<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL , 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
BOSTON CELTICS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7941 04-2936516
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
151 MERRIMAC STREET, BOSTON, MA 02114 -- (617) 523-6050
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
PAUL E. GASTON
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
151 MERRIMAC STREET, BOSTON, MA 02114 -- (617) 523-6050
------------------------
BOSTON CELTICS LIMITED PARTNERSHIP II
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7941 04-3416346
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
151 MERRIMAC STREET, BOSTON, MA 02114 -- (617) 523-6050
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
PAUL E. GASTON
CHIEF EXECUTIVE OFFICER
151 MERRIMAC STREET, BOSTON, MA 02114 -- (617) 523-6050
------------------------
CASTLE CREEK PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7941 04-3416343
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
151 MERRIMAC STREET, BOSTON, MA 02114 -- (617) 523-6050
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
PAUL E. GASTON
CHIEF EXECUTIVE OFFICER
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 AVENUE, N.W. 601 13TH STREET, N.W.
WASHINGTON, D.C. 20036 WASHINGTON, D.C. 20005
(202) 955-8500 (202) 508-9600
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVENESS OF THIS REGISTRATION
STATEMENT AND THE CONSUMMATION OF THE REORGANIZATION DESCRIBED HEREIN.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
======================================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(2) REGISTERED FEE(2)
- ----------------------------------------------------------------------------------------------------------------------
Boston Celtics Limited Partnership II Limited Partnerships
Units...................................................... $58,894,204 $17,373.79
- ----------------------------------------------------------------------------------------------------------------------
Boston Celtics Limited Partnership 6% Subordinated
Debentures due 2038....................................... $58,894,204 $17,373.79
- ----------------------------------------------------------------------------------------------------------------------
Castle Creek Partners, L.P. Limited Partnership Interests... $589,750 $173.98
======================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
Assumes that 49.965727% of BCLP Unit holders receive BCLP 6% Subordinated
Debentures due 2038 and 50.034273% of BCLP Unit holders receive Castle Creek
Partners, L.P. Interests in the Reorganization. See "Summary -- Overview of
the Reorganization."
(2) Pursuant to Rule 457(f), the proposed offering price and registration fee
are 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.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
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 APRIL 17, 1998
INFORMATION STATEMENT/PROSPECTUS
BOSTON CELTICS LIMITED PARTNERSHIP II
2,796,164
LIMITED PARTNERSHIP UNITS
BOSTON CELTICS LIMITED PARTNERSHIP
$55,923,280
6% SUBORDINATED DEBENTURES DUE 2038
CASTLE CREEK PARTNERS, L.P.
28,000
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") 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 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. 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 "Shamrock Limited Partnership."
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 47.6% of
the outstanding BCLP Units presently are held by Don F. Gaston, Paula B. Gaston,
Paul E. Gaston and their affiliates (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 compared to those electing to receive a distribution of
Castle Creek Interests (the
<PAGE> 3
"Proportionate Election"). After the Reorganization, the Team will be owned by
Hoops Limited Partnership ("Hoops"), 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. Application will be made to
list the BCLP II Units on the NYSE, under the symbol "BOS," and to list the
Subordinated Debentures on the NYSE, under the symbol " ," 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 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 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. 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").
It is anticipated that consents from holders of a majority of outstanding BCLP
Units will have been delivered before this Prospectus is mailed and, therefore,
that the Reorganization will be approved even if all BCLP Unit holders other
than Gaston Affiliates and the holder of the Additional Units (as defined
herein) are not in favor of it. Accordingly, proxies are not required and are
not being sought from BCLP Unit holders.
ii
<PAGE> 4
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 , 1998, the closing sale price for the BCLP Units on
the NYSE was .
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. DO NOT SEND BCLP
CERTIFICATES AT THIS TIME.
------------------------
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 APRIL , 1998.
iii
<PAGE> 5
AVAILABLE INFORMATION
BCLP is and, after the Reorganization, BCLP II 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, 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> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
Overview of the Reorganization......................... 1
Pre-Reorganization Ownership by Current BCLP Unit
Holders............................................... 3
Post-Reorganization Ownership by Current BCLP Unit
Holders............................................... 3
The Partnerships....................................... 4
Existing Economic Interests of BCLP Unit Holders....... 5
Risk Factors........................................... 6
Reasons to Reorganize.................................. 7
Alternatives to the Reorganization..................... 8
Allocation of Interests in the Reorganization.......... 9
Restructuring Transactions............................. 9
Summary of the Terms of the Reorganization............. 11
Subordinated Debentures................................ 15
Background of the Reorganization....................... 17
Recommendation of General Partner and Fairness
Determination......................................... 18
Comparative Rights of the Interests and the Securities
to be Issued.......................................... 18
Certain Federal Income Tax Consequences................ 18
Accounting Treatment................................... 18
Conditions to the Reorganization....................... 18
No Appraisal Rights.................................... 19
Consequences if Reorganization is Not Consummated...... 19
List of Partners....................................... 19
Summary Historical Consolidated Financial Information
of BCLP and Summary Unaudited Pro Forma Consolidated
Financial Information of BCLP II and Castle Creek..... 20
Ratio of Earnings to Fixed Charges..................... 24
RISK FACTORS AND OTHER IMPORTANT CONSIDERATIONS............. 25
Risks Relating to the Reorganization................... 25
Risks Relating to BCLP II After the Reorganization..... 27
Risks Relating to the Subordinated Debentures.......... 29
Risks Relating to Castle Creek After the
Reorganization........................................ 31
VOTING INFORMATION.......................................... 33
Vote Required; Written Consent in Lieu of Meeting...... 33
No Appraisal Rights.................................... 33
SPECIAL FACTORS............................................. 34
Background of the Reorganization....................... 34
Existing Partnership Structure......................... 34
Existing Economic Interests of the Partners............ 35
Reasons to Reorganize.................................. 35
Alternatives to the Reorganization..................... 35
Terms of the Reorganization............................ 37
Financing the Reorganization........................... 39
Allocation of Interests in the Reorganization.......... 39
Accounting Treatment................................... 40
Determinations of the Board of Directors of Celtics,
Inc................................................... 40
Consequences if Reorganization is Not Consummated...... 44
COMPARISON OF INTERESTS AND SECURITIES TO BE ISSUED......... 44
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 48
Partnership Status and Taxation of Entities............ 48
Formation of Entities.................................. 50
Distribution of Subordinated Debentures and Interests
in Castle Creek....................................... 50
Tax Consequences of Ownership of Interests in Castle
Creek................................................. 52
General Tax Treatment of the Merger.................... 53
Certain Tax Consequences of the Merger to Holders of
Units................................................. 54
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Tax Consequences of Ownership of Subordinated
Debentures............................................ 55
Persons Other Than United States Persons............... 56
Information Reporting to Holders....................... 56
Withholding............................................ 56
Other Tax Issues Affecting Holders of BCLP Units....... 56
Tax Consequences to BCLP II and BCLP................... 57
Unrelated Business Taxable Income...................... 57
Other Tax Aspects...................................... 58
MARKET PRICES AND DISTRIBUTIONS............................. 59
CAPITALIZATION.............................................. 60
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............. 61
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.................................. 62
General................................................ 62
Results of Operations.................................. 62
Liquidity and Capital Resources........................ 65
BUSINESS.................................................... 66
Basketball Operations.................................. 66
Sources of Revenue..................................... 66
Ticket Sales........................................... 66
Television, Cable and Radio Broadcasting............... 67
Other Sources.......................................... 67
Basketball Team........................................ 67
Basketball Facilities.................................. 70
Competition............................................ 70
Insurance.............................................. 70
Employees.............................................. 71
Legal Proceedings...................................... 71
MANAGEMENT.................................................. 72
Directors and Executive Officers....................... 72
Directors and Executive Officers after the
Reorganization........................................ 73
Executive Compensation................................. 74
Employment and Consulting Agreements................... 75
CLP/The Team........................................... 76
Compensation Committee Interlocks and Insider
Participation......................................... 76
Security Ownership of Certain Beneficial Owners and
Management............................................ 77
Certain Relationships and Related Transactions......... 77
Section 16(a) Beneficial Ownership Reporting
Compliance............................................ 78
DESCRIPTION OF BCLP II UNITS................................ 79
DESCRIPTION OF CASTLE CREEK INTERESTS....................... 86
DESCRIPTION OF SUBORDINATED DEBENTURES...................... 93
LEGAL MATTERS............................................... 101
EXPERTS..................................................... 101
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> 8
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> 9
CURRENT STRUCTURE*
[CURRENT STRUCTURE FLOW CHART]
* Includes only those affiliates of BCLP involved in the Reorganization and
related transactions.
viii
<PAGE> 10
POST-REORGANIZATION STRUCTURE
[POST-REORGANIZATION STRUCTURE CHART]
* Generally referred to in this Information Statement/Prospectus as "BCLP II."
+ Generally referred to in this Information Statement/Prospectus as "BCLP."
+ Generally referred to in this Information Statement/Prospectus as "BCLP II
GP."
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 are distributed in the Distribution.
ix
<PAGE> 11
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 50.03427% 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 50.03427% 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" within the meaning of the federal Private
Securities Litigation Reform Act of 1995, 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 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 (x) holders of BCLP Units
that received Subordinated Debentures in the Distribution will receive
one BCLP II Unit for each BCLP Unit held of record upon which
1
<PAGE> 12
Subordinated Debentures were distributed and (y) holders of BCLP Units
who received 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, (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 47.6% of all outstanding
BCLP Units, and anticipate acquiring a minimum of approximately 5,300 Units in
market purchases or otherwise. 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, a Gaston Affiliate has entered into an
agreement (the "Option Exercise Agreement") with a former executive officer of
BCLP, pursuant to which the former executive 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. The consent to be executed pursuant to
the Option Exercise Agreement, when combined with the consents to be delivered
by Gaston Affiliates, will achieve the Requisite Approval. It is anticipated
that consents from holders of a majority of outstanding BCLP Units will have
been delivered before this Prospectus is mailed and, therefore, that the
Reorganization will be approved even if all BCLP Unit holders other than Gaston
Affiliates and the holder of the Additional Units are not in favor of it.
Accordingly, proxies are not required and are not being sought from BCLP Unit
holders. In connection with the Option Exercise Agreement, the former executive
has granted BCLP a call option to purchase the BCLP Units obtained upon exercise
of the Unit Option. See "Voting Information -- Vote Required,"
"Management -- Certain Relationships and Related Transactions."
BCLP has been further advised that Gaston Affiliates intend, and such
former executive officer 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.
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 partnership
treatment for tax purposes.
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PRE-REORGANIZATION OWNERSHIP BY CURRENT BCLP UNIT HOLDERS
- Current BCLP Unit holders own 99% of the limited partnership interests of
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 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 "Shamrock 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 Parquet General
Partnership, a Delaware general partnership that was formed in connection
with the Reorganization ("Parquet");
- Parquet will own a percentage of the limited partnership interests in
Hoops Holdings Limited Partnership, a Delaware limited partnership that
was formed in connection with the Reorganization ("Hoops Holdings"),
equal to the proportion of BCLP Units with respect to which Subordinated
Debentures are distributed in the Distribution;
- Hoops Holdings will own a 99.999% limited partnership interest in Hoops
Limited Partnership, a Delaware limited partnership that was formed in
connection with the Reorganization ("Hoops"); and
- Hoops 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 Hoops Holdings equal to the proportion of BCLP Units with respect to
which Castle Creek Interests are distributed in the Distribution;
- Hoops Holdings will own a 99.999% limited partnership interest in Hoops;
and
- Hoops 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.
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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 47.6% 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
Shamrock GP, 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, and BCLP will change its name to "Shamrock Limited
Partnership."
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 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 Hoops to Hoops GP.
CLP'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, which is
wholly owned and controlled by Gaston Affiliates. 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 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
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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.
PARQUET
Parquet is a Delaware general partnership that is to be formed in
connection with the Reorganization. CLP will hold after the Reorganization, a
99.999% general partnership interest in Parquet. CCC will hold after the
Reorganization, a 0.001% general partnership interest in Parquet. Parquet does
not presently contemplate paying management fees to either of its general
partners. Parquet's principal executive offices will be located at 151 Merrimac
Street, Boston, Massachusetts 02114 and its telephone number is (617) 523-6050.
HOOPS HOLDINGS
Hoops Holdings is a Delaware limited partnership that is to be formed in
connection with the Reorganization. The 0.001% general partnership interest of
Hoops Holdings will be held by Hoops Holdings GP, which will be wholly owned and
controlled by Gaston Affiliates. Although Hoops Holdings' payment of management
fees to Hoops Holdings GP is not presently contemplated, Hoops Holdings'
partnership agreement will provide that management fees may be paid by Hoops
Holdings to Hoops Holdings GP. Hoops Holdings' and Hoops Holdings GP's principal
executive offices will be located at 151 Merrimac Street, Boston, Massachusetts
02114 and its telephone number is (617) 523-6050.
HOOPS
Hoops is a Delaware limited partnership that is to be formed in connection
with the Reorganization. Hoops Holdings will be the sole limited partner of
Hoops. The 0.001% general partnership interest of Hoops is held by Hoops GP,
which is wholly owned and controlled by Gaston Affiliates. Hoops' partnership
agreement will provide that management fees may be paid by Hoops to Hoops GP.
After the Reorganization it is contemplated that Hoops will pay management fees
to Hoops GP in an amount equal to the management fees currently to BCC by CLP.
Management fees paid to Hoops GP may be increased at any time. Hoops' and Hoops
GP's principal executive offices will be 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 47.6% of the
outstanding BCLP Units and have advised BCLP management that they intend
to acquire a minimum of approximately 5,300 Units and to execute consents
with respect to all of their Units in favor of the Reorganization. In
addition, a Gaston Affiliate has entered into the Option Exercise
Agreement with a former executive officer of BCLP. The consent to be
executed pursuant to the Option Exercise Agreement, when combined with
the consents to be delivered by Gaston Affiliates, will achieve the
Requisite Approval. It therefore is anticipated that consents from
holders of a majority of outstanding BCLP Units will have been delivered
before this Prospectus is mailed and that the Reorganization will be
approved even if all BCLP Unit holders other than Gaston Affiliates and
the holder of the Additional Units are not in favor of it. 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., Shamrock GP, BCLP GP, BCC, Hoops Holdings GP, Hoops GP 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,
Parquet, Hoops Holdings and Hoops (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, Parquet, Hoops Holdings and Hoops. Applicable
provisions of the respective partnership agreements of Castle Creek, BCLP
II, BCLP, CLP, Parquet, Hoops Holdings and Hoops 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.
