all or
substantially all of the assets of Castle Creek GP have been transferred. If
Castle Creek GP wishes to transfer its general partnership interests to a
nonaffiliated third party, the vote of a majority in interest of limited
partners is required. In order to elect an additional general partner, the vote
of a majority in interest of limited partners is required. In each case, the
successor or additional general partner must agree to be bound by the terms and
conditions of the Castle Creek Partnership Agreement, must submit evidence of
its authority to be so bound, and must agree in writing to continue the business
of Castle Creek in accordance with the Castle Creek Partnership Agreement. There
are no restrictions with respect to the general partner's issuance, sale or
transfer of securities or ownership of the general partner.
Castle Creek GP may be removed with or without cause only by a vote of 80%
of Castle Creek limited partners, or for cause by a majority of limited
partners. Under the Castle Creek Partnership Agreement, "cause" is defined as a
finding by a United States Federal or state court of competent jurisdiction (i)
that Castle Creek GP has violated its fiduciary duty to the partnership or the
limited partners; (ii) that Castle Creek GP has breached a material provision of
the Castle Creek Partnership Agreement and such breach has had a material
adverse effect upon Castle Creek or its assets; or (iii) of actual fraud, gross
negligence or willful misconduct by Castle Creek GP in the management of the
affairs of Castle Creek.
Future Dilution. Castle Creek authorizes its general partner to issue
additional Interests, as well as additional classes of equity or other
securities, without any approval of Castle Creek limited partners. The
additional securities may include, without limitation, secured and unsecured
debt obligations of Castle Creek, debt obligations of Castle Creek convertible
into any class or series of limited partnership interests that may be issued by
Castle Creek, or options, rights, warrants or appreciation rights relating to
any class or series of limited partnership interests, any such debt obligations
or any combination of any of the foregoing. The additional securities may be
issued from time to time to partners or other persons on terms and conditions
that Castle Creek GP in good faith determines to be in the best interests of
Castle Creek, all without the approval of the limited partners or any other
persons who may acquire an interest in limited partnership interests. There is
no limit on the number of securities that may be so issued.
Partnership interests to be issued by Castle Creek will be issuable from
time to time in one or more classes or series, at such price, and with such
designations, preferences and relative participating, optional or other special
rights, powers and duties, including rights, powers and duties senior to
existing classes or series of partnership interests, all as are fixed by Castle
Creek GP in a manner that Castle Creek GP determines in good faith to be in the
best interests of Castle Creek, including without limitation: (a) the
allocation, for federal income and other tax purposes, to such class or series
of partnership interests of items of partnership income, gain, loss, deduction
and credit; (b) the rights of such class or series of partnership interests to
share in Castle Creek distributions; (c) the rights of such class or series of
partnership interests upon dissolution and liquidation of Castle Creek; (d)
whether such class or series of partnership interests are redeemable by Castle
Creek and, if so, the price at which, and the terms and conditions on which,
such class or series of partnership interests may be redeemed by Castle Creek;
(e) whether such class or series of partnership interests is issued with the
right of conversion and, if so, the rate at and the terms and conditions upon
which such class or series of partnership interests may be converted into any
other class or series of partnership interests; (f) the terms and conditions of
the issuance of such class or series of partnership interests, and all other
matters relating to
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the assignment thereof; and (g) the rights of such class or series of
partnership interests to vote on matters relating to Castle Creek and the Castle
Creek Partnership Agreement.
Castle Creek GP has no present plans to issue any additional classes of
securities following the Reorganization, but may determine to issue additional
classes from time to time in the future in accordance with the preceding
discussion.
Liability of General Partner. Castle Creek GP will not be liable to Castle
Creek for any losses or liabilities caused by acts or omissions of Castle Creek
GP or its affiliates, as long as its conduct did not constitute negligence or
misconduct and Castle Creek GP acted in good faith and in a manner it believed
to be in, or not opposed to, the interests of Castle Creek.
Indemnification. Castle Creek provides indemnification to the general
partner, and its affiliates, officers, directors, employees and agents (each an
"Indemnitee"), for losses, claims, demands, costs, damages, liabilities, joint
and several, expenses of any nature (including attorneys' fees and
disbursements), judgments, fines, settlements, and other amounts arising from
any and all claims, demands, actions, suits, or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, arising out of the
Reorganization and the operation of Castle Creek, whether or not the Indemnitee
continues to be associated with Castle Creek, so long as the conduct of the
indemnified person did not constitute actual fraud, gross negligence, willful
misconduct or a breach of fiduciary duty to Castle Creek or the limited
partners, and the Indemnitee acted in good faith and in a manner it believed to
be in, or not opposed to, the interests of Castle Creek. Castle Creek may
advance funds to an Indemnitee to cover expenses incurred in defending a claim
for which indemnification is available under the Castle Creek Partnership
Agreement.
Castle Creek may purchase and maintain, at its own expense, insurance for
Castle Creek GP and its designees against any liability that may be asserted
against or expense that may be incurred by them, whether or not Castle Creek
would have the power to indemnify the insured against that liability. The
indemnification provided will be paid out of partnership assets, and the limited
partners will have no personal liability for any indemnification. An Indemnitee
will not be denied any indemnification simply because the Indemnitee had an
interest in the transaction giving rise to the indemnity, as long as the
transaction was otherwise authorized under the Castle Creek Partnership
Agreement.
Audit Committee. No provision is made in the Castle Creek Partnership
Agreement for the establishment or maintenance of an audit committee for Castle
Creek.
Transactions with Related Parties. Castle Creek is permitted to enter into
transactions with its general partner and the affiliates of the general partner
and Castle Creek, so long as such transactions are on terms no less favorable to
Castle Creek than would be obtained in a comparable transaction between
unrelated parties.
Conflicts of Interest. Except where the Castle Creek Partnership Agreement
provides otherwise, Castle Creek GP is authorized to resolve any potential
conflict of interest between Castle Creek GP and its affiliates, on one hand,
and Castle Creek and its limited partners and Unit holders, on the other. In the
absence of bad faith on the part of Castle Creek GP, its determination is
permitted and conclusively deemed to be fair and reasonable to Castle Creek and
its present and future limited partners, and not a breach of the Castle Creek
Partnership Agreement, any other agreement or any duty stated or implied by law
or equity. The determination is also deemed ratified, confirmed and approved by
present and future limited partners. Castle Creek GP shall be authorized in
connection with its resolution of any conflict of interest to consider (a) the
relative interests of any party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and burdens relating to
such interest; (b) any customary or accepted industry practices; (c) any
applicable generally accepted accounting practices or principles; and (d) such
additional factors as Castle Creek GP deems relevant, reasonable or appropriate
under the circumstances. However, Castle Creek GP is not required to consider
the interests of any person other than Castle Creek. Whenever Castle Creek GP,
any of its affiliates or any Indemnitee is permitted or required to make a
decision (i) in its "discretion" or under a grant of similar authority or
latitude, Castle Creek GP or the affiliate will be entitled to consider such
interests and factors as it desires and will have no duty or obligation to give
any consideration to any interest of
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or factors affecting Castle Creek or any limited partner or (ii) in its "good
faith" or under another express standard, Castle Creek GP, the affiliate or the
Indemnitee is only required to act under such express standard and will not be
subject to any liability thereby or applicable law. Whenever a particular
transaction, arrangement or resolution of a conflict of interest is required
under the Castle Creek Partnership Agreement to be "fair and reasonable" to any
person, the fairness and reasonableness of such transaction, arrangement or
resolution will be considered as a whole in the context of all similar or
related transactions and in the context of all transactions, relationships and
arrangements between or among the relevant persons or their respective
affiliates.
Fees to General Partner. The Castle Creek Partnership Agreement provides
that management fees may be paid by Castle Creek to Castle Creek GP. Although
Castle Creek's payment of management fees to Castle Creek GP after the
Reorganization currently is not contemplated, such fees may be paid at any time.
DESCRIPTION OF SUBORDINATED DEBENTURES
General. The Subordinated Debentures are to be issued under an Indenture,
to be dated as of , 1998 (the "Indenture"), between BCLP and
, as Trustee (the "Trustee"). A copy of the form of the
Indenture is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939, as amended.
Principal of, premium, if any, and interest on the Subordinated Debentures
will be payable, and the Subordinated Debentures may be exchanged or
transferred, at the office or agency of BCLP in the Borough of Manhattan, The
City of New York (which initially shall be the corporate trust office of the
Trustee, at , New York, New York ),
except that, at the option of BCLP, payment of interest may be made by check
mailed to the address of the Holders as such address appears in the Debenture
register.
The Subordinated Debentures will be issued only in fully registered form,
without coupons, in denominations of $20 and any integral multiple thereof. No
service charge shall be made for any registration of transfer or exchange of
Subordinated Debentures, but BCLP may require payment of an amount sufficient to
cover any transfer tax or other similar governmental charge payable in
connection therewith.
Terms of the Subordinated Debentures. The Subordinated Debentures will be
general unsecured obligations of BCLP, subordinated in right of payment to all
Senior Indebtedness of BCLP, and will mature on June 30, 2038. The Subordinated
Debentures will bear interest at six percent per annum from June 30, 1998, or
from the most recent date to which interest has been paid or provided for,
payable annually to Holders of record at the close of business on the May 15
immediately preceding the interest payment date on June 30 of each year,
commencing June 30, 1999.
Interest on the Subordinated Debentures will be paid in immediately
available funds to the Person in whose name that Debenture is registered at the
close of business on the Regular Record Date for such interest.
BCLP will pay interest on overdue principal at 1% per year in excess of
such rate and will pay interest on overdue installments of interest at such
higher rate to the extent lawful. Interest on the Subordinated Debentures will
be computed on the basis of a 360-day year of twelve 30-day months.
Subordination. The Indebtedness represented by the Subordinated Debentures
will be subordinated in right of payment to all existing and future Senior
Indebtedness of BCLP. As of March 31, 1998 (on a pro forma basis, assuming the
Reorganization had occurred on that date), BCLP would have had approximately
$47.3 million principal amount of Senior Indebtedness outstanding.
BCLP may not pay the principal of, premium, if any, or interest on, the
Subordinated Debentures or make any deposit pursuant to the provisions described
under "Defeasance" below, and may not repurchase, redeem, defease or otherwise
retire any Subordinated Debentures (collectively, "pay" or a "payment" with
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respect to the Subordinated Debentures) (i) if any Senior Indebtedness of BCLP
is not paid when due, or (ii) for 180 days after any other default on any such
Senior Indebtedness occurs, or (iii) if the maturity thereof has been
accelerated in accordance with its terms, unless, in any such case, (x) the
default has been cured or waived and, if applicable, any such acceleration has
been rescinded or (y) such Senior Indebtedness has been paid in full in cash.
Upon any payment or distribution of the assets of BCLP to creditors upon a
total or partial liquidation or total or partial dissolution of BCLP or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to BCLP or its property (whether voluntary or involuntary), (i) the
holders of Senior Indebtedness of BCLP will be entitled to receive payment in
full in cash before the holders of the Subordinated Debentures are entitled to
receive any payment, and (ii) until the Senior Indebtedness of BCLP is paid in
full in cash, any payment to which the Holders of the Subordinated Debentures
would be entitled but for this provision will be made to holders of Senior
Indebtedness as their interests may appear.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of BCLP shall be received by the Trustee or the Holders
at a time when such payment or distribution is prohibited by the foregoing
provisions, such payment or distribution shall be held in trust for the benefit
of the holders of Senior Indebtedness, and shall be paid or delivered by the
Trustee or such Holders, as the case may be, to the holders of such Senior
Indebtedness remaining unpaid or unprovided for or to their Representative,
ratably according to the aggregate amounts remaining unpaid on account of the
Senior Indebtedness held or represented by each, for application to the payment
of all Senior Indebtedness remaining unpaid, to the extent necessary to pay or
to provide for the payment of all such Senior Indebtedness in full after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness.
If payment of the Subordinated Debentures is accelerated because of an
Event of Default, BCLP or the Trustee shall promptly notify the holders of
Senior Indebtedness or any Representative thereof of the acceleration. If the
Trustee provides such notice, the Trustee also will notify BCLP of the
acceleration.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, holders of the Subordinated Debentures may recover
less, ratably, than other creditors of BCLP, or may recover nothing.
Optional Redemption. The Subordinated Debentures will not be redeemable
prior to maturity, except that, at any time and from time to time prior to
maturity. BCLP may redeem the Subordinated Debentures at a redemption price
(expressed as a percentage of principal amount) of 100% plus accrued interest to
the redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
In the case of any partial redemption, selection of the Subordinated
Debentures for redemption will be made by the Trustee on a pro rata basis, by
lot or by such other method as the Trustee in its sole discretion shall deem to
be fair and appropriate, although no Debenture of $20 in original principal
amount or less shall be redeemed in part. If any Debenture is to be redeemed in
part, the notice of redemption relating to such Debenture shall state the
portion of the principal amount thereof to be redeemed. A new Debenture in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Debenture.
Sinking Fund. There will be no mandatory sinking fund for the Subordinated
Debentures.
Same-Day Settlement and Payment. Settlement for the Subordinated
Debentures will be made in immediately available funds. All payments of
principal, premium, if any, and interest will be made by BCLP in immediately
available funds. The Subordinated Debentures will trade in the Same-Day Funds
Settlement System of The Depository Trust Company ("DTC") until maturity, and
secondary market trading activity for the Subordinated Debentures will therefore
settle in immediately available funds.
Merger, Consolidation or Transfer of Assets. Under the Indenture, BCLP may
not consolidate with or merge with or into, or convey, transfer or lease all or
substantially all of its assets unless the resulting, surviving
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or transferee entity is organized under United States law and expressly assumes,
by supplemental indenture, all of BCLP's obligations under the Subordinated
Debentures and the Indenture.
Market for the Subordinated Debentures; Commission Reports. BCLP has
applied to list the Subordinated Debentures on the NYSE, subject to official
notice of issuance. The Subordinated Debentures will be new securities, and
there can be no assurance as to the prices or the volatility of the prices at
which they will trade after consummation of the Reorganization or as to the
volume of any trading activity. See "Risk Factors and Other Important
Considerations -- Risks Relating to the Subordinated Debentures."
Defaults. An Event of Default is defined in the Indenture as: (i) a
default in the payment of interest on the Subordinated Debentures when due,
continued for 30 days; (ii) a default in the payment of principal of and
premium, if any, on any Debenture when due at its Stated Maturity, upon optional
redemption, upon required repurchase, upon declaration of acceleration or
otherwise; (iii) the failure by BCLP to file with the Commission and furnish to
the Trustee any reports that may be required of BCLP under the Securities
Exchange Act of 1934 and 30 days or more shall have expired after a Senior
Officer of BCLP first becomes aware of such failure; (iv) the failure by BCLP to
comply for 30 days after notice with its other agreements and covenants
contained in the Indenture; or (v) certain events of bankruptcy, insolvency or
reorganization of BCLP. A default under clause (iv), however, will not
constitute an Event of Default until the Trustee or the Holders of 25% in
principal amount of the outstanding Subordinated Debentures notify BCLP of the
Default and BCLP does not cure such Default within the time specified after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Subordinated Debentures
may declare the principal of, premium, if any, and accrued but unpaid interest
on all the Subordinated Debentures to be due and payable. Upon such a
declaration, such principal, premium, if any, and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of BCLP occurs and is continuing, the
principal of, premium, if any, and any accrued but unpaid interest on all the
Subordinated Debentures will ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders of the Subordinated Debentures. Under certain circumstances, the Holders
of a majority in principal amount of the outstanding Subordinated Debentures may
rescind any such acceleration with respect to the Subordinated Debentures and
its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders of the Subordinated
Debentures unless such Holders have offered to the Trustee reasonable indemnity
or security against any loss, liability or expense. Except to enforce the right
to receive payment of principal, premium, if any, or interest when due, no
Holder may pursue any remedy with respect to the Indenture or the Subordinated
Debentures unless (i) such Holder has previously given the Trustee notice that
an Event of Default is continuing, (ii) Holders of at least 25% in principal
amount of the outstanding Subordinated Debentures have requested the Trustee to
pursue the remedy, (iii) such Holders have offered the Trustee reasonable
security or indemnity against any loss, liability or expense, (iv) the Trustee
has not complied with such request within 60 days after the receipt thereof and
the offer of security or indemnity and (v) the Holders of a majority in
principal amount of the outstanding Subordinated Debentures have not given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the rights
of any other Holder or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder of the Subordinated
Debentures notice of the Default within 60 days after it occurs. Except in the
case of a Default in the payment of principal of, premium, if any, or interest
on any Debenture, the Trustee may withhold notice if and so long as a committee
of its trust officers determines that
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withholding notice is not opposed to the interest of the Holders. In addition,
BCLP is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous year. BCLP also is required to
deliver to the Trustee, within 30 days after a Senior Officer of BCLP becomes
aware of the occurrence thereof, written notice of any event which would
constitute certain Defaults, their status and what action BCLP is taking or
proposes to take in respect thereof.
Amendments and Waivers. Subject to certain exceptions, the Indenture may
be amended with the consent of the Holders of a majority in principal amount of
the Subordinated Debentures then outstanding (including consents obtained in
connection with a tender offer or exchange for the Subordinated Debentures) and
any past Default or compliance with any provisions may be waived with the
consent of the Holders of a majority in principal amount of the Subordinated
Debentures then outstanding. Without the consent of each Holder of an
outstanding Debenture affected thereby, however, no amendment or waiver may,
among other things, (i) reduce the amount of Subordinated Debentures whose
Holders must consent to an amendment, (ii) reduce the rate of or extend the time
for payment of interest on any Debenture, (iii) reduce the principal of or
extend the Stated Maturity of any Debenture, (iv) reduce the premium payable
upon the redemption or acceleration of any Debenture or change the time at which
any Debenture may be redeemed as described under "Optional Redemption", (v) make
any Debenture payable in money or property other than that stated in the
Debenture, (vi) impair the right of any Holder to receive payment of principal
of, premium, if any, and interest on such Holder's Subordinated Debentures on or
after the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Subordinated Debentures, (vii) make
any change to the provisions of the Indenture relating to subordination of the
Subordinated Debentures, or (viii) make any change in the amendment provisions
which require each Holder's consent or in the waiver provisions.
Without the consent of any Holder, BCLP and Trustee may amend the Indenture
to cure any ambiguity, omission, defect or inconsistency, to provide for the
assumption by a successor entity of the obligations of BCLP under the Indenture,
to add guarantees with respect to the Subordinated Debentures, to secure the
Subordinated Debentures, to add to the covenants of BCLP for the benefit of the
Holders or to surrender any right or power conferred upon BCLP, to make any
change not inconsistent with Indenture provisions that does not adversely affect
the rights of any Holder or to comply with any requirement of the Commission in
connection with the qualification of the Indenture under the Trust Indenture
Act.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, BCLP will mail to
Holders a notice briefly describing such amendment. However, the failure to give
such notice to all Holders, or any defect therein, will not impair or affect the
validity of the amendment.
Transfer; Certain Transfer Restrictions. A Holder will be able to register
the transfer of or exchange the Subordinated Debentures only in accordance with
the provisions of the Indenture. BCLP may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge payable in connection
with certain registrations of transfers and exchanges.
The Subordinated Debentures may be freely sold, assigned, transferred,
pledged, encumbered or otherwise disposed of immediately following issuance.
No Personal Liability of Directors, Officers, Employees and Unit
Holders. Neither the general partner of BCLP, nor any officer, director,
employee or agent of its general partner or of BCLP shall have any liability for
any obligations of BCLP under the Subordinated Debentures 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 Subordinated Debenture waives and releases
all such liability. Such waiver, however, may not be effective to waive
liabilities under the federal securities laws.