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- 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 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 and the six months ended December 31, 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, 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 under the Exchange Act and thus
become a reporting entity. As a non-reporting entity, Castle Creek will
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
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<PAGE> 18
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 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 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."
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The Board of Directors of Celtics, Inc. believes that the Reorganization is
fair to 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
conclusions of the Board of Directors of Celtics, Inc. are based on an analysis
of the advantages and disadvantages of the Reorganization, 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.
"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 are distributed
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:
- BCLP will contribute approximately $6.4 million in cash to CLP.
- CLP will contribute the Team to Hoops in exchange for a 99.999% limited
partnership interest in Hoops.
- BCLP will contribute approximately $40.9 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 transfer its 99.999% limited partnership interest in Hoops and
approximately $6.4 million in cash to Hoops Holdings in exchange for a
99.999% limited partnership interest in Hoops Holdings.
- Hoops Holdings will buy a certain investment asset from CCC for
approximately $6.4 million in cash.
- CLP will distribute 99% of the Assumed Castle Creek Election Percentage
of its limited partnership interest in Hoops Holdings to BCLP, and 1% of
the Assumed Castle Creek Election Percentage of its limited partnership
interest in Hoops 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 Hoops Holdings received by it
to Castle Creek and transfer 1% of these interests in Hoops Holdings to
Castle Creek GP. Castle Creek GP will in turn transfer these interests in
Hoops Holdings to Castle
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Creek. BCC will transfer the limited partnership interests in Hoops
Holdings received by it to Castle Creek. The actual percentage of Hoops
Holdings limited partnership interests distributed by CLP will depend
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
Hoops Holdings to Parquet.
- 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 Shamrock GP.
- BCLP II GP will contribute $0.2 million in cash to BCLP II, subject to
later payment of an additional contribution 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 Parquet; (ii) Parquet will own a 49.96523%
limited partnership interest in Hoops Holdings (based on the Assumed Castle
Creek Election Percentage); (iii) Hoops Holdings will own a 99.999% limited
partnership interest in Hoops, which will in turn own the Team; and (iv) Castle
Creek will own a 50.03377% limited partnership interest in Hoops Holdings and
approximately $41.3 million in investment assets (based on the Assumed Castle
Creek Election Percentage). The respective ownership interests of Parquet and
Castle Creek in Hoops 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.
10
<PAGE> 21
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 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
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, 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 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................ Application will be made to list the BCLP II
Units on the NYSE, under the symbol "BOS," and
to list the Subordinated Debentures on the
NYSE, under the symbol " ," 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.
11
<PAGE> 22
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, a Gaston
Affiliate has entered into the Option Exercise
Agreement with a former executive officer of
BCLP, pursuant to which the former executive
has agreed to (i) exercise certain options to
purchase BCLP Units and (ii) execute a consent
with respect to the BCLP Units obtained upon
such exercise in favor of the Reorganization.
The consent to be executed pursuant to the
Option Exercise Agreement, when combined with
the consents to be delivered by Gaston
Affiliates, will achieve the Requisite
Approval. It is therefore anticipated that
consents from holders of a majority of
outstanding BCLP Units will have been delivered
before this Prospectus is mailed, and that the
Reorganization will be approved even if all
BCLP Unit holders other than Gaston Affiliates
and the holder of the Additional Units are not
in favor of it. 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) 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 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
12
<PAGE> 23
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."
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 passthrough 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, it could
consummate a reverse split of Castle Creek
Interests 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.
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
13
<PAGE> 24
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 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 Hoops will pay a management fee to Hoops
GP in an amount equal to, and in lieu of, the
management fees currently collected by BCC from
CLP. Management fees paid to Hoops GP may be
increased at any time.
14
<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 held by a BCLP
Unit holder who elects to receive Subordinated
Debentures 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. The Company, at its
option, may redeem in the aggregate up to
% of the original principal amount of
the Subordinated Debentures at any time and
from time to time at a redemption price equal
to % 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 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 in the form of one or more Global
Subordinated Debentures (the "Global
Debenture"). The 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....................... Application will be made to list the
Subordinated Debentures on the NYSE, under the
symbol " ," 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
Debenture when due at its Stated Maturity, upon
optional redemption, upon required repurchase,
15
<PAGE> 26
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.
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 the 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."
16
<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 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, management of Celtics, Inc. 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.
17
<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 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 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;
(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."
18
<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 if the Reorganization is approved and 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
rescinded 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.
19
<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 six months ended December 31, 1997 and 1996 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.
20
<PAGE> 31
BCLP SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
----------------------- --------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED STATEMENT OF
INCOME DATA:
Revenues............................... $ 25,274 $ 20,630 $ 62,998 $ 64,780 $ 52,325 $ 44,583 $ 47,559
Costs and expenses..................... 22,230 19,511 62,275 48,830 51,810 38,178 36,278
Interest income (expense), net......... 347 622 736 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.......................... (1) 395 361 (101) 110 (3,595) 79
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing operations
before income taxes.................. 3,390 2,136 1,820 17,637 5,172 6,737 10,378
Provision for (benefit from) income
taxes................................ 900 800 1,400 1,850 (345) (600)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing operations...... 2,490 1,336 420 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............................. $ 2,490 $ 1,336 $ 420 $ 54,201 $ 16,156 $ 23,766 $ 5,228
========== ========== ========== ========== ========== ========== ==========
Income from continuing operations
applicable to limited partners....... $ 2,421 $ 1,294 $ 358 $ 15,437 $ 5,396 $ 7,124 $ 10,214
Net income applicable to limited
partners............................. $ 2,421 $ 1,294 $ 358 $ 52,910 $ 15,545 $ 23,126 $ 5,157
Per limited partnership unit:
Income from continuing
operations -- basic.................. $ 0.50 $ 0.23 $ 0.07 $ 2.68 $ 0.84 $ 1.11 $ 1.59
Income from continuing
operations -- assuming dilution...... $ 0.44 $ 0.22 $ 0.06 $ 2.59 $ 0.84 $ 1.11 $ 1.59
Net income -- basic.................... $ 0.50 $ 0.23 $ 0.07 $ 9.18 $ 2.43 $ 3.61 $ 0.80
Net income -- assuming dilution........ $ 0.44 $ 0.22 $ 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............................... $ (2.00) $ (2.15) $ (1.46) $ 2.81 $ (2.46) $ (2.00) $ (4.39)
Weighted average units
outstanding -- basic................. 4,861,278 5,505,626 5,186,100 5,764,966 6,399,722 6,399,722 6,419,493
Weighted average units
outstanding -- assuming dilution..... 5,527,130 5,980,163 5,672,552 5,950,679 6,399,722 6,399,722 6,419,493
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------- --------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED BALANCE SHEET
DATA:
Current assets......................... $ 113,673 $ 109,335 $ 103,801 $ 135,903 $ 186,101 $ 79,492 $ 50,976
Current liabilities.................... 53,331 39,964 39,139 40,289 126,010 23,289 18,809
Total assets........................... 128,939 117,813 119,200 145,233 210,655 102,933 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.... 9,814 11,650 10,380 11,750 14,850 18,248 9,670
Other noncurrent liabilities........... 6,373 7,049 9,870 6,575 19,515 11,325 3,434
Partners' capital (deficit)............ (10,679) (10,950) (7,790) 16,520 (15,720) (12,829) (28,126)
</TABLE>
21
<PAGE> 32
BCLP II
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, JUNE 30,
1997 1997
------------ ----------
<S> <C> <C>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA:
Equity in income of Shamrock L.P............................ $ 2,256 $ 2,932
Costs and expenses.......................................... 2,610 6,606
Interest income (expense), net.............................. (1,443) (2,527)
Net realized gains (losses) on investments.................. (1) 361
---------- ----------
Income (loss) before income taxes........................... (1,798) (5,840)
Provision for income taxes.................................. 900 1,400
---------- ----------
Net income (loss)........................................... $ (2,698) $ (7,240)
========== ==========
Net income (loss) applicable to limited partners............ $ (2,671) $ (7,168)
Per limited partnership unit:
Net income (loss) -- basic.................................. $ (0.96) $ (2.56)
Net income (loss) -- assuming dilution...................... $ (0.96) $ (2.56)
Weighted average units outstanding -- basic................. 2,796,164 2,796,164
Weighted average units outstanding -- assuming dilution..... 2,796,164 2,796,164
DECEMBER 31,
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DATA: 1997
----------
Current assets.............................................. $ 94,255
Current liabilities......................................... 24,478
Total assets................................................ 95,150
Notes payable to bank -- noncurrent......................... 30,000
Subordinated debentures..................................... 41,942
Other noncurrent liabilities................................ 13,316
Partners' capital (deficit)................................. (49,937)
Book value (deficit) per unit at end of period.............. $ (17.86)
</TABLE>
22
<PAGE> 33
CASTLE CREEK
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, JUNE 30,
1997 1997
------------ ----------
<S> <C> <C>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues.................................................... $ 25,274 $62,998
Costs and expenses.......................................... 21,119 55,669
Interest income (expense), net.............................. (214) (1,006)
-------- -------
Income from operations before minority interest............. 3,941 6,323
Minority interest in Hoops Holdings L.P..................... (2,302) (2,992)
-------- -------
Net income.................................................. $ 1,639 $ 3,331
======== =======
Net income applicable to limited partners................... $ 1,622 $ 3,297
Per limited partnership unit:
Net income -- basic......................................... $ 70.08 $142.43
Net income -- assuming dilution............................. $ 57.94 $117.76
Weighted average units outstanding -- basic................. 23,151 23,151
Weighted average units outstanding -- assuming dilution..... 28,000 28,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C> <C>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DATA:
Current assets.............................................. $ 49,665
Current liabilities......................................... 30,399
Total assets................................................ 99,107
Notes payable to bank -- noncurrent......................... 50,000
Deferred compensation -- noncurrent......................... 9,814
Other noncurrent liabilities................................ 13,157
Minority interest in capital deficiency of Hoops Holdings
L.P....................................................... (35,351)
Partners' capital (deficit)................................. (4,263)
Book value (deficit) per unit at end of period.............. $(152.24)
</TABLE>
23
<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>
SIX MONTHS
ENDED YEARS ENDED
DECEMBER 31, JUNE 30,
------------- --------------------------------
1997 1996 1997 1996 1995 1994 1993
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BCLP Historical Ratio of Earnings to Fixed
Charges.......................................... 2.13 1.69 1.30 3.72 1.54 2.49 5.62
BCLP II Pro Forma Ratio of Earnings to
Fixed Charges (1)................................ 0.65 0.43
</TABLE>
(1) The pro forma earnings for the six months ended December 31, 1997 and
the year ended June 30, 1997 are inadequate to cover the minimum fixed
charge ratio of 1.0 to 1. The pro forma coverage deficiencies amounted
to $1,797,669 and $5,840,183, respectively.
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.
24
<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, Hoops Holdings GP, Hoops 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, at least a 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, Castle Creek GP and Hoops Holdings GP,
Hoops 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. The
consent of the holders of record of more than 50% of the outstanding BCLP Units
is required for approval of 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 and Subordinated Debentures, Castle
Creek Interests or some combination thereof in respect of their BCLP Units, even
if such holder was 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 Subordinated Debentures and BCLP II
Units or Castle Creek Interests, or some combination thereof, other than selling
their BCLP Units before consummation of the Reorganization.
25
<PAGE> 36
Control by Gaston Affiliates. Gaston Affiliates presently own
approximately 47.6% of outstanding BCLP Units and all of the outstanding capital
stock of Celtics, Inc., and have advised BCLP of their intention to acquire a
minimum of approximately 5,300 BCLP Units and to execute consents with respect
to all of their BCLP Units in favor of the Reorganization. In addition, pursuant
to the Option Exercise Agreement, a former executive officer of BCLP has agreed
to (i) exercise certain options to purchase BCLP Units and (ii) execute a
consent with respect to the BCLP Units obtained upon such exercise in favor of
the Reorganization. The consent to be executed pursuant to the Option Exercise
Agreement, when combined with the consents to be delivered by Gaston Affiliates,
will achieve the Requisite Approval. It therefore is anticipated that consents
from holders of a majority of outstanding BCLP Units will have been delivered
before this Prospectus is mailed and that the Reorganization will be approved
even if all BCLP Unit holders other than Gaston Affiliates and the holder of the
Additional Units are not in favor of it. 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,
Castle Creek GP, Hoops Holdings GP and Hoops 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, Castle Creek GP and Hoops Holdings GP, Hoops GP.
Gaston Affiliates also are expected to hold, after consummation of the
Reorganization, at least a 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, Parquet,
Hoops Holdings and Hoops (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,
Parquet, Hoops Holdings and Hoops. 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 rescinded 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. BCLP has requested that the IRS rule that, provided
the Subordinated Debentures would otherwise be treated as debt for Federal tax
purposes, the Subordinated Debentures will not be considered an "interest" in
BCLP for purposes of determining whether BCLP is a PTP. Receipt of a favorable
ruling from the IRS on this point is a condition to the consummation of the
Reorganization. There can be no assurance as to whether the IRS will issue a
favorable ruling on this point or as to when such a favorable ruling, if any,
will be issued.
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
26
<PAGE> 37
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 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.
Transaction Costs. Transaction costs of approximately $1.5 million will be
incurred by BCLP 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. A comparison of
these factors, which may be related to investment objectives of limited
partners, is set forth in "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, 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 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 April 16, 1998 was $21.00.
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
27
<PAGE> 38
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 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 their
respective governing instruments. 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 $11 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.