Defeasance. BCLP at any time may terminate all its obligations under the
Subordinated Debentures and the Indenture ("legal defeasance"), except for
certain obligations, including those respecting the
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defeasance trust and obligations to register the transfer or exchange of the
Subordinated Debentures, to replace mutilated, destroyed, lost or stolen
Subordinated Debentures and to maintain a registrar and paying agent in respect
of the Subordinated Debentures.
If BCLP exercises its legal defeasance option, payment of the Subordinated
Debentures may not be accelerated because of an Event of Default with respect
thereto (other than an Event of Default with respect to the obligations referred
to in the immediately preceding paragraph).
In order to exercise its legal defeasance option, BCLP must irrevocably
deposit in trust (the "defeasance trust") with the Trustee unencumbered money or
U.S. Government Obligations for the payment of principal of, premium, if any,
and interest on the Subordinated Debentures to redemption or maturity, as the
case may be, and must comply with certain other conditions, including delivery
to the Trustee of an Opinion of Counsel to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a ruling of the
Internal Revenue Service or other change in applicable federal income tax law).
Concerning the Trustee. is to be the Trustee under the
Indenture and has been appointed by BCLP as Registrar and Paying Agent with
regard to the Subordinated Debentures.
The Holders of a majority in principal amount of the outstanding
Subordinated Debentures 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 if an Event of
Default occurs (and is not cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent person in the conduct of
such person's 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, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or expense
and then only to the extent required by the terms of the Indenture.
Governing Law. The Indenture provides that it and the Subordinated
Debentures will be governed by, and construed in accordance with, the laws of
the State of New York without giving effect to applicable principles of
conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
Book-Entry, Delivery and Form. The Subordinated Debentures will initially
be issued, to the extent possible, in the form of one or more Global
Subordinated Debentures (the "Global Debenture"). Each Global Debenture will be
deposited on the Issue Date with The Depository Trust Company (the "Depositary")
or its custodian and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Debenture
Holder"). BCLP has been advised by the Depositary that the Depositary is a
limited-purpose trust company that was created to hold securities for its
participating organizations (collectively, the "Participants" or the
"Depositary's Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic
book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants" or the
"Depositary's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of the
Depositary only through the Depositary's Participants or the Depositary's
Indirect Participants.
BCLP expects that pursuant to procedures established by the Depositary (i)
upon deposit of the Global Debenture, the Depositary will credit the accounts of
Participants with portions of the principal amount of the Global Debenture and
(ii) ownership of the Subordinated Debentures evidenced by the Global Debenture
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to the interests of
the Depositary's Participants), the Depositary's Participants and
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the Depositary's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Subordinated Debentures evidenced by the Global Debenture will be
limited to such extent.
So long as the Global Debenture Holder is the registered owner of any
Subordinated Debentures, the Global Debenture Holder will be considered the sole
Holder under the Indenture of any Subordinated Debentures evidenced by the
Global Debenture for the purposes of receiving payment on the Subordinated
Debentures, receiving notices, and for all other purposes under the Indenture
and the Subordinated Debentures. Beneficial owners of Subordinated Debentures
evidenced by the Global Debenture will not be considered the owners or Holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
Neither BCLP nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Subordinated Debentures.
Accordingly, each person owning a beneficial interest in the Global Debenture
must rely on the procedures of the Depositary, and, if such person is not a
Participant, on the procedures of the Participant through which such person owns
its interest, to exercise any rights of a holder under the Indenture. BCLP
understands that under existing industry practices, in the event that BCLP
requests any action of holders or that an owner of a beneficial interest in the
Global Debenture desires to give or take any action which a holder is entitled
to give or take under the Indenture, the Depositary would authorize the
Participants holding the relevant beneficial interest to give or take such
action and such Participants would authorize beneficial owners owning through
such Participants to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Payments in respect of the principal of, and premium, if any, and interest
on any Subordinated Debentures registered in the name of the Global Debenture
Holder on the applicable record date will be payable by the Trustee to or at the
direction of the Global Debenture Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, BCLP and the
Trustee may treat the persons in whose names Subordinated Debentures, including
the Global Debenture, are registered as the owners thereof for the purpose of
receiving such payments. Consequently, neither BCLP nor the Trustee has or will
have any responsibility or liability for the payment of such amounts to
beneficial owners of the Subordinated Debentures. BCLP believes, however, that
it is currently the policy of the Depositary to immediately credit the accounts
of the relevant Participants with such payments, in amounts proportionate to
their respective holdings of beneficial interests in the relevant security as
shown on the records of the Depositary. Payments by the Depositary's
Participants and the Depositary's Indirect Participants to the beneficial owners
of Subordinated Debentures will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
If (i) BCLP notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and BCLP is unable to locate a
qualified successor within 90 days, (ii) BCLP, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Subordinated
Debentures in other than global form, or (iii) there shall have occurred and be
continuing a Default or an Event of Default with respect to any of the
Subordinated Debentures represented by the Global Debenture, then, upon
surrender by the Global Debenture Holder of its Global Debenture, Subordinated
Debentures in certificated form will be issued to each person that the Global
Debenture Holder and the Depositary identify as being the beneficial owner of
the related Subordinated Debentures.
Neither BCLP nor the Trustee will be liable for any delay by the Global
Debenture Holder or the Depositary in identifying the beneficial owners of
Subordinated Debentures and BCLP and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the Global Debenture Holder
or the Depositary for all purposes.
Certain Definitions.
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of
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such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; provided that a Person shall be deemed to
have such power with respect to BCLP if such Person is the beneficial owner of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of BCLP or of rights or warrants to purchase
such Capital Stock (whether or not currently exercisable). The terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Board of Directors" means the Board of Directors of BCLP's general partner
or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all units, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any preferred stock,
but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those set forth in (i) the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, (ii) statements and pronouncements of
the Financial Accounting Standards Board, (iii) such other statements by such
other entity as approved by a significant segment of the accounting profession
and (iv) the rules and regulations of the Commission governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and similar
written statements from the accounting staff of the Commission and releases of
the Emerging Issues Task Force.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" means any person Guaranteeing any
obligation.
"Holders" or "Debentureholders" means the Person in whose name a
Subordinated Debenture is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for.
"Legal Holiday" means any Saturday, Sunday or other day on which banks in
the State of New York are authorized or obligated by law to be closed for
business.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
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"Principal" of a Subordinated Debenture means the principal of the
Debenture payable on the Debenture which is due or overdue or is to become due
at the relevant time.
"Representative" means, with respect to any Indebtedness, any holder
thereof or any agent, trustee or other representative for any such holder.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on, and fees, indemnification and other amounts due in respect of (a)
all indebtedness of BCLP, whether outstanding on the date of the Indenture or
thereafter created, (i) for money borrowed by BCLP, (ii) for money borrowed by,
or obligations of, others and either assumed or guaranteed, directly or
indirectly, by BCLP, (iii) in respect of letters of credit and acceptances
issued or made by banks, or (iv) constituting purchase money indebtedness, or
indebtedness secured by property included in the property, plant and equipment
accounts of BCLP at the time of the acquisition of such property by BCLP, for
the payment of which BCLP is directly liable, and (b) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements to,
any such indebtedness. As used in the preceding sentence the term "purchase
money indebtedness" means indebtedness evidenced by a note, debenture, bond or
other instrument (whether or not secured by any lien or other security interest)
issued or assumed as all or a part of the consideration for the acquisition of
property, whether by purchase, merger, consolidation or otherwise, unless by its
terms such indebtedness is subordinate to other indebtedness of BCLP.
Notwithstanding anything to the contrary in the Indenture or the Subordinated
Debentures, Senior Indebtedness shall not include (i) amounts owed to trade
creditors in the ordinary course of business, (ii) any indebtedness of BCLP
which, by its terms or the terms of the instrument creating or evidencing it, is
subordinate in right of payment to or pari passu with the Subordinated
Debentures, as the case may be, and, in particular, the Subordinated Debentures
shall rank pari passu with respect to all other debt securities and guarantees
in respect thereof issued to any other trusts, partnerships or other entity
affiliated with BCLP that is a financing vehicle of BCLP in connection with the
issuance of preferred securities by such financing vehicle, or (iii) any
indebtedness of BCLP to a subsidiary of BCLP.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed as to principal and interest by the United States of
America or any agency thereof and maturing within 180 days after acquisition
thereof; (ii) investments in demand deposit accounts or time deposit accounts,
certificates of deposit and money market deposits maturing within 180 days of
the date of acquisition thereof issued by a bank or trust company that is not an
Affiliate of BCLP and that is organized under the laws of the United States of
America or any state thereof, which bank or trust company has capital, surplus
and undivided profits aggregating in excess of $500,000,000 and has outstanding
debt which is rated "AA" (or similar equivalent rating) or higher by at least
one nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a registered
broker-dealer or mutual fund distributor; (iii) repurchase obligations with a
term of not more than 30 days for underlying securities of the types described
in clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above; (iv) investments in commercial paper, maturing
not more than 90 days after the date of acquisition, issued by a corporation
(other than an Affiliate of BCLP) organized and in existence under the laws of
the United States of America with a rating of "P-1" or higher according to
Moody's Investors Service, Inc. or "A-1" or higher according to Standard &
Poor's Ratings Group; and (v) investments in securities with maturities of six
months or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or Moody's Investors Service, Inc.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality
105
<PAGE> 114
thereof) for the payment of which the full faith and credit of the United States
of America is pledged and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for BCLP,
BCLP II and Castle Creek by Gibson, Dunn & Crutcher LLP, Washington, D.C.
Certain federal income tax matters set forth under the heading "Certain Federal
Income Tax Consequences" will be passed upon for Celtics, Inc. by Roberts &
Holland LLP, New York, NY.
EXPERTS
The consolidated financial statements of BCLP at June 30, 1997 and 1996,
and for each of the three years in the period ended June 30, 1997, included in
this Prospectus and Registration Statement, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
106
<PAGE> 115
INDEX TO FINANCIAL STATEMENTS
BOSTON CELTICS LIMITED PARTNERSHIP AND SUBSIDIARIES
BOSTON CELTICS LIMITED PARTNERSHIP II
CASTLE CREEK PARTNERS L.P.
<TABLE>
<S> <C>
Unaudited Pro Forma Consolidated Financial Statements
Unaudited Pro Forma Consolidated Balance Sheet of
Boston Celtics Limited Partnership II at March 31,
1998.................................................. F-2
Unaudited Pro Forma Consolidated Statements of Income
of Boston Celtics Limited Partnership II:
for the nine months ended March 31, 1998.......... F-3
for the year ended June 30, 1997.................. F-4
Unaudited Pro Forma Consolidated Balance Sheet of
Castle Creek Partners, L.P. at March 31, 1998......... F-5
Unaudited Pro Forma Consolidated Statements of Income
of Castle Creek Partners, L.P.:
for the nine months ended March 31, 1998.......... F-6
for the year ended June 30, 1997.................. F-7
Notes to Unaudited Pro Forma Consolidated Financial
Statements............................................ F-8
Audited Historical Consolidated Financial Statements of
Boston Celtics Limited Partnership
Report of Independent Auditors......................... F-12
Consolidated Balance Sheets at June 30, 1997 and
1996.................................................. F-13
Consolidated Statements of Income for each of the three
years in the period ended June 30, 1997............... F-14
Consolidated Statements of Partners' Capital (Deficit)
for each of the three years in the period ended June
30, 1997.............................................. F-15
Consolidated Statements of Cash Flows for each of the
three years in the period ended June 30, 1997......... F-18
Notes to Consolidated Financial Statements............. F-20
Unaudited Historical Consolidated Financial Statements of
Boston Celtics Limited Partnership
Unaudited Consolidated Balance Sheet at March 31,
1998.................................................. F-32
Unaudited Consolidated Statements of Income for the
nine months ended March 31, 1998 and 1997............. F-33
Unaudited Consolidated Statements of Cash Flows for the
nine months ended March 31, 1998 and 1997............. F-34
Notes to Unaudited Consolidated Financial Statements... F-35
</TABLE>
F-1
<PAGE> 116
BOSTON CELTICS LIMITED PARTNERSHIP II
PRO FORMA CONSOLIDATED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------------------------------------------
UNCONSOLIDATE
BCLP CELTICS OTHER PRO FORMA
CONSOLIDATED BASKETBALL LP(A) ADJUSTMENTS BCLP II
------------ ---------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 24,365,452 $(14,526,145) $ (9,000,000)(t) $ 839,307
Marketable securities................................... 6,133,212 30,000,000(h) 4,715,251
(39,551,883)(c)
(399,514)(d)
200,000(f)
(2,791,564)(s)
2,125,000(q)
9,000,000(t)
Other short-term investments............................ 74,501,608 6,499,458(g) 81,001,066
Prepaid expenses and other current assets............... 592,817 (596,954) 4,137(x)
------------ ------------ ------------ -----------
Total current assets.............................. 105,593,089 (15,123,099) (3,914,366) 86,555,624
Property and equipment, net............................... 1,118,795 (1,093,005) 25,790
National Basketball Association franchise, net............ 3,894,542 (3,894,542)
Other intangible assets................................... 900,857 (34,000) 866,857
Other assets.............................................. 9,397,334 (2,897,876) (6,499,458)(g)
------------ ------------ ------------ -----------
$120,904,617 $(23,042,522) $(10,413,824) $87,448,271
============ ============ ============ ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses................... $ 9,051,328 $ (7,687,853) $ 1,200,000(b) $ 2,567,612
4,137(x)
Deferred game revenues.................................. 6,236,227 (6,236,227)
Notes payable........................................... 17,256,489 17,256,489
Deferred compensation -- current portion................ 1,771,107 (1,771,107)
------------ ------------ ------------ -----------
Total current liabilities......................... 34,315,151 (15,695,187) 1,204,137 19,824,101
Other noncurrent liabilities.............................. 6,037,500 (3,100,000) (2,937,500)(q)
Notes payable to bank -- noncurrent portion............... 50,000,000 (50,000,000) 30,000,000(h) 30,000,000
Subordinated debentures................................... 41,873,460(i) 41,873,460
Investment in BCLP........................................ 55,275,309 (27,702,035)(u) 27,573,274
Deferred compensation -- noncurrent portion............... 9,174,365 (9,174,365)
Deferred federal and state income taxes................... 20,100,000 (10,073,411)(j) 10,026,589
Total partners' capital (deficit)......................... 1,277,601 (348,279) 200,000(f) (41,849,153)
(41,873,460)(i)
(39,551,883)(c)
(399,514)(d)
10,073,411(j)
(2,791,564)(s)
5,062,500(q)
(1,200,000)(b)
27,702,035(u)
------------ ------------ ------------ -----------
$120,904,617 $(23,042,522) $(10,413,824) $87,448,271
============ ============ ============ ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-2
<PAGE> 117
BOSTON CELTICS LIMITED PARTNERSHIP II
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, 1998
-------------------------------------------------------------
UNCONSOLIDATE
BCLP CELTICS OTHER PRO FORMA
CONSOLIDATED BASKETBALL LP(A) ADJUSTMENTS BCLP II
------------ ---------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Basketball regular season --
Ticket sales.......................................... $32,906,000 $(32,906,000)
Television and radio broadcast rights fees............ 24,030,000 (24,030,000)
Other, principally promotional advertising............ 8,009,000 (8,009,000)
Equity in income of BCLP................................ $7,804,816(w) $ 7,804,816
----------- ------------ ----------- -----------
64,945,000 (64,945,000) 7,804,816 7,804,816
Costs and expenses:
Basketball regular season --
Team.................................................. 35,803,000 (35,803,000)
Game.................................................. 2,344,000 (2,344,000)
General and administrative.............................. 8,176,676 (3,209,934) 1,200,000(b) 1,456,647
(4,710,095)(o)
Selling and promotional................................. 2,973,892 (2,973,892)
Depreciation............................................ 154,767 (147,555) 7,212
Amortization of NBA franchise and other intangible
assets................................................ 121,783 (121,783)
----------- ------------ ----------- -----------
49,574,118 (44,600,164) (3,510,095) 1,463,859
----------- ------------ ----------- -----------
15,370,882 (20,344,836) 11,314,911 6,340,957
Interest expense.......................................... (4,389,111) 2,586,327 (1,518,750)(k) (6,095,651)
(2,512,408)(l)
(261,709)(m)
Interest income........................................... 4,847,509 (235,073) (402,245)(n) 4,210,191
Net realized losses on disposition of marketable
securities and other short-term investments............. (8,805) (8,805)
----------- ------------ ----------- -----------
Income before income taxes................................ 15,820,475 (17,993,582) 6,619,799 4,446,692
Provision for income taxes................................ 1,400,000 1,400,000
----------- ------------ ----------- -----------
Net income................................................ 14,420,475 (17,993,582) 6,619,799 3,046,692
Net income applicable to interests of General Partners.... 322,608 (179,957) (111,938)(r) 30,713
----------- ------------ ----------- -----------
Net income applicable to interests of Limited Partners.... $14,097,867 $(17,813,625) $6,731,737 $ 3,015,979
=========== ============ =========== ===========
Net income per unit -- basic.............................. $ 2.90 $ 1.08
=========== ===========
Net income per unit -- diluted............................ $ 2.56 $ 1.08
=========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-3
<PAGE> 118
BOSTON CELTICS LIMITED PARTNERSHIP II
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1997
-------------------------------------------------------------
UNCONSOLIDATE
BCLP CELTICS OTHER PRO FORMA
CONSOLIDATED BASKETBALL LP(A) ADJUSTMENTS BCLP II
------------ ---------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Basketball regular season --
Ticket sales......................................... $31,813,019 $(31,813,019)
Television and radio broadcast rights fees........... 23,269,159 (23,269,159)
Other, principally promotional advertising........... 7,915,626 (7,915,626)
Equity in income of BCLP............................... $1,981,182(w) $ 1,981,182
----------- ------------ ----------- -----------
62,997,804 (62,997,804) 1,981,182 1,981,182
Costs and expenses:
Basketball regular season --
Team................................................. 40,941,156 (40,941,156)
Game................................................. 2,386,042 (2,386,042)
General and administrative............................. 13,913,893 (5,380,551) (3,871,394)(o) 4,661,948
Selling and promotional................................ 4,680,168 (4,680,168)
Depreciation........................................... 189,324 (181,010) 8,314
Amortization of NBA franchise and other intangible
assets............................................... 164,702 (164,702)
----------- ------------ ----------- -----------
62,275,285 (53,733,629) (3,871,394) 4,670,262
----------- ------------ ----------- -----------
722,519 (9,264,175) 5,852,576 (2,689,080)
Interest expense......................................... (5,872,805) 3,613,498 (2,025,000)(k) (7,983,129)
(3,349,877)(l)
(348,945)(m)
Interest income.......................................... 6,609,541 (163,643) (536,327)(n) 5,909,571
Net realized gains on disposition of marketable
securities and short-term investments.................. 361,051 361,051
----------- ------------ ----------- -----------
Income (loss) before income taxes...................... 1,820,306 (5,814,320) (407,573) (4,401,587)
Provision for income taxes............................... 1,400,000 1,400,000
----------- ------------ ----------- -----------
Net income (loss)........................................ 420,306 (5,814,320) (407,573) (5,801,587)
Net income (loss) applicable to interests of General
Partners............................................... 62,246 (58,122) (61,638)(r) (57,514)
----------- ------------ ----------- -----------
Net income (loss) applicable to interests of Limited
Partners............................................... $ 358,060 $ (5,756,198) $ (345,935) $(5,744,073)
=========== ============ =========== ===========
Net income (loss) per unit -- basic...................... $ 0.07 $ (2.06)
=========== ===========
Net income (loss) per unit -- assuming dilution.......... $ 0.06 $ (2.06)
=========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-4
<PAGE> 119
CASTLE CREEK PARTNERS, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------------------------------
CONSOLIDATE
CELTICS OTHER PRO FORMA
BASKETBALL LP(A) ADJUSTMENTS CASTLE CREEK LP
---------------- ----------- ---------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................... $ 14,526,145 $ (6,499,458)(g) $ 8,028,687
2,000(v)
Short-term investments.......................... 39,551,883(c) 39,951,397
399,514(d)
Prepaid expenses................................ 506,394 506,394
Other current assets and deferred charges....... 90,560 90,560
------------ ------------ -----------