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 limited partnership interests and the timing and amount
of such distributions, if any). See
28
<PAGE> 39
"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 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. 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
29
<PAGE> 40
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.
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 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 Debentures. On a pro forma basis for the year ended June 30, 1997
and the six months ended December 31, 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."
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 the 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.
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.
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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 than (i) by
gift, bequest or intestate succession, and (ii) once in any calendar year, 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 the BCLP Units and the 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 their respective governing instruments. 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 the 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 Hoops
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. The regulatory scope of the Investment
Company Act of 1940 (the "Investment Company Act") extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading securities. The Investment Company Act also may apply to a
company which does not intend to be characterized as an investment company, but
which, nevertheless, engages in activities that subject it to registration and
regulation under the Investment Company Act's definition of an investment
company. 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. Any such reverse split would be a taxable event to
holders of Castle Creek Interests who received cash in the transaction.
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Public Reporting. Depending on the number of holders of Castle Creek
Interests, Castle Creek may be subject to the public disclosure and reporting
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
will not become 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. 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 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 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 47.6% of all outstanding
BCLP Units and BCLP has been advised that Gaston Affiliates intend to acquire a
minimum of approximately 5,300 BCLP Units and to execute consents with respect
to all of their BCLP Units in favor of the Reorganization. In addition, a Gaston
Affiliate has entered into the Option Exercise Agreement with a former executive
officer of BCLP, pursuant to which the former executive has agreed to (i)
exercise certain options to purchase BCLP Units and (ii) execute a consent with
respect to the BCLP Units obtained upon such exercise in favor of the
Reorganization. The consent to be executed pursuant to the Option Exercise
Agreement, when combined with the consents to be delivered by Gaston Affiliates,
will achieve the Requisite Approval. It therefore is anticipated that consents
from holders of a majority of outstanding BCLP Units will have been delivered
before this Prospectus is mailed and that the Reorganization will be approved
even if all BCLP Unit holders other than Gaston Affiliates and the holder of the
Additional Units are not in favor of it.
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 and
entered into among BCLP, BCLP II and Castle Creek and their respective general
partners. 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 Celtics Limited Partnership ("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 47.6% 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, 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 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, the impact of the Tax Change was examined from time
to time, and 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 its affiliate, Walcott Partners, L.P. ("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
the respective general partners.
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For a graphic depiction of the current ownership structure of BCLP and its
affiliates, see the diagram on page viii.
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 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
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BCLP Units and delisting the BCLP Units from the NYSE and the BSE, and (iv)
selling the Team and 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. In addition, the Board of Directors of Celtics, Inc.
believes that market conditions are such that the Team's inherent value would
not be recognized in a sale. 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 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
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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 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. 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
believes that allocating 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 the advantages and disadvantages of the
Reorganization and 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:
- BCLP will contribute approximately $6.4 million in cash to CLP.
- CLP will contribute the Team to Hoops in exchange for a 99.999% limited
partnership interest in Hoops.
- BCLP will contribute approximately $40.9 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 transfer its 99.999% limited partnership interest in Hoops and
approximately $6.4 million in cash to Hoops Holdings in exchange for a
99.999% limited partnership interest in Hoops Holdings.
- Hoops Holdings will buy a certain investment asset from CCC for
approximately $6.4 million in cash.
- CLP will distribute 99% of the Assumed Castle Creek Election Percentage
of its limited partnership interest in Hoops Holdings to BCLP, and 1% of
the Assumed Castle Creek Election Percentage of its limited partnership
interest in Hoops 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 Hoops Holdings received by it
to Castle Creek and transfer 1% of these interests in Hoops Holdings to
Castle Creek GP. Castle Creek GP will in turn transfer these interests in
Hoops Holdings to Castle Creek. BCC will transfer the limited partnership
interests in Hoops Holdings received by it to Castle Creek. The actual
percentage of Hoops 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
Hoops Holdings to Parquet.
- 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 Shamrock GP.
- BCLP II GP will contribute $0.2 million in cash to BCLP II, subject to
later payment of an additional contribution 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 Parquet; (ii) Parquet will own a 49.96523%
limited
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partnership interest in Hoops Holdings (based on the Assumed Castle Creek
Election Percentage); (iii) Hoops Holdings will own a 99.999% limited
partnership interest in Hoops, which will in turn own the Team; (iv) Castle
Creek will own a 50.03377% limited partnership interest in Hoops Holdings and
approximately $41.3 million in investment assets (based on Assumed Castle Creek
Election Percentage); and (v) Shamrock GP will be BCLP's general partner and
will be wholly owned by Celtics, Inc. The respective ownership interests of
Parquet and Castle Creek in Hoops may vary from the percentages set forth above,
depending on the actual Proportionate Election, which likely will vary 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); (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. To the extent that tax
benefits are realized by BCLP with respect to transactions occurring in prior
periods, BCLP will pay Castle Creek a proportionate amount of such tax benefits
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 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 " -- 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
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<PAGE> 49
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, a Gaston Affiliate, has entered into the
Option Exercise Agreement with a former executive officer of BCLP, pursuant to
which the former executive has agreed to (i) exercise the Unit Option and (ii)
execute a consent with respect to the BCLP Units obtained upon such exercise in
favor of the Reorganization. The consent to be executed pursuant to the Option
Exercise Agreement, when combined with the consents to be delivered by Gaston
Affiliates, will achieve the Requisite Approval. It is anticipated that consents
from holders of a majority of outstanding BCLP Units will have been delivered
before this Prospectus is mailed and, therefore, that the Reorganization will be
approved even if all BCLP Unit holders other than Gaston Affiliates and the
holder of the Additional Units are not in favor of it.
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 , for which BCLP has
secured a commitment in anticipation of the Reorganization. BCLP anticipates
that approximately $ 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 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>
50.03427% 50.03606% 49.96394% 0.0035763% 99.99642% 100% 0%
62.53427 50.03606 49.96394 0.0035763 99.99642 80.01096 19.98904
75.03427 50.03606 49.96394 0.0035763 99.99642 66.68189 33.31811
</TABLE>
- ---------------
(1) Includes Units presently held, approximately 5,300 Units that Gaston
Affiliates intend to acquire prior to the Reorganization 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 0.0001% general partner interest.
(2) Other than Gaston Affiliates. See footnote (1).
(3) Gaston Affiliate post-Reorganization ownership of BCLP II reflects 100 BCLP
Units presently held by Gaston Affiliates with respect to which the holder
will elect to receive Subordinated Debentures in the Distribution and,
accordingly, will receive BCLP II Units in the Merger.
(4) As of April , 1998, prior to consummation of the Reorganization.
(5) Minimum Proportionate Election equal to the Assumed Castle Creek Election
Percentage (50.03427%) assumes that substantially all Gaston Affiliates will
elect to receive Castle Creek Interests in the Distribution.
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 Hoops, 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, 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, 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 and with BCLP senior management
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. In addition,
representatives of Houlihan Lokey met with the Special Committee and its counsel
and with the senior management team and its counsel to discuss the Initial
Recommendation, as well as the business, operations and prospects of BCLP.
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, 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, management substantially revised the Initial Recommendation
and proposed the Reorganization. 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. 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.
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<PAGE> 52
- 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.
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. unanimously determined
that the Reorganization was fair to the unaffiliated holders of BCLP Units. No
opinions, valuations or reports from outside parties concerning the fairness of
the Reorganization were obtained. 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. In reaching its
determination, the Board of Directors of Celtics, Inc. considered a number of
factors. The Board's decision was made after considering all of the factors as a
whole with respect to its conclusion, 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 found it impractical
to, and therefore did not, quantify or otherwise attempt to assign relative
weights to the factors considered in reaching its decision. In reaching its
decision, the Board exercised its independent business judgment assisted by its
independent advisors. The material factors considered by the Board included the
following:
- Analysis of Financial Information. The Board 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
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.
- Pro Rata-Based Allocation of Values. The Board 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
considered the applicable federal income tax consequences of the
Reorganization, including the tax consequences noted below:
- "Flow-through" tax treatment for Castle Creek. The Board took into
account Castle Creek's retention of flow-through partnership tax
treatment, which will have the effect of sheltering from federal
income taxation at the partnership level the income generated by the
former BCLP investment assets transferred to Castle Creek and Castle
Creek's portion of the income generated by the Team.
- Tax advantages of Subordinated Debentures. The Board 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.
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<PAGE> 53
- Tax impact on BCLP Unit holders and BCLP. The Board 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 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.
- Adverse Consequences of Alternatives. The Board 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 under operation of law.
- No Appraisal Rights. The Board was aware of the absence of appraisal or
dissenters' rights for the benefit of holders of BCLP Units. The Board
believed that this factor was mitigated by the requirement that the
Reorganization be approved by the affirmative vote of more than 50% of
the outstanding BCLP Units and 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 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
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.
- Conflicts of Interest. The Board 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, Parquet, Hoops Holdings and Hoops,
respectively. In reaching its conclusion that the Reorganization is fair
to the holders of BCLP Units, the Board of Directors of BCLP 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 concluded that
the Reorganization is fair to all holders of BCLP Units, whether or not
they are Gaston Affiliates.
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.
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."
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<PAGE> 54
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 will 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 certain 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 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 separately transferable and will
trade separately on the NYSE. A more complete description of the Subordinated
Debentures is set forth in "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."
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<PAGE> 55
Public Market. Like BCLP Units, BCLP II Units will be listed on the NYSE.
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."
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 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 of at least
two 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,
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and the transactions are approved by BCLP II's audit committee. BCLP II may 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.
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 the 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, and the transfer is subject to the prior approval of Castle Creek GP. In
addition, transfer of Castle Creek Interests must be made in accordance with the
Securities Act of 1933, either by means of registration or under an exemption.
There is no assurance that the Castle Creek Interests will be so registered or
that an exemption from registration will be available to a Castle Creek Interest
holder. While the Castle Creek Interests will initially be registered under the
Exchange Act, Castle Creek GP has the power to withdraw such registration
following the Reorganization. See "Description of Castle Creek
Interests -- Restrictions on Transfer."
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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 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 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.
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."
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 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.
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
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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 are included
herein for general information only. They 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).
BCLP has requested a ruling from the Internal Revenue Service ("IRS") on
only one question of Federal tax law relevant to the Reorganization. Roberts &
Holland LLP, counsel for Celtics, Inc., has rendered its opinion regarding the
accuracy of this discussion to Celtics, Inc. A copy of Roberts & Holland LLP's
opinion has been filed as an exhibit to the Registration Statement of which this
Proxy Statement/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.
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
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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.
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 requested that the IRS rule that, provided the Subordinated
Debentures would otherwise be treated as debt for Federal tax purposes, 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 and provided the requested
ruling is received, 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.
Hoops. Hoops 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. Hoops will not participate in the
establishment of any Market for any interests in Hoops or in the inclusion of
any interests in Hoops thereon, nor will Hoops 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. Moreover, all
interests in Hoops will be issued in transactions that are not required to be
registered under the Securities Act of 1933 and Hoops will not have more than
100 partners at any time during any taxable year. Accordingly, Hoops will be
classified as a partnership for Federal income tax purposes.
Hoops Holdings. Hoops 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. Hoops Holdings will
not participate in the establishment of any Market for any interests in Hoops
Holdings or in the inclusion of any interests in Hoops 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. Moreover, all interests in Hoops Holdings will be
issued in transactions that are not required to be registered under the
Securities Act of 1933 and Hoops Holdings will not have more than 100 partners
at any time during any taxable year. Accordingly, Hoops Holdings will be
classified as a partnership for Federal income tax purposes.
Parquet. Parquet 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. Parquet will not participate in the
establishment of any Market for any interests in Parquet or in the inclusion of
any interests in Parquet 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. Moreover, all
interests in Parquet will be issued in transactions that are not required to be
registered under the Securities Act of 1933 and Parquet will not have more than
100 partners at any time during any taxable year. Accordingly, Parquet 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
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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.
FORMATION OF ENTITIES
CLP will contribute assets to Hoops, Hoops Holdings, and Parquet, in
exchange for limited partnership interests in Hoops and Hoops Holdings and a
general partnership interest in Parquet, respectively. CLP will distribute a
portion of its limited partnership interests in Hoops Holdings to BCLP and BCC.
BCLP will contribute investment assets (other than marketable securities) and
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 Hoops 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 Hoops 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 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 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, a distribution of only a Castle Creek Interest, or a
distribution consisting in part of Debenture(s) 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. Consistent
with the requested 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 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.
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 will initially reduce
the basis in such holder's Units by the fair market value of the Subordinated
Debentures 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
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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 any net effect on the basis of any
holder of BCLP Units; 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 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 interests in Castle Creek. The basis of a Castle
Creek Interest distributed to such holder of BCLP Units would
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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. Code section 732(a). BCLP estimates that its basis in each unit of
Castle Creek will be $ . 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, Hoops Holdings or Hoops 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
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adjustments under Code section 743 would retain the benefit of those adjustments
with respect to such holder's indirect interest (through Castle Creek, Hoops
Holdings or Hoops) in CLP, if such holder receives a Castle Creek Interest in
the Reorganization. For some income tax purposes, Castle Creek may be considered
a "continuation" of BCLP.
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 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 partnership 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.
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<PAGE> 64
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 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 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 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.
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.
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<PAGE> 65
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.
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. 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.
If the Subordinated Debentures constitute "high yield discount obligations"
("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 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 April 1998, the AFR is 5.98%,
compounded annually. No portion of the amounts received on the
55
<PAGE> 66
Subordinated Debentures will be eligible for the dividends received deduction
applicable to holders that are 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.
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 and BCLP II 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 BCLP II Units. 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. 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.
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
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<PAGE> 67
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, and/or CLP 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.
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.
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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.
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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.