Total current assets.......................... 15,123,099 33,453,939 48,577,038
Property and equipment, net....................... 1,093,005 1,093,005
Minority interest in capital deficiency of Celtics
Basketball Holdings L.P......................... 27,573,274 27,573,274
National Basketball Association franchise, net.... 3,894,542 3,894,542
Other intangible assets........................... 34,000 34,000
Other assets...................................... 2,599,687 6,499,458(g) 9,099,145
------------ ------------ -----------
$ 50,317,607 $ 39,953,397 $90,271,004
============ ============ ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses........... $ 7,687,853 $ 7,687,853
Deferred game revenues.......................... 5,336,356 5,336,356
Deferred revenues............................... 899,871 899,871
Deferred compensation -- current portion........ 1,771,107 1,771,107
------------ ------------ -----------
Total current liabilities..................... 15,695,187 15,695,187
Other noncurrent liabilities...................... 3,100,000 3,100,000
Notes payable to bank -- noncurrent portion....... 50,000,000 50,000,000
Deferred compensation -- noncurrent portion....... 9,174,365 9,174,365
Deferred federal and state income taxes........... $ 10,073,411(j) 10,073,411
Total partners' capital (deficit)................. (27,651,945) 2,000(v) 2,228,041
39,551,883(c)
399,514(d)
(10,073,411)(j)
------------ ------------ -----------
$ 50,317,607 $ 39,953,397 $90,271,004
============ ============ ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-5
<PAGE> 120
CASTLE CREEK PARTNERS, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, 1998
--------------------------------------------------------
CONSOLIDATE
CELTICS OTHER PRO FORMA
BASKETBALL LP(A) ADJUSTMENTS CASTLE CREEK LP
---------------- ----------- ---------------
<S> <C> <C> <C>
Revenues:
Basketball regular season -- Ticket sales.... $32,906,000 $32,906,000
Television and radio broadcast rights fees... 24,030,000 24,030,000
Other, principally promotional advertising... 8,009,000 8,009,000
----------- ------------ -----------
64,945,000 64,945,000
Costs and expenses:
Basketball regular season --
Team...................................... 35,803,000 35,803,000
Game...................................... 2,344,000 2,344,000
General and administrative................... 3,209,934 $ 4,710,095(o) 7,920,029
Selling and promotional...................... 2,973,892 2,973,892
Depreciation................................. 147,555 147,555
Amortization of NBA franchise and other
intangible assets......................... 121,783 121,783
----------- ------------ -----------
44,600,164 4,710,095 49,310,259
----------- ------------ -----------
20,344,836 (4,710,095) 15,634,741
Interest expense............................... (2,586,327) (2,586,327)
Interest income................................ 235,073 1,973,782(p) 2,208,855
----------- ------------ -----------
Income from operations before minority
interest..................................... 17,993,582 (2,736,313) 15,257,269
Minority interest in Celtics Basketball
Holdings L.P................................. (7,963,526)(u) (7,963,526)
----------- ------------ -----------
Net income..................................... 17,993,582 (10,699,839) 7,293,743
Net income applicable to interests of General
Partners..................................... 43,720 29,534(r) 73,254
----------- ------------ -----------
Net income applicable to interests of Limited
Partners..................................... $17,949,862 $(10,729,373) $ 7,220,489
=========== ============ ===========
Net income per unit -- basic................... $ 311.27
===========
Net income per unit -- diluted................. $ 257.45
===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-6
<PAGE> 121
CASTLE CREEK PARTNERS, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1997
-------------------------------------------------------
CONSOLIDATE
CELTICS OTHER PRO FORMA
BASKETBALL LP(A) ADJUSTMENTS CASTLE CREEK LP
---------------- ----------- ---------------
<S> <C> <C> <C>
Revenues:
Basketball regular season -- Ticket sales..... $31,813,019 $31,813,019
Television and radio broadcast rights fees.... 23,269,159 23,269,159
Other, principally promotional advertising.... 7,915,626 7,915,626
----------- ----------- -----------
62,997,804 62,997,804
Costs and expenses:
Basketball regular season --
Team....................................... 40,941,156 40,941,156
Game....................................... 2,386,042 2,386,042
General and administrative.................... 5,380,551 $ 3,871,394(o) 9,251,945
Selling and promotional....................... 4,680,168 4,680,168
Depreciation.................................. 181,010 181,010
Amortization of NBA franchise and other
intangible assets.......................... 164,702 164,702
----------- ----------- -----------
53,733,629 3,871,394 57,605,023
----------- ----------- -----------
9,264,175 (3,871,394) 5,392,781
Interest expense................................ (3,613,498) (3,613,498)
Interest income................................. 163,643 2,371,191(p) 2,534,834
----------- ----------- -----------
Income from operations before minority
interest...................................... 5,814,320 (1,500,203) 4,314,117
Minority interest in Celtics Basketball Holdings
L.P........................................... (2,021,469)(u) (2,021,469)
----------- ----------- -----------
Net income...................................... 5,814,320 (3,521,672) 2,292,648
Net income applicable to interests of General
Partners...................................... 58,122 (35,115)(r) 23,007
----------- ----------- -----------
Net income applicable to interests of Limited
Partners...................................... $ 5,756,198 $(3,486,557) $ 2,269,641
=========== =========== ===========
Net income per unit -- basic.................... $ 97.84
===========
Net income per unit -- diluted.................. $ 80.93
===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-7
<PAGE> 122
BOSTON CELTICS LIMITED PARTNERSHIP II
CASTLE CREEK PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The adjustments to the unaudited pro forma consolidated balance sheets
assume that the Reorganization had been consummated as of March 31, 1998, and
further assume that the holders of 2,804,600 Units of Boston Celtics Limited
Partnership (BCLP) will elect to receive Castle Creek Partners, L.P. (Castle
Creek) Interests in the Distribution. Accordingly, the adjustments give effect
to the change in the method of BCLP II's accounting for its investment in the
Boston Celtics professional basketball team of the National Basketball
Association (the Team) from consolidation to the equity method, the
consolidation of the Team at Castle Creek based on its ownership of over 50%,
the assumed issuance of 2,791,564 of Boston Celtics Limited Partnership II (BCLP
II) Units to former holders of BCLP Units, the issuance of $56 million in
aggregate principal amount of Subordinated Debentures to such former BCLP Unit
holders (recorded at their estimated issue price of approximately $42 million),
proceeds from anticipated new bank borrowings of $30 million, transfer of
certain investment assets to Castle Creek and an anticipated charge for
Reorganization-related expenses totaling approximately $1,500,000, $300,000 of
which has been incurred in the nine months ended March 31, 1998. Such
Reorganization-related expenses include investment advisory fees, regulatory
filing costs, legal and accounting expenses and other transaction costs.
The adjustments to the unaudited pro forma consolidated statements of
income give effect to the increased interest expense on the anticipated new bank
borrowing of $30 million at 6.75%, interest expense on the $42 million of 6%
Subordinated Debentures, the amortization of the $14 million original issue
discount on the Subordinated Debentures over their 40-year life, the decrease in
interest income due to the net $9.8 million reduction in short-term investments
and an anticipated charge for Reorganization-related expenses totaling
approximately $1,500,000, $300,000 of which has been incurred in the nine months
ended March 31, 1998.
The unaudited pro forma consolidated financial statements are not
necessarily indicative of the consolidated operating results or financial
position that would have occurred had the Reorganization been consummated at the
beginning of the periods presented, nor are they necessarily indicative of
future operating results or financial position. The unaudited pro forma
consolidated financial statements and the notes thereto should be read in
conjunction with the rest of this Registration Statement.
Because the only asset of BCLP II will be its 99% interest in BCLP,
separate pro forma financial information of BCLP has not been presented, since
any differences from the information presented for BCLP II would not be
significant.
The adjustments to the unaudited pro forma consolidated balance sheets and
statements of income are as follows:
<TABLE>
<C> <S>
(a) To change the method of BCLP II's accounting for its
investment in the Team from consolidation to the equity
method based on a reduction in ownership to less than 50%,
and to consolidate the Team at Castle Creek based on its
ownership of over 50%.
In the BCLP II unaudited pro forma consolidated financial
statements, the amounts included in the column
"Unconsolidate Celtics Basketball L.P." represent BCLP II's
removal of the Team's assets, liabilities, partners' capital
(deficit), revenues and expenses, and the recognition of an
equity interest in the Team based on BCLP II's ownership
interest in the Team.
In the Castle Creek unaudited pro forma consolidated
financial statements, the amounts included in the column
"Consolidate Celtics Basketball L.P." represent Castle
Creek's consolidation of the Team's assets, liabilities,
partners' capital (deficit), revenues and expenses, and the
recognition of a minority interest representing BCLP II's
ownership interest in the Team.
(b) To record accrual for anticipated Reorganization-related
expenses.
(c) To record the transfer of investment assets to Castle Creek.
(d) To record the transfer of investment assets to Castle Creek
G.P.
</TABLE>
F-8
<PAGE> 123
BOSTON CELTICS LIMITED PARTNERSHIP II
CASTLE CREEK PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<C> <S>
(e) To record the transfer of investment assets to Celtics
Basketball Holdings L.P.
(f) To record proceeds received from BCLP G.P., Inc.
(g) To record the sale of a certain investment asset by Celtics
Capital Corporation to Celtics Basketball Holdings L.P.
(h) To record the new bank borrowing by BCLP.
(i) To record the issuance of 6% Subordinated Debentures by BCLP
at an estimated issue price of $15 per Subordinated
Debenture.
(j) To reflect Castle Creek's proportionate share of deferred
tax liability for pre-Reorganization matters based upon the
Assumed Castle Creek Election Percentage.
(k) To record interest expense on BCLP's new bank borrowing.
(l) To record interest expense on Subordinated Debentures issued
by BCLP.
(m) To record amortization expense related to original issue
discount on Subordinated Debentures.
(n) To reduce BCLP II's interest income due to decrease in
marketable securities.
(o) To reflect adjustment to general and administrative expenses
representing costs to be borne by Castle Creek and by
Celtics Basketball L.P.
(p) To record Castle Creek's interest income due to increase in
short-term investments and other investment assets.
(q) To record the exercise of 250,000 options to purchase BCLP
Units at $8.50 per unit as provided in the Option Exercise
Agreement.
(r) To record general partners' interests in adjustments to the
net income (loss) of BCLP II and Castle Creek.
(s) To record the assumed distribution of $1.00 per BCLP Unit to
the Unit holders electing to receive BCLP II Units.
(t) To record the transfer of cash for the acquisition of
additional marketable securities.
(u) To record adjustment to reflect BCLP II's minority interest
in the Team.
(v) To record general partners' contributions to Celtics
Basketball LP and Celtics Basketball Holdings LP.
(w) To record BCLP II's equity interest in the net income of the
Team.
(x) To record miscellaneous reclassification adjustments.
</TABLE>
F-9
<PAGE> 124
BOSTON CELTICS LIMITED PARTNERSHIP II
CASTLE CREEK PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The post-Reorganization relative ownership percentages of former public
holders of BCLP in BCLP II and Castle Creek, and the relative values of the
post-Reorganization net assets of BCLP II and Castle Creek, will vary depending
on the Proportionate Election (the percentage of BCLP Unit Holders electing to
receive Castle Creek Interests in the Distribution as compared to those electing
to receive Subordinated Debentures). The unaudited pro forma consolidated
financial statements included herein are based on the assumption that holders of
2,804,600 Units of BCLP will elect to receive Castle Creek Interests. The
following table compares the summary unaudited pro forma consolidated financial
data of BCLP II and Castle Creek giving effect to various possible Proportionate
Elections.
ASSUMED LEVELS OF PROPORTIONATE ELECTION
(AMOUNTS IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
50.116473% 62.616106% 75.115740%
------------------------------ ------------------------------ ------------------------------
NINE MONTHS YEAR NINE MONTHS YEAR NINE MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, 1998 JUNE 30, 1997 MARCH 31, 1998 JUNE 30, 1997 MARCH 31, 1998 JUNE 30, 1997
-------------- ------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BCLP II
UNAUDITED PRO FORMA STATEMENT OF INCOME
DATA
Equity in income of
BCLP................... $ 7,805 $ 1,981 $ 5,849 $ 1,485 $ 3,893 $ 988
Costs and expenses....... 1,464 4,670 993 4,283 286 3,702
Interest income
(expense), net......... (1,885) (2,074) (1,695) (1,820) (1,505) (1,566)
Net realized gains
(losses) on
investments............ (9) 361 (9) 361 (9) 361
--------- --------- --------- --------- --------- ---------
Pre-tax income (loss)
before income taxes.... 4,447 (4,402) 3,152 (4,257) 2,093 (3,919)
Provision for income
taxes.................. 1,400 1,400 1,400 1,400 1,400 1,400
--------- --------- --------- --------- --------- ---------
Net income (loss)........ $ 3,047 $ (5,802) $ 1,752 $ (5,657) $ 693 $ (5,319)
========= ========= ========= ========= ========= =========
Net income (loss)
applicable to limited
partners............... $ 3,016 $ (5,744) $ 1,735 $ (5,601) $ 686 $ (5,266)
Per unit:
Net income (loss) -
basic.................. $ 1.08 $ (2.06) $ 0.83 $ (2.68) $ 0.49 $ (3.78)
Net income (loss) -
diluted................ $ 1.08 $ (2.06) $ 0.83 $ (2.68) $ 0.49 $ (3.78)
Units outstanding........ 2,791,564 2,791,564 2,092,064 2,092,064 1,392,564 1,392,564
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1998 MARCH 31, 1998
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BCLP II
UNAUDITED PRO FORMA BALANCE SHEET DATA
Current assets........... $ 86,556 $ 87,291 $ 88,026
Current liabilities...... 19,824 19,824 19,824
Total assets............. 87,448 88,021 88,593
Notes payable to bank -
noncurrent............. 30,000 40,000 50,000
Subordinated
debentures............. 41,873 31,381 20,888
Other noncurrent
liabilities............ 10,027 7,514 5,002
Partners' capital
(deficit).............. (41,849) (31,363) (20,876)
Book value per unit...... $ (14.99) $ (14.99) $ (14.99)
</TABLE>
F-10
<PAGE> 125
BOSTON CELTICS LIMITED PARTNERSHIP II
CASTLE CREEK PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
50.116473% 62.616106% 75.115740%
------------------------------ ------------------------------ ------------------------------
NINE MONTHS YEAR NINE MONTHS YEAR NINE MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, 1998 JUNE 30, 1997 MARCH 31, 1998 JUNE 30, 1997 MARCH 31, 1998 JUNE 30, 1997
-------------- ------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CASTLE CREEK LP
UNAUDITED PRO FORMA
STATEMENT OF INCOME
DATA
Revenues............... $ 64,945 $ 62,998 $ 64,945 $ 62,998 $ 64,945 $ 62,998
Costs and expenses..... 49,310 57,605 49,781 57,992 50,488 58,573
Interest income
(expense), net....... (378) (1,079) 34 (531) 445 17
--------- --------- --------- --------- --------- ---------
Income from operations
before minority
interest............. 15,257 4,314 15,198 4,475 14,902 4,442
Minority interest...... (7,963) (2,021) (5,968) (1,515) (3,973) (1,008)
--------- --------- --------- --------- --------- ---------
Net income............. $ 7,294 $ 2,293 $ 9,230 $ 2,960 $ 10,929 $ 3,434
========= ========= ========= ========= ========= =========
Net income applicable
to limited
partners............. $ 7,220 $ 2,270 $ 9,137 $ 2,930 $ 10,820 $ 3,400
Per unit:
Net income - basic..... $ 311.27 $ 97.84 $ 302.61 $ 97.06 $ 290.95 $ 91.42
Net income - diluted... $ 257.45 $ 80.93 $ 260.74 $ 83.63 $ 257.39 $ 80.87
Units outstanding...... 28,046 28,046 35,041 35,041 42,036 42,036
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1998 MARCH 31, 1998
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASTLE CREEK LP
UNAUDITED PRO FORMA
BALANCE SHEET DATA
Current assets......... $ 48,577 $ 58,541 $ 68,506
Current liabilities.... 15,695 15,695 15,695
Total assets........... 90,271 93,339 96,406
Notes payable to bank -
noncurrent........... 50,000 50,000 50,000
Deferred comp -
noncurrent........... 9,174 9,174 9,174
Other noncurrent
liabilities.......... 13,174 15,686 18,198
Minority interest in
Celtics Basketball
Holdings LP.......... (27,573) (20,664) (13,755)
Partners' capital
(deficit)............ 2,228 2,784 3,339
Book value per unit.... $ 79.44 $ 79.44 $ 79.44
</TABLE>
F-11
<PAGE> 126
REPORT OF INDEPENDENT AUDITORS
To the General Partner
Boston Celtics Limited Partnership
We have audited the accompanying consolidated balance sheets of Boston
Celtics Limited Partnership and Subsidiaries as of June 30, 1997 and 1996, and
the related consolidated statements of income, partners' capital (deficit) and
cash flows for each of the three years in the period ended June 30, 1997. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Boston Celtics Limited Partnership and Subsidiaries at June 30, 1997 and 1996,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended June 30, 1997, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
September 19, 1997, except for Note P
as to which the date is February 6, 1998
F-12
<PAGE> 127
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.............................. $ 6,498,739 $ 5,982,128
Marketable securities.................................. 42,572,683 46,763,501
Other short-term investments........................... 49,671,153 78,723,365
Accounts receivable.................................... 2,667,438 3,777,729
Prepaid federal and state income taxes................. 432,895
Prepaid expenses....................................... 1,856,627 656,396
Other current assets................................... 101,611
------------ ------------
Total current assets........................................ 103,801,146 135,903,119
Property and equipment, net................................. 909,416 1,184,813
National Basketball Association franchise, net of
amortization of $2,159,360 in 1997 and $2,005,120 in
1996...................................................... 4,010,221 4,164,461
Other intangible assets, net of amortization of $47,083 in
1997 and $36,621 in 1996.................................. 903,477 913,939
Other assets................................................ 9,575,396 3,067,140
------------ ------------
$119,199,656 $145,233,472
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities
Accounts payable and accrued expenses.................. $ 12,877,723 $ 15,420,321
Deferred game revenues................................. 5,584,848 4,629,704
Federal and state income taxes payable................. 539,325
Notes payable to bank -- current portion............... 2,500,000
Notes payable.......................................... 16,409,617 15,353,949
Deferred compensation -- current portion............... 1,767,263 4,345,367
------------ ------------
Total current liabilities................................... 39,139,451 40,288,666
Deferred revenues -- noncurrent portion..................... 699,871
Deferred federal and state income taxes..................... 20,100,000 20,100,000
Notes payable to bank -- noncurrent portion................. 47,500,000 50,000,000
Deferred compensation -- noncurrent portion................. 10,380,296 11,749,666
Other non-current liabilities............................... 9,870,000 5,875,000
Partners' capital (deficit), authorized 25,000,000 units of
limited partnership interest, issued 6,399,722 units in
1997 and 1996, outstanding 5,346,164 units in 1997 and
5,876,164 units in 1996
Boston Celtics Limited Partnership --
General Partner...................................... 226,817 284,422
Limited Partners..................................... (8,527,928) 15,688,456
------------ ------------
(8,301,111) 15,972,878
Celtics Limited Partnership -- General Partner......... (129,866) (92,988)
Boston Celtics Communications Limited
Partnership -- General Partner....................... 640,886 640,379
------------ ------------
Total partners' capital (deficit)........................... (7,790,091) 16,520,269
------------ ------------
$119,199,656 $145,233,472
============ ============
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE> 128
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
-----------------------------------------
JUNE 30, JUNE 30, JUNE 30,
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Basketball regular season --
Ticket sales................................. $31,813,019 $35,249,625 $22,036,880
Television and radio broadcast rights fees... 23,269,159 22,071,992 20,956,405
Other, principally promotional advertising... 7,915,626 7,458,651 7,418,487
Basketball playoffs............................ 1,913,481
----------- ----------- -----------
62,997,804 64,780,268 52,325,253
----------- ----------- -----------
Costs and expenses:
Basketball regular season --
Team......................................... 40,941,156 27,891,264 31,203,697
Game......................................... 2,386,042 2,606,218 2,880,566
Basketball playoffs............................ 696,583
General and administrative..................... 13,913,893 15,053,333 14,085,982
Selling and promotional........................ 4,680,168 2,973,488 2,692,208
Depreciation................................... 189,324 140,894 86,347
Amortization of NBA franchise and other
intangible assets............................ 164,702 164,703 164,703
----------- ----------- -----------
62,275,285 48,829,900 51,810,086
----------- ----------- -----------
722,519 15,950,368 515,167
Interest expense.................................... (5,872,805) (6,387,598) (9,074,657)
Interest income..................................... 6,609,541 8,175,184 6,507,902
Net revenue from league expansion................... 7,113,665
Net realized gains (losses) on disposition of
marketable securities and other short-term
investments....................................... 361,051 (101,138) 110,254
----------- ----------- -----------
Income from continuing operations before income
taxes............................................. 1,820,306 17,636,816 5,172,331
Provision for (benefit from) income taxes........... 1,400,000 1,850,000 (345,000)
----------- ----------- -----------
Income from continuing operations................... 420,306 15,786,816 5,517,331
Discontinued operations:
Income from discontinued operations (less applicable
income taxes of $30,000 in 1996 and $7,095,000 in
1995)............................................. 82,806 10,638,675
Gain from disposal of discontinued operations (less
applicable income taxes of $17,770,000)........... 38,330,907
----------- ----------- -----------
Net income.......................................... 420,306 54,200,529 16,156,006
Net income applicable to interests of General
Partners.......................................... 62,246 1,291,014 610,815
----------- ----------- -----------
Net income applicable to interests of Limited
Partners.......................................... $ 358,060 $52,909,515 $15,545,191
=========== =========== ===========
Per unit:
Income from continuing operations -- basic..... $ 0.07 $ 2.68 $ 0.84
Income from continuing operations -- assuming
dilutions.................................... $ 0.06 $ 2.59 $ 0.84
Net income -- basic............................ $ 0.07 $ 9.18 $ 2.43
Net income -- assuming dilution................ $ 0.06 $ 8.89 $ 2.43
Distributions declared......................... $ 1.00 $ 1.50 $ 3.00
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE> 129
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
LIMITED PARTNERS
---------------------------------------
TOTAL UNITS AMOUNT
------------ --------- ------------
<S> <C> <C> <C>
BALANCE AT JUNE 30, 1994................................ ($12,829,500) 6,399,722 ($12,542,458)
Net income for the year ended June 30, 1995............. 16,156,006 15,545,191
Distributions:
Boston Celtics Limited Partnership to unitholders
Cash - $1.50 per unit............................ (9,697,083) (9,599,583)
Declared - $1.50 per unit........................ (9,697,082) (9,599,582)
Cash by Boston Celtics Broadcasting Limited
Partnership to Celtics Communications, Inc.
(General Partner's Share)........................ (74,000)
Cash by Celtics Limited Partnership to Boston
Celtics Corporation (General Partner's Share).... (165,000)
Purchase of 99% of General Partner's interest in Boston
Celtics Communications Limited Partnership............ 74,858
Unrealized gain on marketable securities................ 511,354 506,241
------------ --------- ------------
BALANCE AT JUNE 30, 1995................................ (15,720,447) 6,399,722 (15,690,191)
Net income for the year ended June 30, 1996............. 54,200,529 52,909,515
Distributions:
Cash by Boston Celtics Limited Partnership to
unitholders - $1.50 per unit..................... (8,547,925) (8,461,917)
Cash by Boston Celtics Broadcasting Limited
Partnership to Celtics Communications, Inc.
(General Partner's Share)........................ (152,887)
Cash by Celtics Limited Partnership to Boston
Celtics Corporation (General Partner's Share).... (200,000)
Sale of General Partner's interest in Boston Celtics
Broadcasting Limited Partnership...................... 13,705
Purchase of Boston Celtics Limited Partnership units for
the treasury.......................................... (16,306,546) (758,444) (16,306,546)
Issuance of Boston Celtics Limited Partnership units
from the treasury..................................... 3,658,363 234,886 3,658,363
Unrealized loss on marketable securities................ (424,523) (420,768)
------------ --------- ------------
BALANCE AT JUNE 30, 1996................................ 16,520,269 5,876,164 15,688,456
Net income for the year ended June 30, 1997............. 420,306 358,060
Distributions:
Cash by Boston Celtics Limited Partnership to
unitholders - $1.00 per unit..................... (5,935,876) (5,876,164)
Cash by Celtics Limited Partnership to Boston
Celtics Corporation (General Partner's Share).... (95,000)
Purchase of Boston Celtics Limited Partnership units for
the treasury.......................................... (22,880,000) (780,000) (22,880,000)
Issuance of Boston Celtics Limited Partnership units
from the treasury..................................... 4,331,250 250,000 4,331,250
Unrealized loss on marketable securities................ (151,040) (149,530)
------------ --------- ------------
BALANCE AT JUNE 30, 1997................................ ($ 7,790,091) 5,346,164 ($ 8,527,928)
============ ========= ============
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE> 130
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(CONTINUED)
<TABLE>
<CAPTION>
GENERAL PARTNERS' INTERESTS
--------------------------------------------
BOSTON CELTICS
LIMITED CELTICS LIMITED
TOTAL PARTNERSHIP PARTNERSHIP
----- -------------- ---------------
<S> <C> <C> <C>
BALANCE AT JUNE 30, 1994................................. ($287,042) ($127,387) ($ 54,311)
Net income for the year ended June 30, 1995.............. 610,815 157,019 114,117
Distributions:
Boston Celtics Limited Partnership to unitholders
Cash - $1.50 per unit............................. (97,500) (97,500)
Declared - $1.50 per unit......................... (97,500) (97,500)
Cash by Boston Celtics Broadcasting Limited
Partnership to Celtics Communications, Inc.
(General Partner's Share)......................... (74,000)
Cash by Celtics Limited Partnership to Boston
Celtics Corporation (General Partner's Share)..... (165,000) (165,000)
Purchase of 99% of General Partner's interest in Boston
Celtics Communications Limited Partnership............. 74,858
Unrealized gain on marketable securities................. 5,113 5,113
--------- --------- ---------
BALANCE AT JUNE 30, 1995................................. (30,256) (160,255) (105,194)
Net income for the year ended June 30, 1996.............. 1,291,014 534,440 212,206
Distributions:
Cash by Boston Celtics Limited Partnership to
unitholders -- $1.50 per unit..................... (86,008) (86,008)
Cash by Boston Celtics Broadcasting Limited
Partnership to Celtics Communications, Inc.
(General Partner's Share)......................... (152,887)
Cash by Celtics Limited Partnership to Boston
Celtics Corporation (General Partner's Share)..... (200,000) (200,000)
Sale of General Partner's interest in Boston Celtics
Broadcasting Limited Partnership....................... 13,705
Purchase of Boston Celtics Limited Partnership units for
the treasury...........................................
Issuance of Boston Celtics Limited Partnership units from
the treasury...........................................
Unrealized loss on marketable securities................. (3,755) (3,755)
--------- --------- ---------
BALANCE AT JUNE 30, 1996................................. 831,813 284,422 (92,988)
Net income for the year ended June 30, 1997.............. 62,246 3,617 58,122
Distributions:
Cash by Boston Celtics Limited Partnership to
unitholders -- $1.00 per unit..................... (59,712) (59,712)
Cash by Celtics Limited Partnership to Boston
Celtics Corporation (General Partner's Share)..... (95,000) (95,000)
Purchase of Boston Celtics Limited Partnership units for
the treasury...........................................
Issuance of Boston Celtics Limited Partnership units from
the treasury...........................................
Unrealized loss on marketable securities................. (1,510) (1,510)
--------- --------- ---------
BALANCE AT JUNE 30, 1997................................. $ 737,837 $ 226,817 ($129,866)
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE> 131
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(CONTINUED)
<TABLE>
<CAPTION>
GENERAL PARTNERS' INTERESTS
--------------------------------
BOSTON CELTICS BOSTON CELTICS
COMMUNICATIONS BROADCASTING
LIMITED LIMITED
PARTNERSHIP PARTNERSHIP
-------------- --------------
<S> <C> <C>
BALANCE AT JUNE 30, 1994.................................... ($122,686) $ 17,342
Net income for the year ended June 30, 1995................. 144,619 195,060
Distributions:
Boston Celtics Limited Partnership to unitholders
Cash -- $1.50 per unit...............................
Declared -- $1.50 per unit...........................
Cash by Boston Celtics Broadcasting Limited Partnership
to Celtics Communications, Inc. (General Partner's
Share)............................................... (74,000)
Cash by Celtics Limited Partnership to Boston Celtics
Corporation (General Partner's Share)................
Purchase of 99% of General Partner's interest in Boston
Celtics Communications Limited Partnership................ 74,858
Unrealized gain on marketable securities....................
--------- --------
BALANCE AT JUNE 30, 1995.................................... 96,791 138,402
Net income for the year ended June 30, 1996................. 543,588 780
Distributions:
Cash by Boston Celtics Limited Partnership to
unitholders -- $1.50 per unit........................
Cash by Boston Celtics Broadcasting Limited Partnership
to Celtics Communications, Inc. (General Partner's
Share)............................................... (152,887)
Cash by Celtics Limited Partnership to Boston Celtics
Corporation (General Partner's Share)................
Sale of General Partner's interest in Boston Celtics
Broadcasting Limited Partnership.......................... 13,705
Purchase of Boston Celtics Limited Partnership units for the
treasury..................................................
Issuance of Boston Celtics Limited Partnership units from
the treasury..............................................
Unrealized loss on marketable securities....................
--------- --------
BALANCE AT JUNE 30, 1996.................................... 640,379 0
Net income for the year ended June 30, 1997................. 507
Distributions:
Cash by Boston Celtics Limited Partnership to
unitholders -- $1.00 per unit........................
Cash by Celtics Limited Partnership to Boston Celtics
Corporation (General Partner's Share)................
Purchase of Boston Celtics Limited Partnership units for the
treasury..................................................
Issuance of Boston Celtics Limited Partnership units from
the treasury..............................................
Unrealized loss on marketable securities....................
--------- --------
BALANCE AT JUNE 30, 1997.................................... $ 640,886 $ 0
========= ========
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE> 132
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
---------------------------------------------
JUNE 30, JUNE 30, JUNE 30,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Receipts:
Basketball regular season receipts:
Ticket sales.................................. $ 33,132,256 $ 31,322,745 $ 27,539,038
Television and radio broadcast rights fees.... 22,009,139 19,908,800 20,344,641
Other, principally promotional advertising.... 8,141,716 8,424,038 6,382,803
Basketball playoff receipts........................ 360,895 2,278,100
------------- ------------- -------------
63,283,111 60,016,478 56,544,582
Costs and expenses:
Basketball regular season expenditures:
Team expenses................................. 34,390,240 26,066,875 24,632,232
Game expenses................................. 2,273,709 2,481,007 2,880,566
Basketball playoff expenses........................ 719,799
General and administrative expenses................ 15,650,961 13,996,805 13,069,984
Selling and promotional expenses................... 3,730,578 1,333,238 2,544,114
------------- ------------- -------------
56,045,488 43,877,925 43,846,695
------------- ------------- -------------
7,237,623 16,138,553 12,697,887
Interest income........................................ 6,319,302 9,553,938 4,692,024
Interest expense....................................... (4,422,737) (4,624,043) (8,044,898)
Proceeds from league expansion......................... 4,490,673 4,814,814
Payment of income taxes................................ (2,372,220) (4,973,883) (3,751,320)
Payment of deferred compensation....................... (4,300,147) (5,226,095) (3,624,319)
------------- ------------- -------------
Net cash flows from continuing operations.......... 2,461,821 15,359,143 6,784,188
Net cash flows (used by) from discontinued
operations...................................... (2,931,742) 23,981,166
------------- ------------- -------------
Net cash flows from operating activities........... 2,461,821 12,427,401 30,765,354
Cash flows (used by) from investing activities:
Purchases of:
Marketable securities......................... (43,482,870) (55,272,268) (76,285,589)
Short term investments........................ (594,400,000) (116,150,000) (143,000,000)
Proceeds from sales of:
Marketable securities......................... 47,925,944 53,355,561 54,237,041
Short term investments........................ 617,500,000 103,300,000 77,000,000
Proceeds from the sale of Boston Celtics
Broadcasting Limited Partnership................ 79,200,000
Cash portion of net assets of Boston Celtics
Broadcasting Limited Partnership sold........... (1,602,071)
Capital expenditures............................... (136,279) (796,424) (769,431)
Other receipts (expenditures)...................... (441,129) 293,503 (825,359)
------------- ------------- -------------
Net cash flows (used by) from investing
activities.................................. 26,965,666 62,328,301 (89,643,338)
------------- ------------- -------------
Net cash flows (used by) from operating and
investing activities........................ 29,427,487 74,755,702 (58,877,984)
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE> 133
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------
JUNE 30, JUNE 30, JUNE 30,
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows (used by) from financing activities:
Proceeds from bank borrowings................. 85,000,000
Payment of bank borrowings.................... (80,000,000) (10,000,000)
Purchase of Boston Celtics Limited Partnership
units....................................... (22,880,000) (1,941,450)
Purchase of interest in Boston Celtics
Communications Limited Partnership from
Celtics Communications Inc. ................ (792,000)
Cash distributions:
To its minority interest holder from Boston
Celtics Broadcasting Limited
Partnership.............................. (7,797,244) (3,774,000)
To limited partners of Boston Celtics
Limited Partnership...................... (5,935,876) (18,061,500) (9,599,583)
To General Partners......................... (95,000) (536,395) (486,500)
----------- ------------ -----------
Net cash flows (used by) from financing
Activities.................................. (28,910,876) (108,336,589) 60,347,917
----------- ------------ -----------
Net increase (decrease) in cash and cash
equivalents...................................... 516,611 (33,580,887) 1,469,933
Cash and cash equivalents at beginning of period... 5,982,128 39,563,015 38,093,082
----------- ------------ -----------
Cash and cash equivalents at end of period......... $ 6,498,739 $ 5,982,128 $39,563,015
=========== ============ ===========
Non-cash investing and financing activities:
Conversion of convertible subordinated note
payable for 25% interest in Boston Celtics
Broadcasting Limited Partnership............ $ 10,000,000
Notes payable for acquisition of Boston
Celtics Limited Partnership units........... $ 14,365,096
Net non-cash assets of Boston Celtics
Broadcasting Limited Partnership sold....... $ 9,517,608
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE> 134
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION
Principles of Consolidation: The consolidated financial statements include
the accounts of the Boston Celtics Limited Partnership ("BCLP," the
"Partnership") and its majority-owned and controlled subsidiaries and
partnerships. BCLP, through its subsidiaries, owns and operates the Boston
Celtics professional basketball team of the National Basketball Association and
holds investments. All intercompany transactions are eliminated in
consolidation.
Discontinued operations: The consolidated financial statements for fiscal
1996 and 1995 include the results of operations of the Communications Group,
which comprised Television Station WFXT - Channel 25 of Boston, Massachusetts
(sold July 7, 1995) and Radio Station WEEI of Boston, Massachusetts (sold June
30, 1994) as discontinued operations. Gains on their disposal were also included
in discontinued operations. Revenues of discontinued operations were $534,000
and $51,897,000 for the years ended June 30, 1996 and 1995, respectively.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents: Cash equivalents represent short-term investments with
maturities at date of purchase of three months or less. Marketable securities
represent investments with maturities greater than three months.
Estimates and Assumptions: 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 reported period. Actual results could differ from those estimates.
Concentration of Credit Risk: Financial instruments which potentially
subject the Partnership to credit risk consist principally of cash equivalents,
short-term investments, marketable securities and accounts receivable. The
Partnership's cash equivalents, short-term investments and marketable securities
represent investments with relatively short maturities in the securities of
highly rated financial institutions and United States government entities. The
Partnership performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Credit losses have been
consistently within management's expectations.
Marketable Securities and Other Short Term Investments: The Partnership
accounts for marketable securities and other short-term investments in
accordance with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" which established the
accounting and reporting requirements for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities. All affected investment securities are classified as securities to
be held to maturity, for trading, or available-for-sale.
Financial Instruments: The carrying value of financial instruments such as
cash equivalents, accounts receivable and accounts payable approximate their
fair values based on the short-term maturities of these instruments. The
carrying value of long-term debt approximates its fair value based on references
to similar instruments.
Franchise and Other Intangible Assets: These assets, consisting
principally of the National Basketball Association franchise and other
intangible assets are being amortized primarily on a straight-line basis over 40
years.
Property and Equipment: Property and equipment is stated at cost and is
being depreciated over estimated useful lives of from five to fifteen years
using straight line or accelerated methods of depreciation as appropriate.
Building and leasehold improvements are depreciated over the lesser of the
remaining lives of the leases or the assets.
F-20
<PAGE> 135
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basketball Operations: Revenues, principally ticket sales and television
and radio broadcasting fees, generally are recorded as revenues at the time the
game to which such proceeds relate is played. Team expenses, principally player
and coaches salaries, related fringe benefits and insurance, and game and
playoff expenses, principally National Basketball Association attendance
assessments and travel, are recorded as expense on the same basis. Accordingly,
advance ticket sales and payments on television and radio broadcasting contracts
and payments for team and game expenses not earned or incurred are recorded as
deferred revenues and deferred expenses, respectively, and amortized ratably as
regular season games are played. General and administrative and selling and
promotional expenses are charged to operations as incurred.
Stock Options: The Partnership accounts for stock options in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." The Partnership has adopted the disclosure provisions only of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). Adoption of SFAS 123 did not have a material impact on
the Partnership's financial statements.
Income Taxes: No provision for income taxes is required by BCLP as its
income and expenses are taxable to or deductible to their partners. Celtics
Capital Corporation ("CCC"), BCCLP Holding Corporation ("Holdings") and Celtics
Investments, Inc. ("CII"), wholly-owned subsidiary corporations of BCLP, are
subject to income taxes and report their income tax provision, including the
income (losses) of subsidiary partnerships Boston Celtics Communications Limited
Partnership ("BCCLP") and Boston Celtics Broadcasting Limited Partnership
("BCBLP") (prior to the sale of BCBLP on July 7, 1995), using the liability
method in accordance with Financial Accounting Standards Board Statement 109,
"Accounting for Income Taxes" (see Note M). Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using tax
rates and laws that will be in effect when the differences are expected to
reverse.
Under provisions of the Internal Revenue Code applicable to public limited
partnerships, the Partnership will be taxable as a corporation commencing on
July 1, 1998. Alternatively, pursuant to recent tax legislation, the Partnership
could maintain partnership tax status by electing to pay a tax of 3.5% of gross
income. In response to these prospective changes in the tax treatment of the
Partnership, management is evaluating structural and other alternatives.