<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 April 15, 1998)............ 21.5000 19.8750
</TABLE>
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CAPITALIZATION
The following table sets forth the capitalization of BCLP and its
subsidiaries as of December 31, 1997 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>
DECEMBER 31, 1997
--------------------------------------------
BCLP BCLP II CASTLE CREEK
ACTUAL PRO FORMA(3) PRO FORMA(3)
------ ------------ ------------
<S> <C> <C> <C>
Deferred compensation -- current............... $ 1,994,360 $ 1,994,360
Notes payable -- current....................... 16,974,198 $ 16,974,198
------------ ------------ -----------
$ 18,968,558 $ 16,974,198 $ 1,994,360
============ ============ ===========
Other non-current liabilities.................. $ 6,372,500 $ 3,272,500 $ 3,100,000
Notes payable to bank -- noncurrent portion.... 50,000,000 30,000,000 50,000,000
Subordinated debentures........................ 41,942,460
Deferred compensation -- noncurrent portion.... 9,814,081 9,814,081
Partners' capital (deficit).................... (10,679,088) (49,937,101) (4,262,625)
------------ ------------ -----------
Total capitalization........................... $ 55,507,493 $ 25,277,859 $58,651,456
============ ============ ===========
Limited partnership units...................... 5,346,164(1) 2,796,164(2) 28,000(2)
============ ============ ===========
</TABLE>
- ---------------
(1) Excludes options to purchase 280,000 BCLP Units outstanding at December 31,
1997, all of which were exercisable at December 31, 1997.
(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 2,800,000 Units of BCLP to receive Castle
Creek Interests in the Distribution, the assumed issuance of 2,796,164 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 $55 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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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 six months ended December 31, 1996 and
1997. 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 six months ended December 31, 1996 and 1997 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>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
------------------- ----------------------------------------------------
1997 1996 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..................................... $ 12,797 $ 10,663 $ 31,813 $ 35,249 $ 22,037 $ 20,238 $ 20,197
Television and radio broadcast rights fees....... 9,345 7,074 23,269 22,072 20,956 19,168 21,862
Other, principally promotional advertising....... 3,132 2,893 7,916 7,459 7,419 5,177 3,597
Basketball playoffs................................ 1,913 1,903
-------- -------- -------- -------- -------- -------- --------
25,274 20,630 62,998 64,780 52,325 44,583 47,559
Costs and expenses
Basketball regular season --
Team............................................. 14,346 11,245 40,941 27,891 31,204 22,468 24,743
Game............................................. 912 713 2,386 2,606 2,880 2,762 2,969
Basketball playoffs................................ 697 609
General and administrative......................... 5,066 5,899 13,914 15,053 14,086 11,304 6,575
Selling and promotional............................ 1,722 1,475 4,680 2,974 2,692 1,396 1,152
Depreciation....................................... 102 97 189 141 86 83 70
Amortization of National Basketball Association
franchise and other intangible assets............ 82 82 165 165 165 165 160
-------- -------- -------- -------- -------- -------- --------
22,230 19,511 62,275 48,830 51,810 38,178 36,278
-------- -------- -------- -------- -------- -------- --------
3,044 1,119 723 15,950 515 6,405 11,281
Interest income (expense), net...................... 347 622 736 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........................................ (1) 395 361 (101) 110 (3,595) 79
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations before income
taxes.............................................. 3,390 2,136 1,820 17,637 5,172 6,737 10,378
Provision for (benefit from) income taxes........... 900 800 1400 1,850 (345) (600)
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations................... 2,490 1,336 420 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.......................................... $ 2,490 $ 1,336 $ 420 $ 54,201 $ 16,156 $ 23,766 $ 5,228
======== ======== ======== ======== ======== ======== ========
Income from continuing operations applicable to
limited partners................................... $ 2,421 $ 1,294 $ 358 $ 15,437 $ 5,396 $ 7,124 $ 10,214
Net income applicable to limited partners........... $ 2,421 $ 1,294 $ 358 $ 52,910 $ 15,545 $ 23,126 $ 5,157
Per limited partnership unit:
Income from continuing operations -- basic(1)...... $ 0.50 $ 0.23 $ 0.07 $ 2.68 $ 0.84 $ 1.11 $ 1.59
Income from continuing operations -- assuming
dilution(1)...................................... $ 0.44 $ 0.22 $ 0.06 $ 2.59 $ 0.84 $ 1.11 $ 1.59
Net income -- basic(1)............................. $ 0.50 $ 0.23 $ 0.07 $ 9.18 $ 2.43 $ 3.61 $ 0.80
Net income -- assuming dilution(1)................. $ 0.44 $ 0.22 $ 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..... $ (2.00) $ (2.15) $ (1.46) $ 2.81 $ (2.46) $ (2.00) $ (4.39)
Ratio of earnings to fixed charges................. 2.13 1.69 1.30 3.72 1.54 2.49 5.62
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------- ----------------------------------------------------
1997 1996 1997 1996 1995(2) 1994(2) 1993(2)
---- ---- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED BALANCE SHEET DATA:
Current assets...................................... $113,673 $109,335 $103,801 $135,903 $186,101 $ 79,492 $ 50,976
Current liabilities................................. 53,331 39,964 39,139 40,289 126,010 23,289 18,809
Total assets........................................ 128,939 117,813 119,200 145,233 210,655 102,933 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................. 9,814 11,650 10,380 11,750 14,850 18,248 9,670
Other noncurrent liabilities........................ 6,373 7,049 9,870 6,575 19,515 11,325 3,434
Partners' capital (deficit)......................... (10,679) (10,950) (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.
61
<PAGE> 72
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 six months ended
December 31, 1997 compared with the six months ended December 31, 1996.
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
62
<PAGE> 73
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)
63
<PAGE> 74
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.
Six Months Ended December 31, 1997 and 1996
BCLP had consolidated net income of $2,490,000, or $0.50 per unit ($0.44
assuming dilution), on revenues of $25,274,000 in the six months ended December
31, 1997, compared with consolidated net income of $1,336,000, or $0.23 per unit
($0.22 assuming dilution), on revenues of $20,630,000 in the six months ended
December 31, 1996. 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 $11,646,000 in the six months ended December 31, 1997 compared
with consolidated cash flows from operating activities of $1,401,000 in the six
months ended December 31, 1996.
Revenues from ticket sales recognized in income increased $2,134,000 or 20%
in the six-month period ended December 31, 1997, compared to the same period in
1996, as a result of increased ticket sales ($1,677,000) as well as the result
of the Team having played one more game in the period ended December 31, 1997
than in 1996 ($457,000).
Television and radio revenues increased $2,271,000 or 32% in the six-month
period ended December 31, 1997, compared to the same period in 1996 as a result
of an increase in revenue from the national network and cable television rights
agreements ($1,937,000) as well as the result of the Team having played one more
game in the period ended December 31, 1997 than in 1996 ($334,000).
Other regular season revenues increased $239,000 or 8% in the six-month
period ended December 31, 1997 compared to the same period in 1996 as a result
of increased promotional and novelty income ($127,000) as well as the result of
the Team having played one more game in the period ended December 31, 1997 than
in 1996 ($112,000).
Team expenses increased $3,101,000 or 28% in the six-month period ended
December 31, 1997 compared to the same period in 1996 primarily as a result of
net increases in player and coaching staff compensation ($2,437,000) and other
Team expenses ($152,000) as well as the result of the Team having played one
more game in the period ended December 31, 1997 than in 1996 ($512,000).
Game expenses increased $199,000 or 28% in the six-month period ended
December 31, 1997 compared to the same period in 1996, primarily as a result of
an increase in league assessments on ticket sales ($84,000) and other game
expenses ($82,000) as well as the Team having played one more game in the period
ended December 31, 1997 than in 1996 ($33,000).
64
<PAGE> 75
General and administrative expenses decreased $833,000 or 14% in the
six-month period ended December 31, 1997 as compared to the same period in 1996
primarily as a result of a decrease in option expense ($1,472,000). This
decrease was partially offset by increases in professional expenses ($293,000)
and personnel costs ($256,000).
Selling and promotional expenses increased $247,000 or 17% in the six-month
period ended December 31, 1997 as compared to the same period in 1996 due to
increases in salaries and other costs related to marketing and ticket sales
($163,000), increased sponsorship costs ($65,000) and increases in promotional
and other general marketing expenses ($19,000).
Depreciation and amortization expenses increased $5,000 or 3% in the
six-month period ended December 31, 1997 as compared to the same period in 1996
as a result of additions to property and equipment and leasehold improvements in
leased office space and at the Fleet Center.
Interest expense decreased $92,000 or 3% in the six-months ended December
31, 1997 as compared to the same period in 1996. The decrease is primarily a
result of a decrease in the deferred compensation liability.
Interest income decreased $367,000 or 10% in the six-month period ended
December 31, 1997 as compared to the same period in 1996. The decrease is
attributable to a reduced amount of available funds for short-term investment.
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 $11,646,000 and $1,401,000 in cash from
operating activities in the six months ended December 31, 1997 and 1996,
respectively. Capital expenditures amounted to approximately $332,000 and
$45,000 in the six months ended December 31, 1997 and 1996, respectively. At
December 31, 1997 BCLP had approximately $7,000,000 of available cash,
$29,000,000 of marketable securities and $73,000,000 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 December 31, 1997, 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. 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.
65
<PAGE> 76
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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<PAGE> 77
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
67
<PAGE> 78
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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<PAGE> 79
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 or upon the possible termination of the
Collective Bargaining Agreement after the 1997-98 season as described above,
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.
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<PAGE> 80
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 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
70
<PAGE> 81
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 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> 82
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age as of March 31, 1998 and
position of each 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 partner is
Draycott, Inc. ("Draycott"). 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 when he, together with Alan C. Cohen and Paul R.
Dupee, Jr., acquired the Boston Celtics franchise. 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, including Executive Vice
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<PAGE> 83
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 Shamrock 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 directors of
Hoops GP and Hoops Holdings GP will be Messrs. Paul E. Gaston, Don F. Gaston,
John H.M. Leithead and John B. Marsh, III, and Ms. Paula B. Gaston. 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
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<PAGE> 84
officers or directors of 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 $100,000 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
------------------------------
FISCAL ANNUAL COMPENSATION(2) RESTRICTED SECURITIES
YEAR ----------------------- STOCK UNDERLYING
NAME AND PRINCIPAL POSITION(1) ENDED SALARY($) BONUS($) AWARDS(3)($) OPTIONS/SARS(#)
------------------------------ ------ --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Paul E. Gaston..................... 1997 $ 400,000 (1) (1) --
Chief Executive Officer 1996 400,000 (2) (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 February 28,
1998) 1995 400,000 828,112 -- --
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 -- CLP 1995 -- -- -- --
Michael L. "M.L." Carr............. 1997 1,000,000 1,000,000 -- --
Executive Vice President of 1996 1,000,000 -- -- --
Corporate Development -- CLP 1995 500,000 -- -- --
</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,
$519,000 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
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<PAGE> 85
Committee of Celtics, Inc.'s Board awarded 234,886 1996 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.
(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 (1) 0 0 0 0
Restricted
Units
Stephen C. Schram.......... 0 0 250,000(2) 0 $3,812,500 0(3)
</TABLE>
- ---------------
(1) See Note 1 to Summary Compensation Table.
(2) Options became exercisable in installments as follows:
<TABLE>
<CAPTION>
PERIOD AGGREGATE AMOUNT OF OPTION EXERCISABLE
------ --------------------------------------
<S> <C>
June 30, 1994 -- June 29, 1995....................... 1%
June 30, 1995 -- June 29, 1996....................... 60%
June 30, 1996 -- June 29, 1997....................... 80%
June 30, 1997 -- December 31, 2003................... 100%
</TABLE>
- ---------------
(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 Paul E. Gaston and Stephen C. 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
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<PAGE> 86
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 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> 87
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...................................... 493,200 9.1
Murphey Capital, Inc.
P.O. Box 18065
Tampa, FL 33681-8065
All directors and executive officers as a group (7
people).................................................. 2,542,271 47.1
</TABLE>
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(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.
For information regarding the effect of the Reorganization on Gaston
Affiliates (including Don F. Gaston, Paula B. Gaston and Paul E. Gaston), see
the chart on page 40 of this Information Statement/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.
A Gaston Affiliate has entered into an agreement (the "Option Exercise
Agreement") with a former executive officer of BCLP, pursuant to which the
former executive has agreed to (i) exercise the Unit Option and (ii) execute a
consent with respect to the BCLP Units obtained upon such exercise in favor of
the Reorganization. The consent to be executed pursuant to the Option Exercise
Agreement, when combined with
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the consents to be delivered by Gaston Affiliates, will achieve the Requisite
Approval. It is anticipated that consents from holders of a majority of
outstanding BCLP Units will have been delivered before this Prospectus is mailed
and, therefore, that the Reorganization will be approved even if all BCLP Unit
holders other than Gaston Affiliates and the holder of the Additional Units are
not in favor of it. 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 modified 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, 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. 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 for BCLP II 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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<PAGE> 90
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. 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 or 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 interests
in property as may be deemed appropriate in its sole discretion in
connection with partnership operations;
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(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 LP 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 and
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
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
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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 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 the General Partner 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;
(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);
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(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
banks "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, 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.
BCLP II GP may be removed without cause by a vote of 80% of holders of BCLP
II Units. 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 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
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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 of at least two 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.
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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.
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 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 modified 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. The 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, and the transfer is subject to the prior approval of
Castle Creek GP, which may withhold such approval in its absolute discretion. A
limited partner of Castle Creek may apply to transfer his Interests by
submitting to Castle Creek GP, no earlier than November 15 and no later than
December 15 of any year, a completed transfer application. In considering the
approval of completed 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 Interests), establish ceilings on the numbers of
Interests that may be transferred in any year, approve the transfer of less than
the total number of 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 Interests approved by Castle Creek GP 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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In addition, transfer of Castle Creek Interests must be made in accordance
with the Securities Act of 1933, either by means of registration or under an
exemption. There is no assurance that the Castle Creek Interests will be so
registered or that an exemption from registration will be available to a Castle
Creek limited partner.