NOTE C -- MARKETABLE SECURITIES AND OTHER SHORT-TERM INVESTMENTS
The following is a summary of marketable securities which are classified as
available-for-sale securities:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
June 30, 1997:
U.S. corporate debt securities............ $16,719,000 $ 17,734 ($ 30,767) $16,705,967
U.S. government securities................ 25,917,892 42,120 (93,296) 25,866,716
----------- --------- --------- -----------
$42,636,892 $ 59,854 ($124,063) $42,572,683
=========== ========= ========= ===========
June 30, 1996:
U.S. corporate debt securities............ $ 7,952,261 $ 630 ($ 63,625) $ 7,889,266
U.S. government securities................ 38,724,409 426,956 (277,130) 38,874,235
----------- --------- --------- -----------
$46,676,670 $ 427,586 ($340,755) $46,763,501
=========== ========= ========= ===========
</TABLE>
F-21
<PAGE> 136
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C -- MARKETABLE SECURITIES AND OTHER SHORT-TERM INVESTMENTS (CONTINUED)
Gross realized gains and losses on available-for-sale securities are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
U.S. corporate debt securities
Gross realized gains........................... $ 521 $131,697
Gross realized (losses)........................ (34,805) (1,455)
U.S. government securities
Gross realized gains........................... 596,981 78,770
Gross realized (losses)........................ (201,646) (310,150)
-------- ---------
Net realized gains (losses)......................... $361,051 ($101,138)
======== =========
</TABLE>
The net adjustment to unrealized holding gains and losses on
available-for-sale securities included as a separate component of Partners'
Capital (Deficit) resulted in losses of $151,040 in 1997 and $424,523 in 1996.
The amortized cost and estimated fair value of available-for-sale
securities at June 30, 1997, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because the issuers of the
securities may have the right to prepay obligations without prepayment
penalties.
<TABLE>
<CAPTION>
ESTIMATED
FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less......................... $25,872,690 $25,869,364
Due after one year through three years.......... 10,203,560 10,205,554
Due after three years........................... 6,560,643 6,497,765
----------- -----------
$42,636,893 $42,572,683
=========== ===========
</TABLE>
Other short-term investments, which consist primarily of private placement
notes with a commercial bank with a maturity of under one year, are classified
as held-to-maturity and are carried at amortized cost, which approximates market
value. In addition, the Partnership has a $6,000,000 convertible note receivable
from an unrelated company which has been classified as held-to-maturity and is
carried at amortized cost, which approximates market value. This note has been
recorded in other noncurrent assets. The note bears interest at LIBOR plus 1%,
with quarterly interest payments beginning in May 1999 and quarterly payments of
principal plus interest beginning February 2002 through the maturity of the note
in January 2007. The note is secured by substantially all of the assets of this
company. There were no unrealized gains or losses in any of these investments at
June 30, 1997.
NOTE D -- PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Building and leasehold improvements................. $1,184,244 $1,333,932
Furniture and fixtures.............................. 440,965 377,350
---------- ----------
1,625,209 1,711,282
Less accumulated depreciation....................... 715,793 526,469
---------- ----------
Net property and equipment.......................... $ 909,416 $1,184,813
========== ==========
</TABLE>
F-22
<PAGE> 137
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E -- DEFERRED COMPENSATION AND OTHER COMPENSATION ARRANGEMENTS
Certain player contracts provide for guaranteed compensation payments which
are deferred until a future date. Operations are charged amounts equal to the
present value of future guaranteed payments in the period in which the
compensation is earned. The present value of payments due under these agreements
is as follows:
<TABLE>
<S> <C>
Years ending June 30, 1998.................................. $ 1,767,000
1999................................. 1,497,000
2000................................. 1,254,000
2001................................. 1,156,000
2002................................. 1,082,000
2003 and thereafter.................. 5,392,000
-----------
$12,148,000
===========
</TABLE>
On June 28, 1996, the annual incentive payment arrangements between BCLP
and Paul E. Gaston, Chairman of the Board of Celtics, Inc. ("CI"), the general
partner of BCLP, were modified to permit him to elect to acquire Units of BCLP
which contain certain significant restrictions as to vesting and transferability
(hereinafter the "Restricted Units") in lieu of a cash payment. Mr. Gaston
elected to receive Restricted Units in lieu of the $3,658,363 cash incentive
compensation payment to which he was entitled for the year ended June 30, 1996.
Based on a written report received from an independent employee benefits
consultant regarding the appropriate discount to be applied, the Audit Committee
of the Board of Directors of CI awarded 234,866 Restricted Units to Mr. Gaston.
Mr. Gaston, who is a member of the Audit Committee, was recused from and did not
participate in any of the Audit Committee's deliberations pertaining to this
matter. The fair market value of the Restricted Units awarded to Mr. Gaston will
not be deductible for tax purposes currently, however, they will be deductible
in the taxable year in which the restrictions pertaining to those Restricted
Units expire.
NOTE F -- NOTES PAYABLE
Notes payable represent outstanding borrowings by Celtics Limited
Partnership ("CLP"), BCLP's 99%-owned limited partnership which owns and
operates the Boston Celtics basketball team, under a $50,000,000 loan with its
commercial bank. The loan agreement as amended permits borrowings of up to
$50,000,000 through December 31, 1997, with the available amount declining
thereafter by $1,250,000 per quarter. The term of the loan extends through
December 31, 2002. Interest is payable quarterly in arrears at a fixed annual
rate of 6.35% from October 4, 1995 through December 31, 2002. Prior to October
4, 1995, the initial $30,000,000 borrowing bore interest at a fixed rate of 6.4%
and borrowings in excess of the initial $30,000,000 bore interest at optional
floating rates (7.375% and 4.875% at June 30, 1995 and 1994).
Effective January 1, 1998, the loan agreement requires quarterly payments
of principal in the amount necessary to reduce the outstanding principal balance
to equal the declining available borrowings, if necessary, together with
interest. The borrowings under the bank loan are secured by all of the assets of
and are the liability of CLP. The agreement relating to the commercial bank
borrowing includes various provisions and covenants customary in lending
arrangements of this type including limitations on distributions to unitholders.
Aggregate maturities of notes payable at June 30, 1997 are as follows:
<TABLE>
<S> <C>
Years ending June 30, 1998.................................. $2,500,000
1999................................. 5,000,000
2000................................. 5,000,000
2001................................. 5,000,000
2002................................. 5,000,000
2003 and thereafter.................. 27,500,000
</TABLE>
F-23
<PAGE> 138
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F -- NOTES PAYABLE (CONTINUED)
Interest charged to operations in connection with borrowings (including an
$80,000,000 BCCLP loan with interest at floating rates (6.25% at June 30, 1995)
from a commercial bank which was repaid on July 7, 1995, a $10,000,000 note
payable with interest at 10% which was converted into a 25% interest in BCBLP on
July 7, 1995, a BCBLP term loan with interest at optional floating rates (6.375%
at June 30, 1994) from a commercial bank which was repaid during fiscal year
1995 and a $15,000,000 short-term loan with interest at 4% from the commercial
bank borrowed and repaid during fiscal year 1994) were $3,219,000, $3,366,000,
and $8,478,000 ($3,219,000, $3,366,000 and $7,890,000 from continuing
operations) in the years ended June 30, 1997, 1996 and 1995, respectively.
NOTE G -- RELATED PARTY TRANSACTIONS
Management fee obligations of $820,000, $1,555,000 and $1,336,000
applicable to Boston Celtics Corporation, general partner of CLP, were charged
to operations during the years ended June 30, 1997, 1996 and 1995, respectively.
Boston Celtics Corporation receives a management fee of $750,000 per annum,
subject to annual increases based on annual cash flows from basketball
operations after June 30, 1989. In addition, Celtics Communications, Inc.,
general partner of BCCLP and BCBLP, received aggregate management fees of
$10,000 and $998,000 in 1996 and 1995, respectively, from BCCLP and BCBLP. The
BCCLP fee was based on revenues generated by Radio Station WEEI AM-590 and the
BCBLP fee was based on 2% percent of sales until these operations were sold in
the years ended June 30, 1994 and June 30, 1996, respectively.
NOTE H -- COMMITMENTS AND CONTINGENCIES
The Partnership has employment agreements with officers, coaches and
players of the basketball team (CLP). Certain of the contracts provide for
guaranteed payments which must be paid even if the employee is injured or
terminated. The basketball team players are covered by the terms of a collective
bargaining agreement which expires on June 30, 2001. Amounts required to be paid
under such contracts in effect as of September 19, 1997, including option years
and $10,343,000 included in accrued expenses at June 30, 1997, but excluding
amounts previously earned (see Note E -- Deferred Compensation), are as follows:
<TABLE>
<S> <C>
Years ending June 30, 1998.................................. $38,789,000
1999................................. 39,674,000
2000................................. 39,298,000
2001................................. 24,569,000
2002................................. 17,910,000
2003 and thereafter.................. 33,800,000
</TABLE>
BCLP maintains disability and life insurance policies on most of its key
players. The level of insurance coverage maintained is based on BCLP's
determination of the insurance proceeds which would be required to meet its
guaranteed obligations in the event of permanent or total disability of its key
players.
F-24
<PAGE> 139
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE H -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Partnership and its subsidiaries are also committed under
noncancelable, long-term operating leases, substantially all of which are
related to CLP, for certain of its facilities and equipment. Rent expense
charged to operations during the years ended June 30, 1997, 1996 and 1995 was
$292,000, $282,000, and $2,272,000 ($292,000, $282,000 and $1,667,000 from
continuing operations), respectively. Minimum annual payments, including
renewable option periods, required by these operating leases are as follows:
<TABLE>
<S> <C>
Years ending June 30, 1998.................................. $ 290,000
1999................................. 304,000
2000................................. 319,000
2001................................. 334,000
2002................................. 350,000
2003 and thereafter.................. 1,361,000
</TABLE>
NOTE I -- OPTIONS TO ACQUIRE UNITS OF PARTNERSHIP INTEREST
On December 31, 1993, the Partnership granted options to three employees to
acquire 530,000 Limited Partnership Units of BCLP (Units) at the price of $16.25
per Unit, less all cash distributions per Unit made by the Partnership from July
31, 1993 to the date of exercise. All of the options expire ten years from the
date of grant, and at June 30, 1997, all of the options were fully vested. On
June 27, 1997, the Audit Committee of the Board of Directors of CI (the general
partner of BCLP) voted to offer the three option holders the right to exchange
their options to purchase BCLP Units for an equal number of restricted Units of
Partnership interest. The exchange ratio was determined based on a written
report received from an independent employee benefits consultant regarding the
respective values of the restricted Units and the options to purchase BCLP
Units, and the option holders were required to make this election on or prior to
July 7, 1997. On June 30, 1997, Paul E. Gaston elected to exchange his options
to purchase 250,000 BCLP Units for 250,000 restricted Units of Partnership
interest. Mr. Gaston, who is a member of the Audit Committee, was recused from
and did not participate in any of the Audit Committee's deliberations pertaining
to this matter. As a result of this exchange, $519,000 was charged to
compensation expense in 1997, representing the difference between the fair
market value of the restricted Units and the in-the-money value of the optioned
Units.
In addition to exercising the right to purchase units pursuant to the
options, a holder may exercise a Unit Appreciation Right, entitling the holder
to receive an amount equal to the excess of the fair market value of a Unit,
determined on the date of exercise over the exercise price of the related option
on the date the Unit Appreciation Right was granted in which event options for
an equivalent number of units will be canceled. In the sole discretion of the
General Partner of BCLP payments of amounts payable pursuant to Unit
Appreciation Rights may be made solely in Units, solely in cash, or in a
combination of cash and Units. The compensation element of the options,
$2,208,000, $1,851,000 and $3,174,000 in the years ended June 30, 1997, 1996 and
1995, respectively, is being charged to earnings ratably over the period from
the date of grant until the date of exercise based on the difference between the
exercise and market price of the optioned Units at the end of each quarter. The
market price of Limited Units of BCLP on June 30, 1997 was $24.75.
NOTE J -- BENEFIT PLANS
Certain of the Partnership's subsidiaries have defined contribution plans
covering substantially all employees who meet certain eligibility requirements.
Participants may make contributions to the plans up to 15% of their compensation
(as defined). Contributions to these plans are matched by the Partnership and
its subsidiaries 100% on the first 7% of compensation contributed by each
participant. Contributions are fully vested after three years of service. Costs
of the plans charged to operations amounted to $300,000, $206,000, and $375,000
($300,000, $206,000 and $129,000 from continuing operations) during the years
ended June 30, 1997, 1996 and 1995, respectively.
F-25
<PAGE> 140
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J -- BENEFIT PLANS (CONTINUED)
Players, coaches, trainers and the general manager of the basketball
operation are covered by multiemployer defined benefit pension plans
administered by the National Basketball Association. Costs of these plans
charged to operations amounted to $368,000, $359,000, and $325,000 during the
years ended June 30, 1997, 1996 and 1995, respectively.
NOTE K -- CASH FLOWS
Reconciliations of net income to net cash flows from operating activities
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C>
Net income............................................. $ 420,306 $ 54,200,529 $16,156,006
Items not affecting cash flows from operating
activities:
Depreciation...................................... 189,324 149,046 766,264
Amortization...................................... 164,702 166,211 343,695
Provision for doubtful accounts................... 185,193
Increase in note issued on redemption of
Partnership interest............................ 1,055,668 988,853
Changes in:
Accrued interest receivable.................. (264,625) 1,445,311 (1,815,877)
Accounts receivable.......................... 1,126,788 (378,126) (4,616,167)
Notes receivable............................. (80,772) 4,444,444 (4,444,444)
Accounts payable and accrued expenses........ 816,434 (5,395,131) 10,117,311
Deferred compensation........................ (3,947,474) (3,683,023) (1,751,374)
Deferred revenues............................ 255,273 (2,756,599) 8,086,174
Other non-current liabilities................ 3,995,000 1,851,250 850,000
Net realized gains (losses) on disposition of
marketable securities and other short-term
investments..................................... (361,051) 101,138 (110,254)
Minority interest in earnings of BCBLP............ 27,391 6,853,486
Gain on sale of BCBLP............................. (38,330,907)
Other............................................. (907,752) (402,986) 145,341
----------- ------------ -----------
Net cash flows from operating activities............... $ 2,461,821 $ 12,427,401 $30,765,354
=========== ============ ===========
</TABLE>
The change in accounts receivable is after write-offs, net of recoveries,
of $397,544 in 1995.
F-26
<PAGE> 141
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L -- QUARTERLY RESULTS (UNAUDITED)
A summary of operating results, net income per unit based on the average
units outstanding throughout each year calculated for financial statement
purposes only, and cash distributions for the quarterly periods in the two years
ended June 30, 1997 is set forth below (000's omitted, except for per unit
amounts):
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1996 1996 1997 1997 TOTAL
------------- ------------ --------- -------- -------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1997:
Revenues........................... $ 0 $20,630 $33,865 $ 8,503 $62,998
Income (loss) from continuing
operations....................... (3,207) 4,544 10,006 (10,923) 420
Net income (loss).................. (3,207) 4,544 10,006 (10,923) 420
Net income (loss) applicable to
Limited Partners................. (3,150) 4,444 9,791 (10,727) 358
Per Unit:
Income (loss) from continuing
operations applicable to Limited
Partners -- basic................ $ (0.56) $ 0.83 $ 2.01 $ (2.21) $ 0.07
Income (loss) from continuing
operations applicable to Limited
Partners -- assuming dilution.... $ (0.56) $ 0.76 $ 1.83 $ (2.10) $ 0.06
Net income (loss) applicable to
Limited Partners -- basic........ $ (0.56) $ 0.83 $ 2.01 $ (2.21) $ 0.07
Net income (loss) applicable to
Limited Partners -- assuming
dilution......................... $ (0.56) $ 0.76 $ 1.83 $ (2.10) $ 0.06
Distributions declared to BCLP
unitholders:..................... $ 1.00 $ 1.00
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1996 1996 TOTAL
------------- ------------ --------- -------- -------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1996:
Revenues............................ $ 0 $21,615 $34,062 $9,103 $64,780
Income (loss) from continuing
operations........................ (3,008) 8,649 10,913 (767) 15,787
Net income (loss)................... 36,205 7,849 10,913 (767) 54,200
Net income (loss) applicable to
Limited Partners.................. 35,301 7,707 10,677 (776) 52,909
Per Unit:
Income (loss) from continuing
operations applicable to Limited
Partners -- basic................. $ (0.48) $ 1.50 $ 1.89 $(0.14) $ 2.68
Income (loss) from continuing
operations applicable to Limited
Partners -- assuming dilution..... $ (0.48) $ 1.46 $ 1.84 $(0.14) $ 2.59
Net income (loss) applicable to
Limited Partners -- basic......... $ 5.75 $ 1.37 $ 1.89 $(0.14) $ 9.18
Net income (loss) applicable to
Limited Partners -- assuming
dilution.......................... $ 5.59 $ 1.33 $ 1.84 $(0.14) $ 8.89
Distributions declared to BCLP
unitholders:...................... $ 1.50 $ 1.50
</TABLE>
F-27
<PAGE> 142
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE M -- INCOME TAXES
For financial reporting purposes a valuation allowance of $7.9 million was
established in 1994 to reduce the deferred tax assets (principally related to
intangibles) acquired in the merger to the amount considered realizable on a
more likely than not basis. The allowance was eliminated in 1995 as a result of
the closing of the agreement between BCLP and Fox Television, Inc. (see Note
A -- Basis of Presentation). Taxes related to the agreement have been provided
as a component of income from discontinued operations. Components of deferred
tax liabilities and assets, all of which relate to Holdings or its subsidiary
partnerships BCCLP and BCBLP, are as follows:
<TABLE>
<CAPTION>
JUNE 30
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax liabilities:
Deposit related to issuance of option to acquire
26% partnership interest in BCBLP (tax over
financial basis)................................. $ 6,000,000
Financial basis in excess of tax basis of assets
related to restructuring of ownership of BCCLP... $20,100,000 $20,100,000 11,000,000
----------- ----------- -----------
Total deferred tax liabilities................ 20,100,000 20,100,000 17,000,000
Deferred tax assets:
Intangibles arising from acquisition of BCBLP in a
merger accounted for as a transaction between
entities under common control (tax over financial
basis)........................................... 11,000,000
----------- ----------- -----------
Net deferred tax assets....................... 11,000,000
----------- ----------- -----------
Net deferred tax liability.................... $20,100,000 $20,100,000 $ 6,000,000
=========== =========== ===========
</TABLE>
At June 30, 1997, deferred taxes of $20,100,000 represent the tax effected
difference between the tax and financial statement bases of the net assets of
Holdings and CII.
At June 30, 1997, the tax basis of the net assets of BCLP and CLP exceeded
their financial bases by approximately $45,000,000, consisting primarily of
Deferred Compensation of $13,000,000, other compensation of $4,000,000 and the
National Basketball Franchise of $28,000,000. A substantial part of the Deferred
Compensation will be paid prior to July 1, 1998, when BCLP may become subject to
federal income taxes. No deferred tax assets or liabilities have been provided
for these differences because BCLP and CLP are not subject to income taxes.
The provision for income taxes included in the consolidated statements of
income consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal.................................. $1,100,000 $ 2,550,000 $5,000,000
State.................................... 300,000 800,000 1,750,000
---------- ----------- ----------
Total current....................... 1,400,000 3,350,000 6,750,000
---------- ----------- ----------
Deferred:
Federal.................................. 12,500,000
State.................................... 3,800,000
---------- ----------- ----------
Total deferred...................... 16,300,000
---------- ----------- ----------
$1,400,000 $19,650,000 $6,750,000
========== =========== ==========
</TABLE>
F-28
<PAGE> 143
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE M -- INCOME TAXES (CONTINUED)
A reconciliation of the statutory federal income tax rate applied to
reported pre-tax earnings of CII, CCC, Holdings, BCCLP and BCBLP ($3,270,000 in
1997, $60,252,000 in 1996 and $23,400,000 in 1995) before deduction of taxable
minority interest ($6,800,000 in 1995) to the effective tax rate of the
provision is:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate........................... 34.0% 34.0% 34.0%
State income taxes, net of federal tax benefit.............. 6.2 6.3 6.3
Income tax applicable to sale of BCBLP charged to
discontinued operations when the sale was realized........ (11.7)
Benefit from recognition of deferred tax assets resulting
from prior merger transaction............................. (8.2)
Other....................................................... 2.6 0.5 0.5
---- ---- -----
Effective tax rate.......................................... 42.8% 32.6% 29.1%
==== ==== =====
</TABLE>
NOTE N -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The balances include accrued compensation of $11,163,000 and $12,265,000 at
June 30, 1997 and 1996, respectively, and accrued management fees of $70,000 and
$805,000 due to the general partners of the Partnership and its subsidiaries at
June 30, 1997 and 1996, respectively.
NOTE O -- REDEMPTIONS OF PARTNERSHIP INTERESTS
On November 30, 1996, the Partnership, through its wholly-owned subsidiary
CCC, acquired an aggregate of 780,000 units representing assignments of
beneficial ownership of limited partnership interest in BCLP. The units were
acquired from a principal unitholder and an entity which is an affiliate of the
unitholder for an aggregate purchase price of $22,880,000, or $29.3333 for each
unit acquired. On June 30, 1997, the Partnership purchased these units from CCC.
The units acquired have been classified as treasury units and the purchase price
has been recorded as a reduction of BCLP Limited Partners Capital (Deficit).
Upon the acquisition of the units, the principal unitholder resigned from his
positions as Vice Chairman of the Board and as a director of Celtics, Inc.
On August 30, 1995 the Partnership redeemed an aggregate of 758,444 units
representing assignments of beneficial ownership of limited partnership interest
in BCLP. The redeemed units were beneficially owned by a principal unitholder
and his family. The principal unitholder received two notes from BCLP in
exchange for 668,144 units acquired by BCLP from him. The two notes have an
aggregate initial face amount of $14,365,096 equal to $21.50 per unit for each
unit acquired from him. The two notes, which are due and payable on July 1, 2000
(unless prepaid earlier pursuant to mandatory prepayment provisions contained
therein) also provide that the amounts to be paid to such unitholder pursuant to
the terms of the notes will be increased by specified amounts on each July 1
during their term. If the principal unitholder holds the two notes until July 1,
2000, he would be entitled to receive aggregate payments (excluding interest) in
the amount of $20,044,320 equal to $30.00 per unit for each unit acquired from
him. Each of the notes bears interest payable quarterly at the rate of 7.76% per
annum. Interest of $2,247,134 and $2,008,909 related to these notes was charged
to operations in 1997 and 1996, respectively. At June 30, 1997, the aggregate
balance of the notes, including scheduled increases in the note balances,
amounted to $16,409,617. Under the terms of the redemption, the principal
unitholder's family members were paid $1,941,450, equal to $21.50 in cash for
each of the 90,300 units acquired from them.
F-29
<PAGE> 144
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE P -- NET INCOME PER UNIT
Net Income Per Unit:
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share" ("Statement 128"). Statement 128 replaced the calculation
of primary and fully-diluted earnings per unit with basic and diluted earnings
per unit. Unlike primary earnings per unit, basic earnings per unit excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per unit is similar to the Partnership's previously reported primary
earnings per unit. All earnings per unit amounts for all periods presented have
been restated to conform to the Statement 128 requirements.
F-30
<PAGE> 145
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE P -- NET INCOME PER UNIT (CONTINUED)
The following tables set forth the computation of basic and diluted
earnings per unit for each of the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
NUMERATOR FOR BASIC AND DILUTED EARNINGS PER UNIT:
Income from continuing operations:
Income from continuing operations before interests
of General Partners............................ $ 420,306 $15,786,816 $ 5,517,331
Applicable to interests of General Partners of
subsidiary partnerships........................ 58,629 193,665 67,187
---------- ----------- -----------
361,677 15,593,151 5,450,144
Applicable to 1% General Partnership interest of
BCLP........................................... 3,617 155,932 54,498
---------- ----------- -----------
Income from continuing operations applicable to
interests of Limited Partners.................. $ 358,060 $15,437,219 $ 5,395,646
========== =========== ===========
Net income:
Net income before interests of General Partners... $ 420,306 $54,200,529 $16,156,006
Applicable to interests of General Partners of
subsidiary partnerships........................ 58,629 756,574 453,796
---------- ----------- -----------
361,677 53,446,955 15,702,210
Applicable to 1% General Partnership interest of
BCLP........................................... 3,617 534,440 157,019
---------- ----------- -----------
Net income applicable to interests of Limited
Partners....................................... $ 358,060 $52,909,515 $15,545,191
========== =========== ===========
DENOMINATOR:
Denominator for basic earnings per unit --
weighted average shares........................ 5,186,100 5,764,966 6,399,722
Effect of dilutive securities:
Options to purchase units of Partnership
interest.................................. 250,881 183,782
Restricted stock............................. 235,571 1,931
---------- ----------- -----------
Denominator for diluted earnings per unit......... 5,672,552 5,950,679 6,399,722
========== =========== ===========
Income from continuing operations per unit --
basic............................................. $ 0.07 $ 2.68 $ 0.84
========== =========== ===========
Income from continuing operations per unit --
assuming dilution................................. $ 0.06 $ 2.59 $ 0.84
========== =========== ===========
Net income per unit -- basic........................ $ 0.07 $ 9.18 $ 2.43
========== =========== ===========
Net income per unit -- assuming dilution............ $ 0.06 $ 8.89 $ 2.43
========== =========== ===========
</TABLE>
F-31
<PAGE> 146
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
UNAUDITED
<TABLE>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents.............................. $ 24,365,452
Marketable securities.................................. 6,133,212
Other short-term investments........................... 74,501,608
Accounts receivable.................................... 54,396
Prepaid expenses....................................... 538,421
------------
Total current assets.............................. 105,593,089
Property and equipment, net of depreciation of $870,560..... 1,118,795
National Basketball Association franchise, net of
amortization of $2,275,039................................ 3,894,542
Other intangible assets, net of amortization of $53,187..... 900,857
Other assets................................................ 9,397,334
------------
$120,904,617
============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable and accrued expenses.................. $ 8,317,529
Deferred game revenues................................. 6,236,227
Federal and state income taxes payable................. 733,799
Notes payable.......................................... 17,256,489
Deferred compensation -- current portion............... 1,771,107
------------
TOTAL CURRENT LIABILITIES......................... 34,315,151
Deferred federal and state income taxes..................... 20,100,000
Notes payable to bank -- noncurrent portion................. 50,000,000
Deferred compensation -- noncurrent portion................. 9,174,365
Other noncurrent liabilities................................ 6,037,500
Partners' capital
Boston Celtics Limited Partnership --
General Partner...................................... 315,339
Limited Partners..................................... 271,037
------------
586,376
Celtics Limited Partnership -- General Partner......... 50,090
Boston Celtics Communications Limited Partnership --
General Partner....................................... 641,135
------------
Total partners' capital..................................... 1,277,601
------------
$120,904,617
============
</TABLE>
See notes to condensed consolidated financial statements.
F-32
<PAGE> 147
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
MARCH 31, MARCH 31,
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Basketball regular season --
Ticket sales...................................... $32,906,000 $27,523,000
Television and radio broadcast rights fees........ 24,030,000 19,369,000
Other, principally promotional advertising........ 8,009,000 7,603,000
----------- -----------
64,945,000 54,495,000
----------- -----------
Costs and expenses:
Basketball regular season --
Team.............................................. 35,803,000 28,175,000
Game.............................................. 2,344,000 2,153,000
General and administrative............................. 8,176,676 9,114,742
Selling and promotional................................ 2,973,892 3,309,145
Depreciation........................................... 154,767 139,630
Amortization of NBA franchise and other intangible
assets................................................ 121,783 123,527
----------- -----------
49,574,118 43,015,044
----------- -----------
15,370,882 11,479,956
Interest expense............................................ (4,389,111) (4,459,947)
Interest income............................................. 4,847,509 4,922,078
Net realized gains (losses) on disposition of marketable
securities and other short-term investments............... (8,805) 400,204
----------- -----------
Income before income taxes.................................. 15,820,475 12,342,291
Provision for income taxes.................................. 1,400,000 1,000,000
----------- -----------
Net income.................................................. 14,420,475 11,342,291
Net income applicable to interests of General Partners...... 322,608 258,035
----------- -----------
Net income applicable to interests of Limited Partners...... $14,097,867 $11,084,256
=========== ===========
Net income per unit -- basic................................ $ 2.90 $ 2.09
Net income per unit -- diluted.............................. $ 2.56 $ 1.92
Distributions declared per unit............................. $ 1.00 $ 1.00
</TABLE>
See notes to condensed consolidated financial statements.
F-33
<PAGE> 148
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-----------------------------
MARCH 31, MARCH 31,
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from (used by) operating activities:
Receipts:
Basketball regular season receipts:
Ticket sales...................................... $ 32,819,142 $ 26,614,247
Television and radio broadcast rights fees........ 18,339,004 15,152,558
Other, principally promotional advertising........ 7,273,256 5,661,903
------------- -------------
58,431,402 47,428,708
Costs and expenses:
Basketball regular season expenditures:
Team expenses..................................... 30,453,919 27,930,313
Game expenses..................................... 2,239,188 1,902,806
General and administrative expenses.................... 11,110,257 12,832,125
Selling and promotional expenses....................... 3,067,845 2,867,595
------------- -------------
46,871,209 45,532,839
------------- -------------
11,560,193 1,895,869
Interest expense............................................ (2,586,176) (3,323,118)
Interest income............................................. 5,001,335 5,129,937
Payment of income taxes..................................... (233,306) (1,872,220)
Payment of deferred compensation............................ (1,299,282) (3,814,344)
------------- -------------
Net cash flows from (used by) operating activities..... 12,442,764 (1,983,876)
Cash flows from investing activities:
Purchases of:
Marketable securities............................. (41,399,070) (30,996,438)
Short-term investments............................ (557,767,039) (505,600,000)
Proceeds from sales of:
Marketable securities............................. 54,870,332 40,466,725
Short-term investments............................ 555,432,400 529,300,000
Capital expenditures................................... (364,146) (51,746)
Other receipts (expenditures).......................... 51,994 (119,269)
------------- -------------
Net cash flows from investing activities............... 10,824,471 32,999,272
------------- -------------
Net cash flows from operating and investing
activities........................................... 23,267,235 31,015,396
Cash flows used by financing activities:
Proceeds from bank borrowings.......................... 50,000,000
Payment of bank borrowings............................. (50,000,000)
Purchase of Boston Celtics Limited Partnership units... (22,880,000)
Cash distributions to limited partners of Boston
Celtics Limited Partnership.......................... (5,400,522) (5,935,876)
------------- -------------
Net cash flows used by financing activities....... (5,400,522) (28,815,876)
------------- -------------
Net increase in cash and cash equivalents......... 17,866,713 2,199,520
Cash and cash equivalents at beginning of period............ 6,498,739 5,982,128
------------- -------------
Cash and cash equivalents at end of period.................. $ 24,365,452 $ 8,181,648
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
F-34
<PAGE> 149
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- The condensed consolidated financial statements include the
accounts of the Boston Celtics Limited Partnership ("BCLP," the "Partnership")
and its majority-owned and controlled subsidiaries and partnerships. BCLP,
through its subsidiaries, owns and operates the Boston Celtics professional
basketball team of the National Basketball Association and holds investments.
All intercompany transactions are eliminated in consolidation. Certain amounts
in 1997 have been reclassified to permit comparison.
NOTE 2 -- The unaudited interim condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial statements and with instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation have been
included therein. Operating results for interim periods are not indicative of
the results that may be expected for the full year. Such financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto of Boston Celtics Limited Partnership and Subsidiaries
included in the annual report on Form 10-K for the year ended June 30, 1997 and
the Forms 10-Q for the quarters ended December 31, 1997 and September 30, 1997.
NOTE 3 -- Revenues and costs applicable to the regular season are
recognized in income proportionately over the 82 games played in the regular
season. The excess of revenue received or costs incurred over amounts recognized
in income are included in deferred game costs or deferred game revenues on the
condensed consolidated balance sheets.
NOTE 4 -- On December 15, 1997, Celtics Limited Partnership ("CLP"), the
Partnership's 99%-owned limited partnership which owns and operates the Boston
Celtics basketball team, entered into a $60,000,000 credit facility with its
commercial bank, consisting of a $50,000,000 term loan and a $10,000,000
revolving line of credit. As of March 31, 1998, no borrowings were outstanding
against the $10,000,000 revolving line of credit. The proceeds from the
$50,000,000 term loan were used to repay a separate $50,000,000 loan from a
commercial bank.
Under the terms of the $50,000,000 term loan agreement, interest is payable
quarterly in arrears at a fixed annual rate of 6.29% from December 15, 1997
through December 15, 2007. Principal payments are due in equal quarterly
installments of $2,500,000 commencing on January 1, 2003, with the final payment
due on December 15, 2007, the maturity date of the loan.
The $10,000,000 revolving line of credit agreement expires on December 15,
2000, with two automatic one-year extensions cancelable at the option of the
commercial bank. Interest on any borrowings under the revolving line of credit
accrues at the Partnership's option of either LIBOR plus 0.70% or the greater of
the bank's Base Rate or the Federal Funds Effective Rate plus 0.50%.
Borrowings under the term loan and revolving line of credit are secured by
all of the assets of and are the liability of CLP. The loan agreement contains
certain restrictions and various provisions and covenants customary in lending
arrangements of this type, including limitations on distributions to partners of
CLP.
NOTE 5 -- In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share ("Statement 128"). Statement 128 replaced
the calculation of primary and fully-diluted earnings per unit with basic and
diluted earnings per unit. Unlike primary earnings per unit, basic earnings per
unit excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per unit is similar to the Partnership's previously
reported primary earnings per unit. All earnings per unit amounts for all
periods presented have been restated to conform to the Statement 128
requirements.
F-35
<PAGE> 150
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 (CONTINUED)
The following table sets forth the computation of basic and diluted
earnings per unit:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
MARCH 31, MARCH 31,
1998 1997
--------- ---------
<S> <C> <C>
Numerator for basic and diluted earnings per unit:
Net income before interests of General Partners........ $14,420,475 $11,342,291
Applicable to interests of General Partners of
subsidiary partnerships............................... 180,205 146,073
----------- -----------
14,240,270 11,196,218
Applicable to 1% General Partnership interest of
BCLP.................................................. 142,403 111,962
----------- -----------
Applicable to interests of Limited Partners............ $14,097,867 $11,084,256
=========== ===========
Denominator:
Denominator for basic earnings per unit -- weighted
average shares........................................ 4,861,278 5,293,979
Effect of dilutive securities:
Options to purchase units of Partnership
interest.................................. 165,721 244,441
Restricted stock............................. 484,886 234,886
----------- -----------
Denominator for diluted earnings per unit.............. 5,511,885 5,773,306
=========== ===========
Basic earnings per unit..................................... $ 2.90 $ 2.09
=========== ===========
Diluted earnings per unit................................... $ 2.56 $ 1.92
=========== ===========
</TABLE>
NOTE 6 -- In June 1997, the Financial Accounting Standards Board issued
Statement No. 130, "Reporting Comprehensive Income" ("Statement 130"). Statement
130 is effective for fiscal years beginning after December 15, 1997. The
Partnership believes that the adoption of Statement 130 will not have a material
impact on the Partnership's condensed consolidated financial statements.
F-36
<PAGE> 151
EXHIBIT A
GLOSSARY OF DEFINED TERMS
<TABLE>
<S> <C>
Additional Units..................... BCLP Units subject to the Voting Agreement with respect to
which a consent will be executed in favor of the
Reorganization and as to which an election to receive Castle
Creek Interests in the Distribution will be made.
Assumed Castle Creek................. Assumption that 50.116473% of current BCLP Unit holders will
Election Percentage elect to receive Castle Creek Interests in the Distribution.
Bank Loan............................ The borrowing to be made by BCLP in connection with the
Restructuring Transactions.
BCBLP................................ Boston Celtics Broadcasting Limited Partnership, a Delaware
limited partnership.
BCC.................................. Boston Celtics Corporation, the general partner of CLP,
Celtics Basketball Holdings and Celtics Basketball
BCCLP................................ Boston Celtics Communications Limited Partnership, a
Delaware limited partnership.
BCLP................................. Boston Celtics Limited Partnership, a Delaware limited
partnership.
BCLP Units........................... Units representing limited partnership interests in BCLP.
BCLP II.............................. Boston Celtics Limited Partnership II, a Delaware limited
partnership.
BCLP II GP........................... BCLP II GP, Inc., the general partner of BCLP II.
BCLP II Units........................ Units representing limited partnership interests in BCLP II.
BSE.................................. Boston Stock Exchange.
Castle Creek......................... Castle Creek LP, a Delaware limited partnership.
Castle Creek GP...................... Castle Creek GP, Inc., a Delaware corporation, the general
partner of Castle Creek.
Castle Creek Interest................ Limited partnership interest in Castle Creek.
CCC.................................. Celtics Capital Corporation, a Delaware corporation.
CCI.................................. Celtics Communications, Inc., the general partner of BCCLP.
Celtics, Inc......................... Celtics, Inc., the general partner of BCLP.
Celtics Basketball................... Celtics Basketball L.P., a Delaware limited partnership.
Celtics Basketball Holdings.......... Celtics Basketball Holdings L.P., a Delaware limited
partnership.
Celtics Pride........................ Celtics Pride GP, a Delaware general partnership.
CLP.................................. Celtics Limited Partnership, a Delaware limited partnership.
Commission........................... The United States Securities Exchange Commission.
Depositary........................... The Depository Trust Company.
Distribution......................... The distribution by BCLP, at the option of each BCLP Unit
holder, of either $20 in principal amount of Subordinated
Debentures and $1 in cash for each BCLP Unit or one Castle
Creek Interest for each 100 BCLP Units; an interdependent
part of the Reorganization.
Effective Date....................... The date the Reorganization is expected to become effective.
Exchange Act......................... The Securities Exchange Act of 1934, as amended.
Fractional Lots...................... Lots of less than 100 BCLP Units.
Gaston Affiliates.................... Don F. Gaston, Paul E. Gaston and their affiliates.
Global Debenture..................... The initial form of one or more Global Subordinated
Debentures, held by the Global Debenture Holder.
Global Debenture Holder.............. Cede & Co., the nominee of the Depositary.
Indenture............................ Indenture, to be dated as of , 1998, between BCLP
and , as Trustee (the "Trustee"), pursuant to
which the Subordinated Debentures will be issued.
Investment Company Act............... The Investment Company Act of 1940 , as amended.
Merger............................... The Merger of Merger Sub with and into BCLP, in which BCLP
will be the surviving entity; an interdependent part of the
Reorganization.
</TABLE>
A-1
<PAGE> 152
<TABLE>
<S> <C>
Merger Sub........................... BCLP Merger, Inc., a Delaware corporation.
NBA.................................. National Basketball Association.
NYSE................................. New York Stock Exchange.
Option Exercise Agreement............ Agreement between Walcott and Stephen C. Schram pursuant to
which Mr. Schram has agreed to (i) exercise the Unit Option
and (ii) execute a consent with respect to the Additional
Units in favor of the Reorganization.
Plan................................. Amended and Restated Agreement and Plan of Reorganization,
dated as of , 1998, by and among BCLP, BCLP II,
Castle Creek, Celtics, Inc., BCLP II GP and Castle Creek GP.
Proportionate Election............... The percentage of BCLP Unit holders electing to receive
Castle Creek Interests as compared to those electing to
receive Subordinated Debentures and cash in the
Distribution.
Prospectus........................... Information Statement/Prospectus that is being furnished to
holders of BCLP Units.
PTP.................................. Publicly traded partnership.
Registration Statement............... Registration on Form S-4 (File No. 33-50367) filed with the
SEC on April 17, 1998, and exhibits thereto.
Reorganization....................... The Distribution and the Merger.