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' 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, or
increase the compensation payable to Castle Creek GP, then an majority of
limited partners of Unit holders unaffiliated with Castle Creek GP is required
to approve the amendment. An 80% supermajority vote of limited partners or Unit
holders would be required to approve an amendment that would more likely than
not cause the limited partners or Unit holders to lose their limited liability
for Castle Creek 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, an 80% supermajority is required to approve certain extraordinary
transactions such as mergers in which Castle Creek is not the survivor, and
sales of all or substantially all its assets. 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 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 Castle
Creek Interests. Castle Creek GP will be authorized to subdivide 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. 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.
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.
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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;
(ix) To issue additional securities or additional units or additional
classes or series of units, and to purchase, sell or otherwise acquire or
dispose of units, 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
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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 and other
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 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;
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(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 Units 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.
The 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 exceed the lesser of a
major banks "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.
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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 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.
Castle Creek GP may be removed without cause 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 units, 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 Units or limited partnership interests that may be issued by Castle
Creek, 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 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 units or limited partnership
interests. There is no limit on the number of units or other securities that may
be so issued.
Units and 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 units and 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 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 Castle Creek distributions; (c) the rights of
such class or series of units and partnership interests upon dissolution and
liquidation of Castle Creek; (d) whether such class or series of units and
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 units and
partnership interests may be redeemed by Castle Creek; (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 Castle Creek and the Castle Creek Partnership Agreement. The total number of
units that may be issued by Castle Creek, including units issued in connection
with the Reorganization, may not exceed .
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.
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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 actual fraud,
gross negligence, willful misconduct or a breach of fiduciary duty to Castle
Creek or its limited partners, 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. The 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 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 Castle Creek or any
limited partner or Unit holder, 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
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
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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 1 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
respect to the Subordinated Debentures) if (i) any Senior Indebtedness of BCLP
is not paid when due or (ii) any other default on any such Senior Indebtedness
occurs and the maturity thereof has been accelerated in accordance with its
terms, unless, in either case, (x) the default has been cured or waived and any
such acceleration has been rescinded or (y) such Senior Indebtedness has been
paid in full.
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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 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, 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
, , BCLP may redeem the Subordinated Debentures at a
redemption price (expressed as a percentage of principal amount) of % 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 $ 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 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
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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 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.
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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 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).
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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 in the form of one or more Global Subordinated Debentures (the "Global
Debenture"). The 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 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
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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 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.
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"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.
"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 (a) all indebtedness of BCLP, whether outstanding on the date of the
Indenture or thereafter created, (i) for money borrowed by
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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 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.
100
<PAGE> 111
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.
101
<PAGE> 112
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 December 31,
1997.................................................. F-2
Unaudited Pro Forma Consolidated Statements of Income
of Boston Celtics Limited Partnership II:
for the six months ended December 31, 1997........ F-3
for the year ended June 30, 1997.................. F-4
Unaudited Pro Forma Consolidated Balance Sheet of
Castle Creek Partners, L.P. at December 31, 1997...... F-5
Unaudited Pro Forma Consolidated Statements of Income
of Castle Creek Partners, L.P.
for the six months ended December 31, 1997 and for
the year ended June 30, 1997...................... F-6
Notes to Unaudited Pro Forma Consolidated Financial
Statements............................................ F-7
Audited Historical Consolidated Financial Statements of
Boston Celtics Limited Partnership
Report of Independent Auditors......................... F-8
Consolidated Balance Sheets at June 30, 1997 and
1996.................................................. F-9
Consolidated Statements of Income for each of the three
years in the period ended June 30, 1997............... F-10
Consolidated Statements of Partners' Capital (Deficit)
for each of the three years in the period ended June
30, 1997.............................................. F-11
Consolidated Statements of Cash Flows for each of the
three years in the period ended June 30, 1997......... F-14
Notes to Consolidated Financial Statements............. F-16
Unaudited Historical Consolidated Financial Statements of
Boston Celtics Limited Partnership
Unaudited Consolidated Balance Sheet at December 31,
1997.................................................. F-28
Unaudited Consolidated Statements of Income for the six
months ended December 31, 1997 and 1996............... F-29
Unaudited Consolidated Statements of Cash Flows for the
six months ended December 31, 1997 and 1996........... F-30
Notes to Unaudited Consolidated Financial Statements... F-31
</TABLE>
F-1
<PAGE> 113
BOSTON CELTICS LIMITED PARTNERSHIP II
PRO FORMA CONSOLIDATED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------
BCLP PRO
CONSOLIDATED ADJUSTMENTS FORMA
------------ ----------- -----
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents(a)..................... $ 7,142,146 $ (4,484,050) $ 2,658,096
Marketable securities(c)(d)(e)(f)(g)............. 29,251,018 (17,471,311) 11,779,707
Other short-term investments(g).................. 73,368,911 6,393,035 79,761,946
Deferred game costs(a)........................... 2,334,963 (2,334,963)
Prepaid expenses and other current assets(a)..... 1,575,586 (1,519,962) 55,624
------------ ------------ ------------
Total current assets..................... 113,672,624 (19,417,251) 94,255,373
Property and equipment, net(a)..................... 1,139,727 (1,111,663) 28,064
National Basketball Association franchise,
net(a)........................................... 3,933,102 (3,933,102)
Other intangible assets(a)......................... 902,232 (35,375) 866,857
Other assets(a)(g)................................. 9,290,911 (9,290,911)
------------ ------------ ------------
$128,938,596 $(33,788,302) $ 95,150,294
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses(a)(b)...... $ 10,709,632 $ (8,641,673) $ 2,067,959
Distribution payable(a).......................... 5,400,522 35,278 5,435,800
Deferred game revenues(a)........................ 18,252,391 (18,252,391)
Notes payable.................................... 16,974,198 16,974,198
Deferred compensation -- current portion(a)...... 1,994,360 (1,994,360)
------------ ------------ ------------
Total current liabilities................ 53,331,103 (28,853,146) 24,477,957
Other noncurrent liabilities(a).................... 6,372,500 (3,100,000) 3,272,500
Notes payable to bank -- noncurrent portion
(a)(h)........................................... 50,000,000 (20,000,000) 30,000,000
Subordinated debentures(i)......................... 41,942,460 41,942,460
Investment in Shamrock L.P.(a)..................... 35,351,367 35,351,367
Deferred compensation -- noncurrent portion(a)..... 9,814,081 (9,814,081)
Deferred federal and state income taxes(j)......... 20,100,000 (10,056,889) 10,043,111
Total partners' capital
(deficit)(a)(b)(c)(d)(e)(f)(i)(j)................ (10,679,088) (39,258,013) (49,937,101)
------------ ------------ ------------
$128,938,596 $(33,788,302) $ 95,150,294
============ ============ ============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-2
<PAGE> 114
BOSTON CELTICS LIMITED PARTNERSHIP II
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1997
------------------------------------------------------------------
BCLP PRO
CONSOLIDATED ADJUSTMENTS FORMA
------------ ----------- -----
<S> <C> <C> <C>
Revenues:
Basketball regular season --
Ticket sales(a)................................... $12,797,000 $(12,797,000)
Television and radio broadcast rights fees(a)..... 9,345,000 (9,345,000)
Other, principally promotional advertising(a)..... 3,132,000 (3,132,000)
Equity in income of Shamrock L.P.(a)................. 2,256,107 $ 2,256,107
----------- ------------ -----------
25,274,000 (23,017,893) 2,256,107
Costs and expenses:
Basketball regular season --
Team(a)........................................... 14,346,000 (14,346,000)
Game(a)........................................... 912,000 (912,000)
General and administrative(a)(b)(o).................. 5,065,506 (2,460,106) 2,605,400
Selling and promotional(a)........................... 1,721,945 (1,721,945)
Depreciation(a)...................................... 101,807 (96,869) 4,938
Amortization of NBA franchise and other intangible
assets(a)......................................... 82,351 (82,351)
----------- ------------ -----------
22,229,609 (19,619,271) 2,610,338
----------- ------------ -----------
3,044,391 (3,398,622) (354,231)
Interest expense(a)(k)(l)(m)........................... (2,949,868) (1,302,120) (4,251,988)
Interest income(a)(n).................................. 3,296,253 (486,657) 2,809,596
Net realized losses on disposition of marketable
securities and other short-term investments.......... (1,046) (1,046)
----------- ------------ -----------
Income (loss) before income taxes...................... 3,389,730 (5,187,399) (1,797,669)
Provision for income taxes............................. 900,000 900,000
----------- ------------ -----------
Net income (loss)...................................... 2,489,730 (5,187,399) (2,697,669)
Net income (loss) applicable to interests of General
Partners(a).......................................... 68,344 (95,155) (26,811)
----------- ------------ -----------
Net income (loss) applicable to interests of Limited
Partners............................................. $ 2,421,386 $ (5,092,244) $(2,670,858)
=========== ============ ===========
Net income (loss) per unit -- basic.................... $ 0.50 $ (0.96)
=========== ===========
Net income (loss) per unit -- assuming dilution........ $ 0.44 $ (0.96)
=========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-3
<PAGE> 115
BOSTON CELTICS LIMITED PARTNERSHIP II
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1997
-------------------------------------------
BCLP PRO
CONSOLIDATED ADJUSTMENTS FORMA
------------ ----------- -----
<S> <C> <C> <C>
Revenues:
Basketball regular season --
Ticket sales (a).............................. $31,813,019 $(31,813,019)
Television and radio broadcast rights fees
(a)......................................... 23,269,159 (23,269,159)
Other, principally promotional advertising
(a)......................................... 7,915,626 (7,915,626)
Equity in income of Shamrock L.P. (a)............ 2,932,356 $ 2,932,356
----------- ------------ -----------
62,997,804 (60,065,448) 2,932,356
Costs and expenses:
Basketball regular season --
Team (a)...................................... 40,941,156 (40,941,156)
Game (a)...................................... 2,386,042 (2,386,042)
General and administrative (a)(o)................ 13,913,893 (7,316,248) 6,597,645
Selling and promotional (a)...................... 4,680,168 (4,680,168)
Depreciation (a)................................. 189,324 (181,010) 8,314
Amortization of NBA franchise and other
intangible assets (a)......................... 164,702 (164,702)
----------- ------------ -----------
62,275,285 (55,669,326) 6,605,959
----------- ------------ -----------
722,519 (4,396,122) (3,673,603)
Interest expense (a)(k)(l)(m)...................... (5,872,805) (2,491,419) (8,364,224)
Interest income (a)(n)............................. 6,609,541 (772,948) 5,836,593
Net realized gains on disposition of marketable
securities and short-term investments............ 361,051 361,051
----------- ------------ -----------
Income (loss) before income taxes................ 1,820,306 (7,660,489) (5,840,183)
Provision for income taxes......................... 1,400,000 1,400,000
----------- ------------ -----------
Net income (loss).................................. 420,306 (7,660,489) (7,240,183)
Net income (loss) applicable to interests of
General Partners (a)............................. 62,246 (134,146) (71,900)
----------- ------------ -----------
Net income (loss) applicable to interests of
Limited Partners................................. $ 358,060 $ (7,526,343) $(7,168,283)
=========== ============ ===========
Net income (loss) per unit -- basic................ $ 0.07 $ (2.56)
=========== ===========
Net income (loss) per unit -- assuming dilution.... $ 0.06 $ (2.56)
=========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-4
<PAGE> 116
CASTLE CREEK PARTNERS, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
UNAUDITED
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents (a)............................. $ 4,486,050
Marketable securities (c)(d).............................. 41,278,276
Accounts receivable (a)................................... 2,334,963
Deferred game costs (a)................................... 1,511,477
Prepaid expenses and other current assets (a)............. 54,138
-----------
Total current assets................................... 49,664,904
Property and equipment, net (a)............................. 1,111,663
Minority interest in capital deficiency of Hoops Holdings
L.P. (a).................................................. 35,351,367
National Basketball Association franchise, net (a).......... 3,933,102
Other intangible assets (a)................................. 35,375
Other assets (a)............................................ 9,010,733
-----------
$99,107,144
===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses (a)................. $10,152,048
Deferred game revenues (a)................................ 17,402,520
Deferred revenues (a)..................................... 849,871
Deferred compensation -- current portion (a).............. 1,994,360
-----------
Total current liabilities.............................. 30,398,799
Other noncurrent liabilities................................ 3,100,000
Notes payable to bank -- noncurrent portion (a)............. 50,000,000
Deferred compensation -- noncurrent portion (a)............. 9,814,081
Deferred federal and state income taxes (j)................. 10,056,889
Total partners' capital (deficit) (a)(c)(d)................. (4,262,625)
-----------
$99,107,144
===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-5
<PAGE> 117
CASTLE CREEK PARTNERS, L.P.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
Revenues:
Basketball regular season -- Ticket sales(a).............. $12,797,000 $31,813,019
Television and radio broadcast rights fees(a)............. 9,345,000 23,269,159
Other, principally promotional advertising(a)............. 3,132,000 7,915,626
----------- -----------
25,274,000 62,997,804
Costs and expenses:
Basketball regular season --
Team(a)................................................ 14,346,000 40,941,156
Game(a)................................................ 912,000 2,386,042
General and administrative(a)(o).......................... 3,960,106 7,316,248
Selling and promotional(a)................................ 1,721,945 4,680,168
Depreciation(a)........................................... 96,869 181,010
Amortization of NBA franchise and other intangible
assets(a).............................................. 82,351 164,702
----------- -----------
21,119,271 55,669,326
----------- -----------
4,154,729 7,328,478
Interest expense(a)......................................... (1,750,338) (3,613,498)
Interest income(a)(p)....................................... 1,520,621 2,605,675
Other income(a)............................................. 15,873 2,137
----------- -----------
Income from operations before minority interest............. 3,940,885 6,322,792
Minority interest in Hoops Holdings L.P.(a)................. (2,301,985) (2,991,985)
----------- -----------
Net income.................................................. 1,638,900 3,330,807
Net income applicable to interests of General Partners(a)... 16,480 33,427
----------- -----------
Net income applicable to interests of Limited Partners...... $ 1,622,420 $ 3,297,380
=========== ===========
Net income per unit -- basic................................ $ 70.08 $ 142.43
=========== ===========
Net income per unit -- assuming dilution.................... $ 57.94 $ 117.76
=========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
F-6
<PAGE> 118
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 December 31, 1997, and
further assume that the holders of 2,800,000 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's accounting for its investment in 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 2,796,164 of
Boston Celtics Limited Partnership II (BCLP II) Units to former holders of BCLP
Units, the issuance of $55 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. 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 8%, 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 $11.1 million reduction in short-term investments
and an anticipated charge for Reorganization-related expenses totaling
approximately $1,500,000.