Requisite Approval................... Consent of a majority of all outstanding BCLP Units, which
is required in order to effect the Merger (and therefore the
Reorganization).
Restructuring Transactions........... Several transactions described herein to be undertaken by
BCLP pursuant to the Plan, and in anticipation of the
Reorganization, which are designed to facilitate the
Reorganization.
Subordinated Debentures.............. BCLP's 6% Subordinated Debentures due 2038.
Tax Change........................... The Revenue Act of 1987, which caused PTPs to be taxed as
corporations for federal income tax purposes.
Team................................. The Boston Celtics professional basketball team of the
National Basketball Association.
Toll Tax............................. 3.5% tax on gross income from the active conduct of trades
or businesses in taxable years beginning after December 31,
1997, which PTPs may elect to pay rather than becoming
subject to tax as a corporation pursuant to the Tax Change.
Unit Option.......................... A certain option to purchase BCLP Units held by Stephen G.
Schram; will be exercised pursuant to the Option Exercise
Agreement.
Walcott.............................. Walcott Partners, L.P., a Delaware limited partnership.
</TABLE>
A-2
<PAGE> 153
EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
B-1
<PAGE> 154
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of , 1998, by
and among Boston Celtics Limited Partnership, a Delaware limited partnership
("BCLP"); Boston Celtics Limited Partnership II, a Delaware limited partnership
("BCLP II"); Castle Creek Partners, L.P., a Delaware limited partnership
("Castle Creek"); Celtics Limited Partnership, a Delaware limited partnership
("CLP"); Celtics, Inc., a Delaware corporation and currently the general partner
of BCLP; BCLP II GP, Inc., a Delaware corporation and the general partner of
BCLP II ("BCLP II GP"); Castle Creek GP, Inc., a Delaware corporation and the
general partner of Castle Creek ("Castle Creek GP"); Boston Celtics Corporation,
a Delaware corporation and the general partner of CLP ("CLP GP"); and Celtics
Capital Corporation, a Delaware corporation ("CCC").
BACKGROUND
BCLP is a master limited partnership the general partner of which is
Celtics, Inc., and the limited partnership interests of which ("BCLP Units") are
listed on the New York Stock Exchange ("NYSE"). The primary business of BCLP is
the ownership and operation, through CLP, of the Boston Celtics franchise of the
National Basketball Association (the "Team"). BCLP II and Castle Creek have been
formed in anticipation of the Reorganization (as defined herein).
The parties desire to reorganize so that the net assets of BCLP will be
allocated between BCLP II and Castle Creek pro rata according to the respective
proportions of holders of BCLP Units prior to the reorganization ("BCLP
Unitholders") electing to participate in BCLP II and Castle Creek, respectively.
In connection with that allocation and the reorganization as described herein,
BCLP will cause to be formed the following entities: BCLP Merger, Inc. ("Merger
Sub"); BCLP GP, Inc., a Delaware corporation ("BCLP GP"); Celtics Pride GP, a
Delaware general partnership ("Parquet"); Celtics Basketball Holdings LP, a
Delaware limited partnership ("Celtics Basketball Holdings"); and Celtics
Basketball LP, a Delaware limited partnership ("Celtics Basketball").
CLP will transfer its interests in the Team to Celtics Basketball, all of
the limited partnership interests of which will subsequently be held by Celtics
Basketball Holdings. CLP will hold a 99.999% general partner interest in Celtics
Pride, and BCLP will allocate limited partnership interests in Celtics
Basketball Holdings between BCLP II (indirectly, through ownership of BCLP, CLP
and Celtics Pride) and Castle Creek pro rata according to the elections of BCLP
Unitholders. BCLP will also enter into that certain Plan and Agreement of Merger
attached as Exhibit A hereto (the "Merger Agreement"), with Merger Sub, a wholly
owned subsidiary of BCLP II, and BCLP II, pursuant to which Merger Sub will
merge with and into BCLP, with the result that BCLP will be a wholly owned
subsidiary of BCLP II (the "Merger"). The foregoing series of events are
hereinafter referred to collectively as the "Reorganization."
The Reorganization is to be accomplished through the contributions,
distributions and asset transfers set forth in Exhibit B, as it may be amended
from time to time.
Pursuant to the Merger Agreement, on the date when the Merger becomes
effective (the "Effective Date"), (i) all of the BCLP Units that are issued and
outstanding as of the applicable record date, except for the BCLP Units with
respect to which BCLP Unitholders have elected to receive Castle Creek
Interests, will be converted automatically, by operation of law, on a
one-for-one basis into an equal number of issued and outstanding units of BCLP
II ("BCLP II Units"); and (ii) all of the outstanding shares of capital stock of
Merger Sub will be converted automatically, by operation of law, into that
number of issued and outstanding limited partnership units of BCLP that equals
the number of BCLP II Units into which Debenture Units are converted in the
Merger.
The foregoing conversion of BCLP Units into BCLP II units is intended to
constitute an exchange under Section 351(a) of the Internal Revenue Code of
1986, as amended.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions contained herein, and in order to set forth
the terms and conditions of the Reorganization and
B-2
<PAGE> 155
the mode of carrying the same into effect, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE I
THE REORGANIZATION
1.1 THE INITIAL CONTRIBUTIONS AND DISTRIBUTIONS. The parties hereby agree
to take all actions necessary to effect the contributions, distributions and
asset transfers set forth in Exhibit B.
Following consummation of the contributions, distributions and asset
transfers set forth in Exhibit B, Celtics, Inc. will be the indirect owner,
through BCLP GP and Castle Creek GP, of all of the general partner interests in
both BCLP and Castle Creek. Castle Creek GP will be the direct owner of all of
the general partner interests in Castle Creek (the book value of total general
partner interests of Castle Creek GP in Castle Creek, the "Castle Creek GP
Amount"). BCLP GP will be the direct owner of all of the general partner
interests in BCLP.
1.2 ELECTIONS AND APPROVAL OF BCLP UNITHOLDERS. BCLP will take the
following actions with respect to its unitholders:
(a) SEC FILINGS. In connection with the Reorganization, BCLP will
prepare or has prepared for filing with the Securities and Exchange
Commission ("SEC"), the following documents: (i) a registration statement
("Registration Statement") and prospectus (the "Prospectus") on Form S-4
under the Securities Act of 1933 (the "Securities Act"); (ii) an
Information Statement (the "Information Statement") on Schedule 14C under
the Securities Exchange Act of 1934 (the "Exchange Act"); and (iii) a
report on Schedule 13E-3 under the Exchange Act (the "Schedule 13E-3").
BCLP II and Castle Creek will join BCLP in filing the Registration
Statement, Prospectus and Information Statement. Certain affiliates of BCLP
will join in filing the Schedule 13E-3.
(b) RECORD DATE. Prior to the declaration of effectiveness of the
Registration Statement by the SEC, BCLP will set a record date as of which
record holders of BCLP Units will be entitled to receive the combined
Prospectus and Information Statement, including the Schedule 13E-3
information (the "Disclosure Document") and make the BCLP Unitholder
elections referred to in subsection (d) of this Section 1.2 ("Record
Date"). Holders of BCLP Units as of the Record Date are referred to below
as "Eligible Unitholders."
(c) MAILING OF DISCLOSURE DOCUMENT. As promptly as possible following
the declaration of effectiveness by the SEC (on the "Mailing Date"), the
Disclosure Document will be mailed to Eligible Unitholders.
(d) UNITHOLDER ELECTIONS. In the same package as the mailing of the
Disclosure Document, BCLP will include an election form, by means of which
BCLP will seek from Eligible Unitholders their elections to receive a
distribution of either Castle Creek Interests or Debentures and cash, or
some combination of Castle Creek Interests or Debentures and cash, with
respect to their BCLP Units. Eligible Unitholders will be entitled to
receive one Castle Creek Interest for each 100 BCLP Units held on the
Record Date, or one Debenture and $1 in cash for each BCLP Unit held on the
Record Date. Fractional shares of Castle Creek Interests will not be issued
in the Reorganization. BCLP or its appointed agent must receive completed
election forms from Eligible Unitholders on or before the date designated
by BCLP, ("Election Deadline"). Eligible Unitholders who make no timely
election will receive distributions of Debentures and cash with respect to
all of their BCLP Units.
(e) UNITHOLDER CONSENTS. Celtics, Inc. hereby grants its approval of
all aspects of the Reorganization, and directs BCLP to seek approval from
its Eligible Unitholders of the Reorganization by written consent without a
meeting. BCLP will seek to obtain the approval of a majority of Eligible
Unitholders by written consent for the Reorganization as a whole, including
approval of the transactions undertaken pursuant to the Merger Agreement
(the "Reorganization Consent").
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(f) ELECTION TALLY. Promptly following the Election Deadline, BCLP or
its appointed agent will determine the total number of BCLP Units ("Castle
Creek Election Units") with respect to which Eligible Unitholders have made
proper elections to receive Castle Creek Interests. All BCLP Units that are
not Castle Creek Election Units will entitle the Eligible Holders thereof
(or their transferees) to distributions of Debentures and cash ("Debenture
Units"). The foregoing determination is referred to below as the "Election
Tally."
1.3 PRO RATA ADJUSTMENTS. The total assets held, directly and indirectly,
by BCLP prior to the contributions and distributions described in Section 1.1,
are referred to as the "BCLP Assets." Promptly following the Election Tally, the
assets of BCLP II and Castle Creek, including interests in Celtics Basketball
Holdings, will be adjusted in accordance with the following formula. The "Castle
Creek Percentage" will be determined by (a) dividing the number of Castle Creek
Election Units by the total number of issued and outstanding BCLP Units (the
"Fraction"), and (b) multiplying the Fraction times (i) the total amount of net
investment assets of BCLP, (ii) 100% of the limited partnership interests in
Celtics Basketball Holdings, (iii) the Total BCLP GP Amount, and (iv) the total
number of issued and outstanding BCLP Units on the Record Date. If the products
of that multiplication are different in amount from the amount of the (w) Castle
Creek Investment Assets, (x) Castle Creek Celtics Basketball Holdings Interests,
(y) Castle Creek GP Amount, and (z) 100 times the number of Castle Creek
Interests held by BCLP, respectively, on that date, then appropriate adjustments
will be made by means of transfers of assets and units, as applicable, to ensure
that the assets of Castle Creek will equal the Fraction multiplied by the BCLP
Assets.
1.4 BCLP UNITHOLDER DISTRIBUTIONS. The following distributions will take
place on the Effective Date (defined below), immediately prior to the
effectiveness of the Merger:
(a) CASTLE CREEK INTERESTS. For each 100 Castle Creek Election Units,
BCLP will distribute one Castle Creek Interest to the Eligible Unitholder
who made a proper election to receive Castle Creek Interests (or the
transferee thereof) with respect to the BCLP Units owned as of the Record
Date by the Eligible Unitholder.
(b) DEBENTURES AND CASH. For each Debenture Unit, BCLP will
distribute one Debenture and $1 in cash to the Eligible Unitholder (or the
transferee thereof) who held that Debenture Unit on the Record Date.
1.5 THE MERGER. Immediately following the distributions described in
Section 1.4, the Merger will be consummated pursuant to the Merger Agreement.
Upon consummation of the Merger, (a) Debenture Units will by operation of law be
converted into BCLP II Units, (b) Castle Creek Election Units will be canceled,
and (c) all of the outstanding shares of capital stock of Merger Sub will be
converted automatically, by operation of law, into that number of issued and
outstanding limited partnership units of BCLP that equals the number of BCLP II
Units into which Debenture Units are converted in the Merger.
1.6 CLOSING AND EFFECTIVE TIME. Subject to BCLP's obtaining the
Reorganization Consent and subject to the provisions of this Agreement, the
parties shall hold a closing (the "Closing") on (i) the business day on which
the last of the conditions set forth in Article IV is fulfilled or waived or
(ii) at such other date as the parties hereto may agree (the "Closing Date"), at
10:00 A.M. (local time) at the offices of Gibson, Dunn & Crutcher LLP,
Washington, D.C., or at such other place or time as the parties hereto may
agree. The Merger shall become effective as set forth in Article I of the Merger
Agreement (the "Effective Time"). At the Closing, the transfer agent with
respect to the BCLP Units will be authorized to make the distributions set forth
in Section 1.4 hereof, and immediately thereafter a certificate of merger shall
be filed in the Office of the Secretary of State of Delaware.
1.7 AMENDMENT TO PARTNERSHIP AGREEMENTS AND RATIFICATION. To the extent
that any terms of this Article I may be inconsistent with the provisions of the
Amended and Restated Agreement of Limited Partnership of BCLP dated as of
December 4, 1986 and as amended to the date hereof (the "BCLP Partnership
Agreement"), and of the Amended and Restated Agreement of Limited Partnership
Agreement of Celtics Limited Partnership dated January 21, 1993 (the "CLP
Partnership Agreement"), the Reorganization Consent by the limited partners as
set forth in subsection 1.2(e) shall be deemed to be (i) an amendment
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and waiver of any such provisions in order to effectuate the Reorganization and
(ii) a ratification and approval of Celtics, Inc.'s actions in connection with
the adoption and implementation of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Each of the parties represents and warrants to each of the other parties
that:
2.1 ORGANIZATION AND GOOD STANDING OF THE PARTNERSHIPS, THE GENERAL
PARTNERS, CCC AND MERGER SUB. At the Effective Date, each of the Partnerships
will be a limited partnership duly formed, validly existing and in good standing
under the laws of the State of Delaware; Celtics Pride will be a general
partnership duly formed, validly existing and in good standing under the laws of
the State of Delaware; and each of the General Partners, CCC and Merger Sub will
be corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware.
2.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement have been duly and validly authorized by all necessary action on the
part of each of the parties hereto, except for the Reorganization Consent. This
Agreement has been duly executed and delivered by each of the parties and is
enforceable against each of them, respectively, in accordance with its terms.
2.3 INFORMATION STATEMENT; OTHER INFORMATION. BCLP represents that the
Registration Statement, the Information Statement, the Schedule 13E-3 and all
other filings with the SEC in connection with the Reorganization comply in all
material respects with the Securities Act and the Exchange Act, as the case may
be, and that these materials do not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which they were made, not misleading. Each
other party hereto who manually executes a document filed with the SEC makes the
same representation with respect to the contents of such document.
2.4 CONSENTS AND APPROVALS; NO VIOLATION. Except as to certain amendments
of the BCLP Partnership Agreement and the CLP Partnership Agreement
(collectively, the "Partnership Agreement Amendments"), which may have been made
prior to the Closing Date, each of the parties severally represents that neither
the execution and delivery of this Agreement by it nor the consummation of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of its currently effective agreement of limited partnership or
certificate of incorporation, as applicable; (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority or body, except (i) pursuant to the Securities Act and
the Exchange Act or the rules and requirements of any national securities
exchange or the National Association of Securities Dealers, Inc., (ii) the
filing of a certificate of merger pursuant to the Delaware Revised Uniform
Limited Partnership Act and the General Corporation Law of the State of
Delaware, (iii) filings under state securities laws or in connection with
maintaining the good standing and qualification of any of the Partnerships, the
General Partners, CCC or Merger Sub following the Effective Time, (iv)
Hart-Scott-Rodino Premerger Notification Act filings, if any, (v) the approval
by BCLP Unitholders of the Reorganization, including the Partnership Agreement
Amendments, (vi) all required approvals by the National Basketball Association,
or (vii) where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not in the aggregate have
a material adverse effect on the parties; (c) result in a default (or give rise
to any right of termination, unilateral modification or amendment, cancellation
or acceleration) under any of the terms, conditions or provisions of any note,
license, agreement or other instrument or obligation to which any of the
Partnerships, the General Partners, CCC or Merger Sub is a party or by which the
Partnerships, the General Partners, CCC or Merger Sub or any of their respective
assets may be bound, except for such defaults (or rights of termination,
unilateral modification or amendment, cancellation or acceleration) which in the
aggregate would not have a material adverse effect on the parties; or (d)
violate any order, writ, injunction, decree, judgment, ordinance, statute, rule
or regulation applicable to the parties or any of their respective properties or
businesses, except for violations (other than of orders, writs, injunctions or
decrees) which would not in the aggregate have a material adverse effect on the
parties.
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ARTICLE III
ADDITIONAL COVENANTS AND AGREEMENTS
3.1 LEGAL CONDITIONS TO REORGANIZATION; AGREEMENT TO COOPERATE. Each of
the parties hereto will take all reasonable actions necessary to comply promptly
with all legal requirements which may be imposed on itself with respect to the
Reorganization. Each of the parties shall use reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, property or advisable to consummate the Reorganization, including (i)
the preparation and filing with applicable authorities all requisite
applications and amendments thereto, together with related information, data and
exhibits, (ii) securing all necessary waivers, consents and approvals, (iii)
effecting all necessary registrations, filings and submissions; (iv) defending
any suit, action or proceeding challenging the Reorganization or any of the
transactions contemplated thereby; (v) obtaining the satisfaction of the
conditions specified in Article IV.
3.2 FEES AND EXPENSES. Whether or not the Reorganization is consummated,
all costs and expenses incurred by the parties hereto in connection with this
Agreement and the transactions contemplated hereunder shall be paid by BCLP.
3.3 STOCK EXCHANGE LISTING. Each of BCLP and BCLP II shall use their
respective best efforts to cause the BCLP II Units and the Debentures,
respectively, to be issued in the Reorganization to be approved for listing on
the NYSE or with respect to the Debentures, subject to official notice of
issuance, prior to the Effective Date.
3.4 INDEMNIFICATION. BCLP before the Effective Date, and BCLP II and
Castle Creek jointly after the Effective Date, shall indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date of
this Agreement or who becomes prior to the Effective Date, an officer, director,
partner, stockholder, agent or fiduciary of BCLP, BCLP II, Castle Creek, their
respective general partners or their respective affiliates (collectively,
"Indemnified Parties") from and against any damages, losses, claims, costs,
expenses, liabilities or judgments, or amounts that are paid in settlement with
the approval of the indemnifying party (which approval shall not be unreasonably
withheld) of, or in connection with, any claim, action, suit, proceeding or
investigation ("Proceeding") to which any Indemnified Party may be or become
subject by virtue of the fact that such person was an officer, director, partner
or stockholder of one or more of such entities, whether pertaining to any matter
existing or occurring at or prior to the Effective Date and whether asserted or
claimed prior to, or at or after, the Effective Date, in each case to the
fullest extent permitted by law; and BCLP before the Effective Date and BCLP II
and Castle Creek jointly after the Effective Date, will pay or reimburse
expenses (including attorney's fees) in advance of the final disposition of any
such Proceeding to each Indemnified Party to the fullest extent permitted by law
upon receipt of an undertaking to repay such expenses if and when requested to
do so under applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 3.4 shall, upon learning of any Proceeding,
promptly notify BCLP or BCLP II and Castle Creek, as the case may be. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to each such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties.
3.5 TAX INDEMNITY; TAX BENEFITS. Castle Creek hereby agrees to indemnify
and reimburse BCLP for all taxes imposed by any taxing authority on BCLP and
subsidiaries that are not yet paid, and all liabilities, claims and expenses
relating to potential obligations of BCLP for payment of taxes ("Tax Amounts and
Expenses"), in each case only to the extent Tax Amounts and Expenses are
attributable to periods prior to the Effective Date; provided, however, that
Castle Creek's obligation to indemnify and reimburse Tax Amounts and Expenses
under this Section 3.5 shall be limited to a proportionate amount of such Tax
Amounts and Expenses that is equal to the Proportionate Election.
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ARTICLE IV
CONDITIONS TO THE REORGANIZATION
4.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
REORGANIZATION. The respective obligations of the parties to effect the
Reorganization shall be subject to the satisfaction, on or before the Effective
Date, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES AND PERFORMANCE. The
representations and warranties of each of the other parties herein
contained shall be true and correct on the Effective Date with the same
effect as though made at such time. Each of the other parties shall have
performed in all material respects all obligations and complied in all
material respects with all agreements, undertakings, covenants and
conditions required by this Agreement to be performed or complied with by
it at or prior to the Effective Date.
(b) PENDING LITIGATION. There shall not be any litigation or other
proceeding pending or threatened to restrain or invalidate the transactions
contemplated by this Agreement.
(c) LIMITED PARTNER APPROVAL. The Reorganization Consent shall have
been obtained.
(d) REGULATORY APPROVAL. All authorizations, consents and permits
required to perform this Agreement and the Merger Agreement (including
requisite approvals from the National Basketball Association) shall have
been obtained without any conditions deemed, in the reasonable discretion
of Celtics, Inc., to be unduly burdensome, and the required statutory
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, if applicable, shall have expired or been terminated.
(e) REGISTRATION STATEMENT. The Registration Statement filed pursuant
to Section 1.2 (a) shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceeding seeking a stop
order.
(f) NYSE LISTING. The BCLP II Units shall have been approved for
listing on the NYSE upon official notice of issuance; and the Debentures
shall have been approved on the NYSE, upon official notice of issuance.
(g) BLUE SKY COMPLIANCE. BCLP and Castle Creek shall have complied
with all requirements of state securities or "blue sky" laws with respect
to the issuance of the Castle Creek Interests in the Reorganization.
(h) TAX OPINION. The tax opinion of Roberts & Holland LLP delivered
to Celtics, Inc. and filed as an exhibit to the Registration Statement
shall not have been rescinded prior to the Effective Date. A tax ruling,
satisfactory in form and substance to BCLP, shall have been obtained from
the Internal Revenue Service.
(i) VALIDITY OPINION. The Delaware law opinion of Gibson, Dunn &
Crutcher LLP filed as an exhibit to the Registration Statement shall not
have been rescinded prior to the Effective Date.
(j) CHANGES IN APPLICABLE LAW. There shall have been no material
change in effect or pending in applicable law, including with respect to
the taxation of the Reorganization, the Partnerships or the Debentures.
(k) CONSUMMATION OF THE DISTRIBUTIONS. The distributions provided by
Section 1.4 and the Merger shall have been consummated.
(l) OTHER DOCUMENTATION. The parties hereto shall have entered into
such other agreements as are contemplated by the Reorganization, including,
without limitation, the Indenture, on terms satisfactory to the parties
hereto.
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ARTICLE V
TERMINATION AND ABANDONMENT
5.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated and the
Reorganization may be abandoned at any time prior to the Effective Time, whether
before or after approval by the Eligible Unitholders, by action of the Board of
Directors of Celtics, Inc.
5.2 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto; provided, however,
that after BCLP obtains the Reorganization Consent, no amendment may be made
which decreases the amount or changes the type of consideration to which the
unitholders of BCLP are entitled under this Agreement or otherwise materially
adversely affects the rights of the BCLP Unitholders without the further
approval of the BCLP Unitholders.
5.3 WAIVER. Any time prior to the Effective Time any party hereto may
waive compliance with any of the agreements of any other party or with any
conditions to the obligations of such other party; provided, however, that after
BCLP obtains the Reorganization Consent, no waiver may be given which materially
adversely affects the rights of the unitholders of BCLP without the further
approval of the unitholders. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party by a duly authorized officer.
ARTICLE VI
MISCELLANEOUS
6.1 NOTICES. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by telecopy or facsimile
transmission (with hard copy to follow), registered or certified mail, postage
prepaid, or Federal Express or similar overnight delivery services addressed, in
the case of all parties at:
c/o Celtics Group
33 East 63rd Street
New York, New York 10021
with required copies to:
John F. Olson, Esq.
Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
and:
Jeffrey L. Holden, Esq.
Zapruder & Odell
601 13th Street, N.W.
Washington, D.C. 20005
or such other address as shall be furnished in writing by any party to the
others prior to the giving of the applicable notice or communication.
6.2 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.3 HEADINGS. The headings herein are for convenience of reference only,
do not constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions hereof.
6.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties, with respect to the subject matter hereof.
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6.5 COOPERATION; FURTHER ASSURANCES. Subject to the terms and conditions
of this Agreement, each of the parties hereto shall use its reasonable efforts
to take, or cause to be taken, such action, to execute and deliver, or cause to
be executed and delivered, such governmental notifications and additional
documents and instruments and to do, or cause to be done, all things necessary,
proper or provisions of this Agreement and under applicable law to effective the
transactions contemplated by this Agreement.
6.6 NO RIGHTS, ETC. Nothing in this Agreement express or implied is
intended to confer upon any other person any rights or remedies under or by
reason of this Agreement.
6.7 GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware applicable to contracts made and to be performed in that State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Reorganization to be duly executed as of the date first above written.
BOSTON CELTICS LIMITED PARTNERSHIP
By: Celtics, Inc., its General Partner
By:
---------------------------------
RICHARD G. POND
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING OFFICER,
TREASURER AND SECRETARY
BOSTON CELTICS LIMITED PARTNERSHIP II
By: BCLP II GP, Inc., its General
Partner
By:
---------------------------------
RICHARD G. POND
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING OFFICER,
TREASURER AND SECRETARY
CASTLE CREEK PARTNERS LP
By: Castle Creek GP, Inc., its General
Partner
By:
---------------------------------
RICHARD G. POND
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING OFFICER,
TREASURER AND SECRETARY
CELTICS LIMITED PARTNERSHIP
By: Boston Celtics Corporation, its
General Partner
By:
---------------------------------
RICHARD G. POND
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING OFFICER,
TREASURER AND SECRETARY
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CELTICS CAPITAL CORPORATION
By: Celtics, Inc., its General Partner
By:
---------------------------------
RICHARD G. POND
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING OFFICER,
TREASURER AND SECRETARY
CELTICS, INC.
By:
---------------------------------
RICHARD G. POND
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING OFFICER,
TREASURER AND SECRETARY
BCLP II GP, INC.
By: Celtics, Inc., its General
Partner
By:
-------------------------------
RICHARD G. POND
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING OFFICER,
TREASURER AND SECRETARY
CASTLE CREEK GP, INC.
By:
---------------------------------
RICHARD G. POND
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING OFFICER,
TREASURER AND SECRETARY
BOSTON CELTICS CORPORATION
By:
---------------------------------
RICHARD G. POND
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING OFFICER,
TREASURER AND SECRETARY
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EXHIBIT A
PLAN AND AGREEMENT OF MERGER
OF
BCLP MERGER, INC.
(A DELAWARE CORPORATION)
AND
BOSTON CELTICS LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
THIS PLAN AND AGREEMENT OF MERGER (the "Agreement") entered into as of
, 1998 by BCLP Merger, Inc., a Delaware corporation ("MergerCo"),
and entered into as of , 1998 by Boston Celtics Limited Partnership,
a Delaware limited partnership ("BCLP").
WHEREAS, MergerCo is a Delaware corporation, with its registered office
therein located at 9 East Loockerman Street, Dover, Delaware 19901; and
WHEREAS, MergerCo has an authorized capitalization consisting of 1,000
shares of Common Stock, par value of $.01 per share, all of which are issued and
outstanding and owned beneficially and of record by Boston Celtics Limited
Partnership II, a Delaware limited partnership ("BCLP II"); and
WHEREAS, BCLP is a Delaware limited partnership, with its registered office
therein located at 1029 Orange Street, City of Wilmington, County of New Castle;
and
WHEREAS, Section 263 of the Delaware General Corporation Law (the "DGCL")
permits a merger or consolidation of a Delaware corporation with a Delaware
limited partnership; and
WHEREAS, Section 17-211 of the Delaware Revised Uniform Limited Partnership
Act (the "Delaware Act") permits the merger or consolidation of a Delaware
limited partnership with a Delaware corporation; and
WHEREAS, the boards of directors of MergerCo and Celtics, Inc., BCLP's
general partner, deem it advisable for MergerCo to merge with and into BCLP (the
"Merger") in accordance with the DGCL, the Delaware Act and this Agreement and
have, by resolutions duly adopted, approved this Agreement and directed that it
be executed by the appropriate officers and submitted to a vote of the
stockholder of MergerCo and the general partner, limited partners and
unitholders of BCLP; and
WHEREAS, BCLP II, as sole stockholder of MergerCo, has approved the
Agreement;
NOW, THEREFORE, in consideration of the premises, representations and
warranties herein contained, and of the mutual agreement of the parties hereto,
the parties to this Agreement agree that MergerCo will merge with and into BCLP
and that BCLP will be the surviving entity. The terms and conditions of the
Merger, the mode of carrying the Merger into effect, and the manner of
converting the shares of MergerCo and the partnership interests of BCLP will be
as follows:
ARTICLE I
THE MERGER
At the Effective Time (as herein defined), in accordance with the
provisions of this Agreement, the DGCL and the Delaware Act, MergerCo will be
merged with and into BCLP, whereupon the separate corporate existence of
MergerCo will cease and BCLP will continue as the surviving entity (the
"Surviving Entity").
Subject to and in accordance with the provisions of this Agreement,
MergerCo and BCLP will consummate the Merger by filing a certificate of merger
with the Secretary of State of the State of Delaware and making all other
filings or recordings required by the DGCL and the Delaware Act in connection
with the
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Merger. The Merger will become effective at such time as the certificate of
merger is duly filed with the Secretary of State of the State of Delaware (the
"Effective Time"). The Merger will have the effects set forth in the DGCL and
the Delaware Act. Without limiting the generality of the foregoing, and subject
thereto and to any other applicable laws, at the Effective Time all the
properties, rights, privileges, powers and franchises of each of MergerCo and
BCLP will vest in the Surviving Entity, and all debts, liabilities,
restrictions, disabilities and duties of each of MergerCo and BCLP will become
the debts, liabilities, restrictions, disabilities and duties of the Surviving
Entity.
ARTICLE II
TERMS OF CONVERSION OF UNITS
At the Effective Time:
(a) Each unit of BCLP issued and outstanding immediately prior to the
Effective Time, with respect to which BCLP shall have issued as a distribution
$20 in principal amount of 6% Subordinated Debentures due 2038 of BCLP and $1 in
cash (an "Eligible Unit"), will thereupon, and without any action on the part of
the holder thereof, be converted into one validly issued unit of beneficial
interest in a limited partnership interest of BCLP II (a "BCLP II Unit").
(b) Each unit of BCLP held in treasury, and each unit of BCLP other than an
Eligible Unit, immediately prior to the Effective Time shall thereupon be
cancelled and retired and all rights in respect thereof shall cease.
(c) All of the Shares of MergerCo Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into that number of
validly issued units of beneficial interest in a limited partnership interest in
the Surviving Entity that equals the number of BCLP II Units into which all of
the Eligible Units are converted pursuant to Section (a) of this Article II.
ARTICLE III
Agreement of Limited Partnership
From and after the Effective Time, BCLP will be governed by the Amended and
Restated Agreement of Limited Partnership of BCLP then in effect.
ARTICLE IV
Certificates
Following the Effective Time, each holder of an outstanding certificate or
certificates theretofore representing units of BCLP may, but will not be
required to, surrender those certificates to BCLP II for cancellation, exchange
or transfer, and each such holder or transferee thereof will be entitled to
receive a certificate or certificates representing the same number of BCLP II
Units as the number of units of BCLP previously represented by the certificate
or certificates so surrendered. Until so surrendered or presented for
cancellation, exchange or transfer, each outstanding certificate that, before
the Effective Time, represented units of BCLP will be deemed and treated for all
corporate and partnership purposes to represent the ownership of the same number
of BCLP II Units as though surrender for cancellation, exchange or transfer
thereof had taken place. If any certificate representing BCLP II Units is to be
issued in a name other than that of the registered holder of the certificate
formerly representing units of BCLP presented for transfer, it will be a
condition of issuance that:
(a) the certificate so surrendered is properly endorsed or accompanied by a
document of transfer and is otherwise in proper form for transfer, and
(b) the person requesting issuance pays to BCLP II's transfer agent any
transfer or other taxes required by reason of issuance of certificates
representing BCLP II Units in a name other than that of the registered holder of
the certificate presented, or establishes to the satisfaction of BCLP II or its
registered agent that
B-12
<PAGE> 165
such taxes have been paid or are not applicable. The transfer books for units of
BCLP will be deemed to be closed at the Effective Time, and no transfer of units
of BCLP outstanding immediately before the Effective Time will thereafter be
made on the transfer books. After the Effective Time, the holders of
certificates representing units of BCLP outstanding immediately before the
Effective Time will cease to have any rights with respect to units of beneficial
interest in limited partnership interests in the Surviving Entity and their sole
rights will be with respect to the BCLP II Units into which their units of BCLP
are converted in the Merger.
ARTICLE V
Conditions of The Merger
Consummation of the Merger is subject to the satisfaction or waiver, where
permissible, prior to the Effective Time, of each of the following conditions:
(a) A majority in interest of the limited partners and unitholders of BCLP,
and a majority of the stockholders of MergerCo, have each approved the Merger.
(b) No statute, rule, regulation, executive order, decree, injunction or
other order has been enacted, entered, promulgated or enforced by any court or
governmental authority that is in effect and has the effect of prohibiting the
consummation of the Merger.
(c) All approvals and consents necessary or desirable, if any, in
connection with consummation of the Merger have been obtained.
(d) The BCLP II Units to be issued and to be reserved for issuance as a
result of the Merger shall have been approved for listing, upon official notice
of issuance, by the New York Stock Exchange.
(e) A Registration Statement on Form S-4 relating to the BCLP II Units to
be issued or reserved for issuance as a result of the Merger, has been declared
effective under the Securities Act of 1933, as amended, and is not be the
subject of any "stop order."
(f) A tax ruling, in form and substance acceptable to BCLP, has been
received from the Internal Revenue Service.
ARTICLE VI
Amendment and Waiver
The parties hereto, by mutual consent, may amend, modify or supplement this
Agreement, or waive any condition set forth herein, in such manner as may be
agreed upon by them in writing, at any time before or after approval of this
Agreement by the limited partners and unitholders of BCLP, to the extent
permitted by the DGCL and the Delaware Act.
ARTICLE VII
Miscellaneous
(a) This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. Neither this Agreement nor any right,
interest or obligation under this Agreement may be assigned, in whole or in
part, by operation of law or otherwise, without the prior written consent of the
other parties.
(b) This Agreement will be governed by and construed in accordance with the
substantive laws of the State of Delaware regardless of the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
(c) Nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
B-13
<PAGE> 166
(d) This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original, but all of which will constitute one and
the same agreement, and will become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
(e) At any time before the Effective Time, this Agreement may be terminated
and the Merger may be abandoned or the time of consummation of the Merger may be
deferred for a reasonable time by the board of directors of either MergerCo or
Celtics, Inc.
(f) From time to time, as and when required or requested by either MergerCo
or BCLP, as applicable, or its respective successors and assigns, such deeds,
assignments and other instruments, and there will be taken or caused to be taken
by it all such further and other action, as may be appropriate or necessary to
vest, perfect or confirm in the Surviving Entity the title to and possession of
all property, interests, assets, rights, powers, franchises and authority of
MergerCo and otherwise to carry out the purposes of this Agreement, and the
officers and directors of MergerCo, BCLP and Celtics, Inc. are fully authorized
to take any and all such action and to execute and deliver any and all such
deeds, assignments and other instruments.
IN WITNESS WHEREOF, this Plan and Agreement of Merger is hereby executed
upon behalf of each of the consistent corporations parties thereto.
Dated: [Month] , 1998
BCLP MERGER, INC.
By:
------------------------------------
RICHARD G. POND
Its:
--------------------------------------
BOSTON CELTICS LIMITED PARTNERSHIP II
By: CELTICS, INC.
GENERAL PARTNER
Its:
By:
---------------------------------
RICHARD G. POND
EXECUTIVE VICE PRESIDENT, CHIEF
Its:
OPERATING OFFICER, TREASURER
AND SECRETARY
B-14
<PAGE> 167
EXHIBIT B
REORGANIZATION TRANSACTIONS
The Reorganization is to be accomplished through the following steps in the
following order:
(a) CLP's contribution of the Team to Celtics Basketball;
(b) BCLP's contribution of approximately $39,600,000 in investment assets
to Castle Creek, and approximately $400,000 in investment assets to Castle Creek
GP, followed by Castle Creek GP's contribution of the $400,000 in investment
assets to Castle Creek in return for a 1% general partner interest in Castle
Creek;
(d) the contribution by CLP of all of its limited partnership interests in
Celtics Basketball and the Hood Asset to Celtics Basketball Holdings;
(c) the purchase by CLP of a certain investment asset (the "Hood Asset")
from CCC for approximately $6,500,000;
(e) the distribution by CLP of (i) 99% of 50.116473% of its limited
partnership interest in Celtics Basketball Holdings to BCLP (the "CLP-BCLP
Distribution"), and (ii) 1% of 50.116473% of its limited partnership interests
in Celtics Basketball Holdings to CLP GP (the "CLP-CLP GP Distribution");
(f) the contribution by BCLP of (i) 99% of the CLP-BCLP Distribution to
Castle Creek, and (ii) 1% of the CLP-BCLP Distribution to Castle Creek GP,
followed by the contribution by Castle Creek GP of its 1% of the CLP-BCLP
Distribution to Castle Creek;
(g) the contribution by CLP GP of the CLP-CLP GP Distribution to Castle
Creek in exchange for Castle Creek Interests;
(h) the contribution by CLP of the remainder of its limited partnership
interests in Celtics Basketball Holdings to Celtics Pride;
(i) the distribution by BCLP of all of the issued and outstanding stock of
Castle Creek GP to BCLP GP;
(j) the contribution by BCLP GP of its 1% general partner interest in BCLP
to BCLP GP;
(k) the contribution by BCLP II GP of approximately $200,000 in cash to
BCLP II, subject to later adjustment based on market trading prices;
(l) the election by BCLP Unitholders to receive Castle Creek Interests at a
ratio of one Castle Creek Interest for each one hundred BCLP Units with respect
to which such election is made;
(m) the distribution by BCLP to BCLP Unitholders who so elect of Castle
Creek Interests;
(n) the distribution by BCLP to BCLP Unitholders, who either so elect or
who make no election, of 6% Subordinated Debentures due 2038 of BCLP (the
"Debentures"), as more fully described in that certain Indenture entered into
between BCLP and , as trustee, dated , 1998, and $1 in cash;
and
(o) the merger of Merger Sub with and into BCLP, with BCLP being the
surviving entity, pursuant to the Merger Agreement.
B-15
<PAGE> 168
======================================================
NO DEALER, SALESMAN OR ANY 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 BCLP, BCLP II OR CASTLE CREEK.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BCLP,
BCLP II OR CASTLE CREEK OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE AS OF WHICH SUCH INFORMATION IS GIVEN. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION, OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary...................................... 1
Risk Factors and Other Important
Considerations............................. 26
Voting Information........................... 34
Special Factors.............................. 35
Comparison of Interests and Securities to be
Issued..................................... 46
Certain Federal Income Tax Consequences...... 50
Market Prices and Distributions.............. 61
Capitalization............................... 63
Selected Historical Consolidated Financial
Data....................................... 64
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 65
Business..................................... 70
Management................................... 76
Description of BCLP II Units................. 83
Description of Castle Creek Interests........ 90
Description of Subordinated Debentures....... 97
Legal Matters................................ 105
Experts...................................... 105
Index to Financial Statements................ F-1
Exhibit A: Glossary of Defined Terms......... A-1
Exhibit B: Agreement and Plan of
Reorganization............................. B-1
</TABLE>
======================================================
======================================================
BOSTON CELTICS
LIMITED
PARTNERSHIP
BOSTON CELTICS
LIMITED
PARTNERSHIP II
CASTLE CREEK
PARTNERS, L.P.
------------------------
PROSPECTUS
------------------------
MAY , 1998
======================================================