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.
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's accounting for 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%.
(b) To record $1,500,000 accrual for anticipated
Reorganization-related expenses.
(c) To record the transfer of $40,865,493 of investment assets
to Castle Creek.
(d) To record the transfer of $412,783 of investment assets to
Castle Creek G.P.
(e) To record the transfer of $6,393,035 of investment assets to
Hoops L.P.
(f) To record proceeds of $200,000 received from BCLP G.P., Inc.
(g) To record the sale of $6,393,035 note receivable by Celtics
Capital Corporation to Hoops L.P.
(h) To record the new $30,000,000 bank borrowing by BCLP.
(i) To record the issuance of $41,942,460 of 6% Subordinated
Debentures by Shamrock L.P. at an estimated issue price of
$15 per Subordinated Debenture.
(j) To reduce deferred tax liability by $10,056,889 to reflect
Castle Creek's proportionate share of liability for
pre-Reorganization matters based upon the Assumed Castle
Creek Election Percentage.
(k) To record interest expense on BCLP's new bank borrowing
($1,200,000 for the six months ended December 31, 1997 and
$2,400,000 for the year ended June 30, 1997).
(l) To record interest expense on Subordinated Debentures issued
by Shamrock L.P. ($1,677,698 for the six months ended
December 31, 1997 and $3,355,397 for the year ended June 30,
1997).
</TABLE>
F-7
<PAGE> 119
BOSTON CELTICS LIMITED PARTNERSHIP II
CASTLE CREEK PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<C> <S>
(m) To record amortization expense related to original issue
discount on debentures ($174,760 for the six months ended
December 31, 1997 and $349,521 for the year ended June 30,
1997).
(n) To reduce BCLP's interest income due to decrease in
marketable securities ($304,653 for the six months ended
December 31, 1997 and $609,305 for the year ended June 30,
1997).
(o) To reduce BCLP's general and administrative expenses for
costs to be borne by Castle Creek ($1,801,450 for the six
months ended December 31, 1997 and $1,935,697 for the year
ended June 30, 1997).
(p) To record Castle Creek's income due to increase in
marketable securities ($1,354,490 for the six months ended
December 31, 1997 and $2,444,169 for the year ended June 30,
1997).
</TABLE>
F-8
<PAGE> 120
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-9
<PAGE> 121
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)
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-10
<PAGE> 122
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-11
<PAGE> 123
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-12
<PAGE> 124
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-13
<PAGE> 125
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-14
<PAGE> 126
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-15
<PAGE> 127
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-16
<PAGE> 128
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-17
<PAGE> 129
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-18
<PAGE> 130
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-19
<PAGE> 131
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-20
<PAGE> 132
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-21
<PAGE> 133
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-22
<PAGE> 134
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-23
<PAGE> 135
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-24
<PAGE> 136
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-25
<PAGE> 137
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 bear 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-26
<PAGE> 138
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-27
<PAGE> 139
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-28
<PAGE> 140
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents.............................. $ 7,142,146
Marketable securities.................................. 29,251,018
Other short-term investments........................... 73,368,911
Accounts receivable.................................... 18,893
Deferred game costs.................................... 2,334,963
Prepaid income taxes...................................
Prepaid expenses....................................... 1,556,693
------------
Total current assets.............................. 113,672,624
Property and equipment, net of depreciation of $817,600..... 1,139,727
National Basketball Association franchise, net of
amortization of $2,236,479................................ 3,933,102
Other intangible assets, net of amortization of $52,315..... 902,232
Other assets................................................ 9,290,911
------------
$128,938,596
============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities
Accounts payable and accrued expenses.................. $ 10,475,833
Distribution payable................................... 5,400,522
Deferred game revenues................................. 18,252,391
Federal and state income taxes payable................. 233,799
Notes payable to bank -- current portion...............
Notes payable.......................................... 16,974,198
Deferred compensation -- current portion............... 1,994,360
------------
TOTAL CURRENT LIABILITIES......................... 53,331,103
Deferred federal and state income taxes..................... 20,100,000
Notes payable to bank -- noncurrent portion................. 50,000,000
Deferred compensation -- noncurrent portion................. 9,814,081
Other non-current liabilities............................... 6,372,500
Partners' capital (deficit)
Boston Celtics Limited Partnership --
General Partner...................................... 197,136
Limited Partners..................................... (11,431,130)
------------
(11,233,994)
Celtics Limited Partnership -- General Partner......... (86,147)
Boston Celtics Communications Limited Partnership --
General Partner....................................... 641,053
------------
Total partners' capital (deficit)........................... (10,679,088)
------------
$128,938,596
============
</TABLE>
See notes to condensed consolidated financial statements.
F-29
<PAGE> 141
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Revenues:
Basketball regular season --
Ticket sales...................................... $12,797,000 $10,663,000
Television and radio broadcast rights fees........ 9,345,000 7,074,000
Other, principally promotional advertising........ 3,132,000 2,893,000
----------- -----------
25,274,000 20,630,000
----------- -----------
Costs and expenses:
Basketball regular season --
Team.............................................. 14,346,000 11,245,000
Game.............................................. 912,000 713,000
General and administrative............................. 5,065,506 5,898,944
Selling and promotional................................ 1,721,945 1,474,495
Depreciation........................................... 101,807 96,970
Amortization of NBA franchise and other intangible
assets................................................ 82,351 82,352
----------- -----------
22,229,609 19,510,761
----------- -----------
3,044,391 1,119,239
Interest expense............................................ (2,949,868) (3,041,773)
Interest income............................................. 3,296,253 3,663,429
Net realized gains (losses) on disposition of marketable
securities and other short-term investments............... (1,046) 395,356
----------- -----------
Income before income taxes.................................. 3,389,730 2,136,251
Provision for income taxes.................................. 900,000 800,000
----------- -----------
Net income.................................................. 2,489,730 1,336,251
Net income applicable to interests of General Partners...... 68,344 42,515
----------- -----------
Net income applicable to interests of Limited Partners...... $ 2,421,386 $ 1,293,736
=========== ===========
Net income per unit -- basic................................ $ 0.50 $ 0.23
Net income per unit -- assuming dilution.................... $ 0.44 $ 0.22
Distributions declared per unit............................. $ 1.00 $ 1.00
</TABLE>
See notes to condensed consolidated financial statements.
F-30
<PAGE> 142
BOSTON CELTICS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
-----------------------------
DECEMBER 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Receipts:
Basketball regular season receipts:
Ticket sales...................................... $ 30,728,370 $ 25,023,087
Television and radio broadcast rights fees........ 7,724,116 6,148,244
Other, principally promotional advertising........ 1,921,689 1,999,677
------------- -------------
40,374,175 33,171,008
Costs and expenses:
Basketball regular season expenditures:
Team expenses..................................... 18,341,611 15,115,111
Game expenses..................................... 950,407 816,816
General and administrative expenses.................... 7,783,736 10,316,217
Selling and promotional expenses....................... 2,175,533 1,907,677
------------- -------------
29,251,287 28,155,821
------------- -------------
11,122,888 5,015,187
Interest expense............................................ (2,125,435) (2,223,407)
Interest income............................................. 3,300,002 3,288,426
Payment of income taxes..................................... (233,306) (1,872,220)
Payment of deferred compensation............................ (418,148) (2,807,430)
------------- -------------
Net cash flows from operating activities............... 11,646,001 1,400,556
Cash flows (used by) from investing activities:
Purchases of:
Marketable securities............................. (37,394,187) (24,380,826)
Short-term investments............................ (409,694,599) (388,300,000)
Proceeds from sales of:
Marketable securities............................. 28,100,888 27,051,250
Short-term investments............................ 408,382,400 419,000,000
Capital expenditures................................... (332,118) (44,558)
Other receipts (expenditures).......................... (64,978) (366,048)
------------- -------------
Net cash flows (used by) from investing activities..... (11,002,594) 32,959,818
------------- -------------
Net cash flows from operating and investing
activities........................................... 643,407 34,360,374
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.......................... (5,935,876)
------------- -------------
Net cash flows used by financing activities....... (28,815,876)
------------- -------------
Net increase in cash and cash equivalents......... 643,407 5,544,498
Cash and cash equivalents at beginning of period............ 6,498,739 5,982,128
------------- -------------
Cash and cash equivalents at end of period.................. $ 7,142,146 $ 11,526,626
============= =============
Non-cash financing activities
Distributions declared to limited partners of Boston
Celtics Limited Partnership.......................... $ 5,400,522
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 143
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 1996 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 Form 10-Q for the quarter ended 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 December 31, 1997, 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"). The Partnership 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. The adoption
of Statement 128 increased basic net income per unit for the six and three
months ended December 31, 1996 by $0.01 and $0.07, respectively.
F-32
<PAGE> 144
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>
SIX MONTHS ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Numerator for basic and diluted earnings per unit:
Net income before interests of General Partners........ $2,489,730 $1,336,251
Applicable to interests of General Partners of
subsidiary partnerships............................... 43,886 29,447
---------- ----------
2,445,844 1,306,804
Applicable to 1% General Partnership interest of
BCLP.................................................. 24,458 13,068
---------- ----------
Applicable to interests of Limited Partners............ $2,421,386 $1,293,736
========== ==========
Denominator:
Denominator for basic earnings per unit -- weighted
average shares........................................ 4,861,278 5,505,626
Effect of dilutive securities:
Options to purchase units of Partnership
interest................................... 180,966 239,651
Restricted stock............................. 484,886 234,886
---------- ----------
Denominator for diluted earnings per unit.............. 5,527,130 5,980,163
========== ==========
Basic earnings per unit..................................... $ 0.50 $ 0.23
========== ==========
Diluted earnings per unit................................... $ 0.44 $ 0.22
========== ==========
</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.
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<PAGE> 145
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 50.03427% of current BCLP Unit holders will
Election Percentage elect to receive Castle Creek Interests in the Distribution.
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.
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
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.
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.
CLP.................................. Celtics Limited Partnership, a Delaware limited partnership.
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 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.
Hoops................................ Hoops LP, a Delaware limited partnership.
Hoops GP............................. Hoops GP, Inc., a Delaware corporation, the general partner
of Hoops.
Hoops Holdings....................... Hoops Holding LP, a Delaware limited partnership.
Hoops Holdings GP.................... Hoop Holdings GP, Inc., a Delaware corporation, the general
partner of Hoops Holdings.
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.
</TABLE>
A-1
<PAGE> 146
<TABLE>
<S> <C>
Merger............................... The Merger of Merger Sub with and into BCLP, in which BCLP
will be the surviving entity; an interdependent part of the
Reorganization.
Merger Sub........................... BCLP Merger Sub, Inc., a Delaware corporation.
NBA.................................. National Basketball Association.
NYSE................................. New York Stock Exchange.
Option Exercise Agreement............ Agreement between Walcott and a former executive officer of
BCLP pursuant to which the former executive 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................................. Agreement and Plan of Reorganization, dated as of March ,
1998, by and among BCLP, BCLP II, Castle Creek, Celtics,
Inc., BCLP II GP and Castle Creek GP.
Promissory Note...................... Certain Promissory notes between BCLP and a former principal
holder of BCLP Units, aggregating approximately $17 million.
Proportionate Election............... The percentage of BCLP Unit holders electing to receive
Castle Creek Interests as compared to those electing to
receive Subordinated Debentures in the Distribution.
Prospectus........................... Information Statement/Prospectus that is being furnished to
holders of units.
PTP.................................. Publicly traded partnership.
Registration Statement............... Registration on Form S-4 (File No. 33- ) filed with the SEC
on April , 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.
Shamrock LP.......................... Shamrock Limited Partnership, a Delaware limited
partnership.
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.
The Commission....................... The United States Securities Exchange Commission.
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 a former
executive officer of BCLP; will be exercised pursuant to the
Option Exercise Agreement.
Walcott.............................. Walcott Partners, L.P., a Delaware limited partnership.
</TABLE>
A-2
<PAGE> 147
EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
B-1
<PAGE> 148
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 14, 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 GP"); 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"); Parquet GP, a Delaware general partnership ("Parquet"); Hoops Holdings
LP, a Delaware limited partnership ("Hoops Holdings"); Hoops LP, a Delaware
limited partnership ("Hoops"); Hoops Holdings GP, Inc., a Delaware corporation
and the general partner of Hoops Holdings ("Hoops Holdings GP"); Hoops GP, Inc.,
a Delaware corporation and the general partner of Hoops ("Hoops GP"); Shamrock
GP, Inc., a Delaware corporation ("Shamrock GP").
CLP will transfer its interests in the Team to Hoops, all of the limited
partnership interests of which will be held by Hoops Holdings. CLP will hold a
99.999% general partner interest in Parquet, and BCLP will allocate limited
partnership interests in Hoops Holdings between BCLP II (indirectly, through
ownership of BCLP, CLP and Parquet) 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) the single outstanding share of capital stock of
Merger Sub will be converted automatically, by operation of law, into one issued
and outstanding limited partnership unit of BCLP, which will be the sole issued
and outstanding limited partnership unit of BCLP.
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> 149
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, BCLP GP will be the indirect owner, through
Shamrock 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"). Shamrock 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, or some
combination of Castle Creek Interests or Debentures, 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 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 ("Election Deadline") that is [30] days
after the Mailing Date. Eligible Unitholders who make no timely election
will receive distributions of Debentures with respect to all of their BCLP
Units.
(e) UNITHOLDER CONSENTS. BCLP GP 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").
B-3
<PAGE> 150
(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 ("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 Hoops Holding, 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
Hoops 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 Hoops 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. For each Debenture Unit, BCLP will distribute one
Debenture 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) the single outstanding share of capital stock of Merger Sub will be
converted automatically, by operation of law, into one issued and outstanding
limited partnership unit of BCLP, which will be the sole issued and outstanding
limited partnership unit of BCLP.
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 Section [3] 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
B-4
<PAGE> 151
and waiver of any such provisions in order to effectuate the Reorganization and
(ii) a ratification and approval of BCLP GP'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; Parquet 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, any other stock exchange or the
National Association of Securities Dealers Automated Quotations system
("NASDAQ") or other public trading market, 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 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.
To the extent that tax benefits (including refunds, credits or other
reductions) are realized by BCLP with respect to periods prior to the Effective
Date, BCLP will pay Castle Creek a proportionate amount of such tax benefits
that is equal to the Proportionate Election.
B-6
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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 or the NASDAQ or other public trading
market, 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 BCLP 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 (in reliance upon the opinion of Morris, Nichols, Arsht &
Tunnell) 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.
B-7
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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 BCLP GP.
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.
B-8
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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
B-9
<PAGE> 156
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
B-10
<PAGE> 157
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
B-11
<PAGE> 158
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 (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) Each share of MergerCo Common Stock issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued unit of
beneficial interest in a limited partnership interest in the Surviving Entity.
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 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 such taxes have been paid or are not applicable. The
transfer books for units of BCLP will be deemed to be
B-12
<PAGE> 159
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> 160
(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> 161
EXHIBIT B
REORGANIZATION TRANSACTIONS
The Reorganization is to be accomplished through the following steps:
(a) the contribution of approximately $6,400,000 in cash (the "Cash
Transfer Amount") to CLP by BCLP;
(b) CLP's contribution of the Team to Hoops;
(c) BCLP's contribution of approximately $40,900,000 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
Hoops and the Cash Transfer Amount to Hoops Holdings;
(e) the purchase by Hoops Holdings of a certain investment asset (the "Hood
Asset") from CCC for the Cash Transfer Amount;
(f) the distribution by CLP of (i) 99% of 50.0477% of its limited
partnership interest in Hoops Holdings to BCLP (the "CLP-BCLP Distribution"),
and (ii) 1% of 50.0477% of its limited partnership interests in Hoops Holdings
to CLP GP (the "CLP-CLP GP Distribution");
(g) 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;
(h) the contribution by CLP GP of the CLP-CLP GP Distribution to Castle
Creek in exchange for Castle Creek Interests;
(i) the contribution by CLP of the remainder of its limited partnership
interests in Hoops Holdings to Parquet;
(j) the distribution by BCLP of all of the issued and outstanding stock of
Castle Creek GP to BCLP GP;
(k) the contribution by BCLP GP of its 1% general partner interest in BCLP
to Shamrock GP;
(l) the contribution by BCLP II GP of $200,000 in cash to BCLP II, subject
to later payment of an additional contribution based on market trading prices;
(m) 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;
(n) the distribution by BCLP to BCLP Unitholders who so elect of Castle
Creek Interests;
(o) 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
(p) the merger of Merger Sub with and into BCLP, with BCLP being the
surviving entity, pursuant to the Merger Agreement.
B-16
<PAGE> 162
======================================================
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.......................... 25
Voting Information........................ 33
Special Factors........................... 34
Comparison of Interests and Securities to
be Issued............................... 44
Certain Federal Income Tax Consequences... 48
Market Prices and Distributions........... 59
Capitalization............................ 60
Selected Historical Consolidated Financial
Data.................................... 61
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 62
Business.................................. 66
Management................................ 72
Description of BCLP II Units.............. 79
Description of Castle Creek Interests..... 86
Description of Subordinated Debentures.... 93
Legal Matters............................. 101
Experts................................... 101
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
------------------------
APRIL , 1998
======================================================
<PAGE> 163
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act
provides that, subject to such standards and restrictions, if any, as are set
forth in its partnership agreement, a limited partnership may, and shall have
the power to, indemnify and hold harmless any partner or other person from and
against any claims and demands whatsoever.
Section 7.10 of the BCLP's Amended and Restated Agreement of Limited
Partnership provides that, to the maximum extent permitted by law, BCLP shall
indemnify and hold harmless the General Partners (Celtics, Inc. and any
successor or additional general partner admitted to the partnership), their
Affiliates and all officers, directors, employees and agents of the General
Partners and their Affiliates (each an "Indemnitee") from and against any and
all losses, claims, demands, costs and other amounts arising from any and all
claims, demands, actions, suits or proceedings, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, in connection
with the business of the Registrant.
The Agreement of Limited Partnership of BCLP II provides that BCLP II shall
indemnify and hold harmless the General Partner and the officers, directors,
stockholders, members, managers or partners of any non-individual Partner
against any and all losses, claims, damages, expenses, and liabilities of any
kind or nature that any such person may become subject to or liable for by
reason of the formation, operation or termination of BCLP II, or such person's
acting as a Partner under the Agreement, or the authorized actions of such
person in connection with the conduct of the affairs of BCLP II.
The Agreement of Limited Partnership of Castle Creek provides that Castle
Creek shall indemnify and hold harmless the General Partner and the officers,
directors, stockholders, members, managers or partners of any non-individual
Partner against any and all losses, claims, damages, expenses, and liabilities
of any kind or nature that any such person may become subject to or liable for
by reason of the formation, operation or termination of Castle Creek, or such
person's acting as a Partner under the Agreement, or the authorized actions of
such person in connection with the conduct of the affairs of Castle Creek.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of April 14,
1998, among Boston Celtics Limited Partnership, 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.
2.2 Agreement and Plan of Merger of BCLP Merger, Inc. and Boston
Celtics Limited Partnership, dated as of April 14,1998.
3.1 Agreement of Limited Partnership of Boston Celtics Limited
Partnership II, dated as of April 13, 1998.
3.2 Agreement of Limited Partnership of Castle Creek Partners,
L.P., dated as of April 13, 1998.
3.3 Certificate of Incorporation of BCLP II GP, Inc., dated as
of April 13, 1998.
3.4 Certificate of Incorporation of Castle Creek GP, Inc., dated
as of April 13, 1998.
3.5 Bylaws of BCLP II GP, Inc.
3.6 Bylaws of Castle Creek GP, Inc.
4.1 Form of Indenture between Boston Celtics Limited Partnership
and , as Trustee, dated as of ,
1998.
5.1* Opinion of Gibson, Dunn & Crutcher LLP.
8.1* Opinion of Roberts & Holland LLP.
12.1 Statement regarding Computation of Ratio of Earnings to
Fixed Charges.
</TABLE>
II-1
<PAGE> 164
<TABLE>
<C> <S>
21.1* Subsidiaries of BCLP.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Gibson, Dunn & Crutcher LLP (included in its
opinion filed as Exhibit 5.1 hereto).
23.3* Consent of Roberts & Holland LLP.
24.1 Powers of Attorney (included on the signature page hereto).
25.1* Statement of eligibility of Trustee under the Indenture, on
Form T-1.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
*To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules are omitted because of the absence of conditions under which they
are required or because the required information is given in the financial
statements or notes thereto.
(C) OPINION MATERIALLY RELATING TO THE TRANSACTION
None.
ITEM 22. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decreased in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form or
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
II-2
<PAGE> 165
(3) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(4) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(5) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of an included
in the registration statement when it became effective.
(6) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrants have
duly caused this registration statement to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on April 17, 1998.
BOSTON CELTICS LIMITED PARTNERSHIP
By: Celtics, Inc.
Its: General Partner
By: /s/ PAUL E. GASTON
------------------------------------
PAUL E. GASTON
Its: Chairman of the Board of
Directors
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul E. Gaston and Richard G. Pond, and
each of them, his attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for him in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully as to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ PAUL E. GASTON Chairman of the Board of April 17, 1998
- ----------------------------------------------------- Directors (Principal
PAUL E. GASTON Executive Officer)
/s/ RICHARD G. POND Executive Vice President, April 17, 1998
- ----------------------------------------------------- Chief Operating Officer,
RICHARD G. POND Chief Financial Officer,
Treasurer and Secretary
(Principal Financial
Officer)
/s/ WILLIAM J. REISSFELDER Vice President and Controller April 17, 1998
- ----------------------------------------------------- (Principal Accounting
WILLIAM J. REISSFELDER Officer)
/s/ DON F. GASTON Director April 17, 1998
- -----------------------------------------------------
DON F. GASTON
/s/ PAULA B. GASTON Director April 17, 1998
- -----------------------------------------------------
PAULA B. GASTON
/s/ JOHN H.M. LEITHEAD Director April 17, 1998
- -----------------------------------------------------
JOHN H.M. LEITHEAD
/s/ JOHN B. MARSH, III Director April 17, 1998
- -----------------------------------------------------
JOHN B. MARSH, III
</TABLE>
II-4
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrants have
duly caused this registration statement to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on April 17, 1998.
BOSTON CELTICS LIMITED PARTNERSHIP II
By: BCLP II GP, Inc.
Its: General Partner
By: /s/ PAUL E. GASTON
------------------------------------
PAUL E. GASTON
Its: Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul E. Gaston and Richard G. Pond, and
each of them, his attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for him in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully as to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ PAUL E. GASTON Chairman of the Board of April 17, 1998
- ----------------------------------------------------- Directors (Principal
PAUL E. GASTON Executive Officer)
/s/ RICHARD G. POND Executive Vice President, April 17, 1998
- ----------------------------------------------------- Chief Operating Officer,
RICHARD G. POND Chief Financial Officer,
Treasurer and Secretary
(Principal Financial
Officer)
/s/ WILLIAM J. REISSFELDER Vice President and Controller April 17, 1998
- ----------------------------------------------------- (Principal Accounting
WILLIAM J. REISSFELDER Officer)
/s/ DON F. GASTON Director April 17, 1998
- -----------------------------------------------------
DON F. GASTON
/s/ PAULA B. GASTON Director April 17, 1998
- -----------------------------------------------------
PAULA B. GASTON
/s/ JOHN H.M. LEITHEAD Director April 17, 1998
- -----------------------------------------------------
JOHN H.M. LEITHEAD
/s/ JOHN B. MARSH, III Director April 17, 1998
- -----------------------------------------------------
JOHN B. MARSH, III
</TABLE>
II-5
<PAGE> 168
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrants have
duly caused this registration statement to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on April 17, 1998.
CASTLE CREEK PARTNERS, L.P.
By: Castle Creek GP, Inc.
Its: General Partner
By: /s/ PAUL E. GASTON
------------------------------------
PAUL E. GASTON
Its: Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul E. Gaston and Richard G. Pond, and
each of them, his attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for him in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully as to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ PAUL E. GASTON Chairman of the Board of April 17, 1998
- ----------------------------------------------------- Directors (Principal
PAUL E. GASTON Executive Officer)
/s/ RICHARD G. POND Executive Vice President, April 17, 1998
- ----------------------------------------------------- Chief Operating Officer,
RICHARD G. POND Chief Financial Officer,
Treasurer and Secretary
(Principal Financial
Officer)
/s/ WILLIAM J. REISSFELDER Vice President and Controller April 17, 1998
- ----------------------------------------------------- (Principal Accounting
WILLIAM J. REISSFELDER Officer)
/s/ DON F. GASTON Director April 17, 1998
- -----------------------------------------------------
DON F. GASTON
/s/ PAULA B. GASTON Director April 17, 1998
- -----------------------------------------------------
PAULA B. GASTON
/s/ JOHN H.M. LEITHEAD Director April 17, 1998
- -----------------------------------------------------
JOHN H.M. LEITHEAD
/s/ JOHN B. MARSH, III Director April 17, 1998
- -----------------------------------------------------
JOHN B. MARSH, III
</TABLE>
II-6
<PAGE> 169
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
- ------- ----------- -----------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization, dated as of April 14,
1998, among Boston Celtics Limited Partnership, 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.
2.2 Agreement and Plan of Merger of BCLP Merger, Inc. and Boston
Celtics Limited Partnership, dated as of April 14,1998.
3.1 Agreement of Limited Partnership of Boston Celtics Limited
Partnership II, dated as of April 13, 1998.
3.2 Agreement of Limited Partnership of Castle Creek Partners,
L.P., dated as of April 13, 1998.
3.3 Certificate of Incorporation of BCLP II GP, Inc., dated as
of April 13, 1998.
3.4 Certificate of Incorporation of Castle Creek GP, Inc., dated
as of April 13, 1998.
3.5 Bylaws of BCLP II GP, Inc.
3.6 Bylaws of Castle Creek GP, Inc.
4.1 Form of Indenture between Boston Celtics Limited Partnership
and , as Trustee, dated as of ,
1998.
5.1* Opinion of Gibson, Dunn & Crutcher LLP.
8.1* Opinion of Roberts & Holland LLP.
12.1 Statement regarding Computation of Ratio of Earnings to
Fixed Charges.
21.1* Subsidiaries of BCLP.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Gibson, Dunn & Crutcher LLP (included in its
opinion filed as Exhibit 5.1 hereto).
23.3* Consent of Roberts & Holland LLP.
24.1 Powers of Attorney (included on the signature page hereto).
25.1* Statement of eligibility of Trustee under the Indenture, on
Form T-1.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
*To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 14, 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 GP"); 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").
B A C K G R O U N D
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"); Parquet GP, a Delaware general partnership ("Parquet"); Hoops Holdings
LP, a Delaware limited partnership ("Hoops Holdings"); Hoops LP, a Delaware
limited partnership ("Hoops"); Hoops Holdings GP, Inc., a Delaware corporation
and the general partner of Hoops Holdings ("Hoops Holdings GP"); Hoops GP, Inc.,
a Delaware corporation and the general partner of Hoops ("Hoops GP"); Shamrock
GP, Inc., a Delaware corporation ("Shamrock GP").
CLP will transfer its interests in the Team to Hoops, all of the limited
partnership interests of which will be held by Hoops Holdings. CLP will hold a
99.999% general partner interest in Parquet, and BCLP will allocate limited
partnership interests in Hoops Holdings between BCLP II (indirectly, through
ownership of BCLP, CLP and Parquet) 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."
<PAGE> 2
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 of units of
BCLP II ("BCLP II Units"); and (ii) the single outstanding share of capital
stock of Merger Sub will be converted automatically, by operation of law, into
one issued and outstanding limited partnership unit of BCLP, which will be the
sole issued and outstanding limited partnership unit of BCLP.
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 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, BCLP GP will be the indirect owner, through
Shamrock 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"). Shamrock 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
2
<PAGE> 3
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, or some combination of Castle Creek
Interests or Debentures, 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 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 agend must receive completed election
forms from Eligible Unitholders on or before the date ("Election Deadline") that
is [30] days after the Mailing Date. Eligible Unitholders who make no timely
election will receive distributions of Debentures with respect to all of their
BCLP Units.
(e) UNITHOLDER CONSENTS. BCLP GP 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").
(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 ("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
Hoops Holding, 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
3
<PAGE> 4
(b) multiplying the Fraction times (i) the total amount of net investment assets
of BCLP, (ii) 100% of the limited partnership interests in Hoops 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 Hoops 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. For each Debenture Unit, BCLP will distribute one
Debenture 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) the single outstanding share of capital stock of Merger Sub will be
converted automatically, by operation of law, into one issued and outstanding
limited partnership unit of BCLP, which will be the sole issued and outstanding
limited partnership unit of BCLP.
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 Section [3] 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 and waiver
of any such provisions in
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<PAGE> 5
order to effectuate the Reorganization and (ii) a ratification and approval of
BCLP GP'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; Parquet 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
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<PAGE> 6
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.
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, any other stock exchange or the
National Association of Securities Dealers Automated Quotations system
("NASDAQ") or other public trading market, 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
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<PAGE> 7
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 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.
To the extent that tax benefits (including refunds, credits or other
reductions) are realized by BCLP with respect to periods prior to the Effective
Date, BCLP will pay Castle Creek a proportionate amount of such tax benefits
that is equal to the Proportionate Election.
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
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<PAGE> 8
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 or the NASDAQ or other public trading market,
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
BCLP 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 (in reliance upon the opinion of Morris, Nichols, Arsht & Tunnell)
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 BCLP GP.
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.
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<PAGE> 10
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.
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.
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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
11
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CELTICS LIMITED PARTNERSHIP
By: Boston Celtics Corporation, its General Partner
By:
-------------------------------------------
Richard G. Pond
Executive Vice President,
Chief Operating Officer,
Treasurer and Secretary
CELTICS CAPITAL CORPORATION
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:
-----------------------------------------------
Richard G. Pond
Executive Vice President,
Chief Operating Officer,
Treasurer and Secretary
12
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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
13
<PAGE> 14
EXHIBIT A
PLAN AND AGREEMENT OF MERGER
<PAGE> 15
EXHIBIT B
REORGANIZATION TRANSACTIONS
The Reorganization is to be accomplished through the following steps:
(a) the contribution of approximately $6,400,000 in cash (the "Cash
Transfer Amount") to CLP by BCLP;
(b) CLP's contribution of the Team to Hoops;
(c) BCLP's contribution of approximately $40,900,000 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 Hoops and the Cash Transfer Amount to Hoops Holdings;
(e) the purchase by Hoops Holdings of a certain investment asset (the
"Hood Asset") from CCC for the Cash Transfer Amount;
(f) the distribution by CLP of (i) 99% of 50.0477% of its limited
partnership interest in Hoops Holdings to BCLP (the "CLP-BCLP Distribution"),
and (ii) 1% of 50.0477% of its limited partnership interests in Hoops Holdings
to CLP GP (the "CLP-CLP GP Distribution");
(g) 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;
(h) the contribution by CLP GP of the CLP-CLP GP Distribution to Castle
Creek in exchange for Castle Creek Interests;
(i) the contribution by CLP of the remainder of its limited partnership
interests in Hoops Holdings to Parquet;
(j) the distribution by BCLP of all of the issued and outstanding stock
of Castle Creek GP to BCLP GP;
(k) the contribution by BCLP GP of its 1% general partner interest in
BCLP to Shamrock GP;
<PAGE> 16
(l) the contribution by BCLP II GP of $200,000 in cash to BCLP II,
subject to later payment of an additional contribution based on market trading
prices;
(m) 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;
(n) the distribution by BCLP to BCLP Unitholders who so elect of Castle
Creek Interests;
(o) 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
(p) the merger of Merger Sub with and into BCLP, with BCLP being the
surviving entity, pursuant to the Merger Agreement.
<PAGE> 1
EXHIBIT 2.2
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;
<PAGE> 2
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 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 (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) Each share of MergerCo Common Stock issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued unit of
beneficial interest in a limited partnership interest in the Surviving Entity.
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<PAGE> 3
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 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 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.
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<PAGE> 4
(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.
(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.
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<PAGE> 5
(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
By: ___________________________________
Celtics, Inc.
Its: General Partner
By:______________________________
Richard G. Pond
Its: Executive Vice President, Chief
Operating Officer, Treasurer and
Secretary
5
<PAGE> 1
EXHIBIT 3.1
AGREEMENT OF LIMITED PARTNERSHIP
OF
BOSTON CELTICS LIMITED PARTNERSHIP II
THE UNDERSIGNED are executing this Agreement of Limited Partnership
("Agreement") for the purpose of forming a limited partnership (the
"Partnership") pursuant to the provisions of the Delaware Revised Uniform
Limited Partnership Act, 6 DEL. C. secs. 17-101 ET SEQ. (the "LP Act"), and do
hereby certify and agree as follows:
1. NAME. The name of the Partnership shall be Boston Celtics Limited
Partnership II, or such other name as the General Partners may from time to time
hereafter designate.
2. DEFINITIONS. In addition to terms otherwise defined herein, the
following terms are used herein as defined below:
"Capital Contribution" means, with respect to any Partner, the amount of
capital contributed by such Partner to the Partnership in accordance with
Section 8 hereof.
"Event of Withdrawal of a General Partner" means an event that causes a
person or entity to cease to be a General Partner as provided in Section 17-402
of the LP Act.
"General Partners" means the Initial General Partners and any or all
other persons or entities admitted as General Partners pursuant to the
provisions of this Agreement, so long as they remain General Partners. Reference
to a "General Partner" means any one of the General Partners.
"Initial General Partner" means BCLP II GP, Inc.
"Initial Limited Partner" means Boston Celtics Limited Partnership.
"Interest" means the ownership interest of a Partner in the Partnership
(which shall be considered personal property for all purposes), consisting of
(i) such Partner's Percentage Interest in profits, losses, allocations and
distributions, (ii) such Partner's right to vote or grant or withhold consents
with respect to Partnership matters as provided herein or in the LP Act, and
(iii) such Partner's other rights and privileges as herein provided.
"Limited Partners" means the Initial Limited Partners and all other
persons or entities admitted as additional or substituted Limited Partners
pursuant to this Agreement, so long as they remain Limited Partners. Reference
to a "Limited Partner" means any one of the Limited Partners.
"Majority in Interest of the Limited Partners" means Limited Partners
whose Percentage Interests aggregate to greater than 50% of the Percentage
Interests of all Limited Partners.
"Partners" means those persons or entities who from time to time are the
General Partners and the Limited Partners. Reference to a "Partner" means any
one of the Partners.
<PAGE> 2
"Percentage Interest" means a Partner's share of the profits and losses
of the Partnership and the Partner's percentage right to receive distributions
of Partnership assets. The Percentage Interest of each Partner shall be the
percentage set forth opposite such Partner's name on Schedule I hereto, as such
schedule shall be amended from time to time in accordance with the provisions
hereof. The combined Percentage Interest of all Partners shall at all times
equal 100%.
Words used herein, regardless of the number and gender used, shall be
deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires, and, as
used herein, unless the context clearly requires otherwise, the words "hereof,"
"herein," and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provisions hereof.
3. PURPOSE. The purposes of the Partnership shall be
(a) the acquisition, ownership and operation of the Boston Celtics
professional basketball team of the NBA, including the management and operation
of basketball games, the licensing and exploitation of television, cable,
network and radio rights to broadcast basketball games, the acquisition and
disposition of player contracts, the leasing, licensing, construction and/or
acquisition of facilities, properties and/or space in which to play basketball
games and conduct the Partnership's operations, the licensing and use of the
Boston Celtics name for promotional and other purposes, and the participation in
the NBA as an NBA member; the carrying on of any other business relating or
incidental to the ownership and operation of the Boston Celtics professional
basketball team; the entering into any partnership, joint venture or other
similar arrangement to engage in any of the foregoing activities; and any
activities incidental or related to the foregoing activities;
(b) the development, acquisition, ownership and operation of other
businesses and activities, including without limitation the ownership and
operation of other sports teams, over-the-air or cable television stations or
networks, radio stations or networks, or other entertainment or communications
businesses; the carrying on of any other business relating or incidental to such
activities; the entering into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing activities; and any activities
incidental or related to the foregoing activities; and
(c) engaging in such additional or other businesses as may be agreed upon
by all of the General Partners and a Majority in Interest of the Limited
Partners from time to time. In addition to the foregoing business activities,
the Partnership may engage in businesses and activities incidental thereto, so
far as such businesses and activities are necessary or convenient to the
conduct, promotion or attainment of the stated purposes of the Partnership.
4. OFFICES.
The principal office of the Partnership, and such additional offices as
the General Partners may determine to establish, shall be located at such place
or places inside or outside the State of Delaware as the General Partners may
designate from time to time.
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<PAGE> 3
The registered office of the Partnership in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The registered agent of the Partnership for service of
process at such address is The Corporation Trust Company.
5. PARTNERS. The name and business or residence address of each Partner
of the Partnership, the General Partners and the Limited Partners being
separately designated, are as set forth on Schedule I attached hereto, as the
same may be amended from time to time.
6. TERM. The Partnership shall continue until dissolved and terminated in
accordance with Section 14 of this Agreement.
7. MANAGEMENT OF THE PARTNERSHIP.
The General Partners shall have the exclusive right to manage the
business of the Partnership, and shall have all powers and rights necessary,
appropriate or advisable to effectuate and carry out the purposes and business
of the Partnership and, in general, all powers permitted to be exercised by a
general partner under the LP Act. The General Partners may appoint, employ, or
otherwise contract with any persons or entities for the transaction of the
business of the Partnership or the performance of services for or on behalf of
the Partnership, and the General Partners may delegate to any such person (who
may be designated an officer of the Partnership) or entity such authority to act
on behalf of the Partnership as the General Partners may from time to time deem
appropriate.
Except as to actions herein specified to be taken by all the General
Partners or by the General Partners acting unanimously, whenever there is more
than one General Partner of the Partnership, the duties and powers of the
General Partners may be exercised by any one of the General Partners acting
alone.
No Limited Partner, in his status as such, shall have the right to take
part in the management or control of the business of the Partnership or to act
for or bind the Partnership or otherwise to transact any business on behalf of
the Partnership.
Any action to approve or consent to any matter hereunder or pursuant to
the LP Act by the General Partners, the Limited Partners or all Partners may be
accomplished at a meeting of the applicable Partners, held at such time and
place as shall have been agreed on by them, or by written consent executed by at
least such number or percentage in interest of Partners as is required hereunder
or under the LP Act to approve the matter at issue. Written consents may be
executed and delivered by telecopy or like electronic means.
8. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; ADMINISTRATIVE MATTERS.
The Initial General Partners and the Initial Limited Partners have each
contributed to the Partnership in cash the respective amount set forth on
Schedule I hereto. Except as otherwise consented to by all Partners, the Initial
General Partners and the Initial Limited Partners shall not be required to make
any further contributions to the capital of the Partnership. Persons or entities
hereafter admitted as General Partners or Limited Partners of the Partnership
shall make such
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<PAGE> 4
contributions of cash (or promissory obligations), property or services to the
Partnership as shall be determined by the General Partners, acting unanimously,
at the time of each such admission.
A single, separate capital account shall be maintained for each Partner.
Each Partner's capital account shall be credited with the amount of money and
the fair market value of property (net of any liabilities secured by such
contributed property that the Partnership assumes or takes subject to)
contributed by that Partner to the Partnership; the amount of any Partnership
liabilities assumed by such Partner (other than in connection with a
distribution of Partnership property), and such Partner's distributive share of
Partnership profits (including tax exempt income). Each Partner's capital
account shall be debited with the amount of money and the fair market value of
property (net of any liabilities that such Partner assumes or takes subject to)
distributed to such Partner; the amount of any liabilities of such Partner
assumed by the Partnership (other than in connection with a contribution); and
such Partner's distributive share of Partnership losses (including items that
may be neither deducted nor capitalized for federal income tax purposes).
Notwithstanding any provision of this Agreement to the contrary, each
Partner's capital account shall be maintained and adjusted in accordance with
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and
the regulations thereunder (the "Regulations"), including, without limitation,
(i) the adjustments permitted or required by Internal Revenue Code Section
704(b) and, to the extent applicable, the principles expressed in Internal
Revenue Code Section 704(c) and (ii) adjustments required to maintain capital
accounts in accordance with the "substantial economic effect test" set forth in
the Regulations under Internal Revenue Code Section 704(b).
Any Partner, including any substitute Partner, who shall receive an
Interest (or whose Interest shall be increased) by means of a transfer to him of
all or a part of the Interest of another Partner, shall have a capital account
that reflects the capital account associated with the transferred Interest (or
the applicable percentage thereof in case of a transfer of a part of an
Interest).
The Partnership hereby designates BCLP II GP, Inc. as "Tax Matters
Partner" for purposes of Internal Revenue Code Section 6231 and the Regulations
promulgated thereunder. The Tax Matters Partner shall promptly advise each
Partner of any audit proceedings proposed to be conducted with respect to the
Partnership.
It is the intention of the Partners that the Partnership shall be taxed
as a "partnership" for federal, state, local and foreign income tax purposes.
The Partners agree to take all reasonable actions, including the execution of
such documents, as may reasonably be required in order for the Partnership to
qualify for and receive "partnership" treatment for federal, state, local and
foreign income tax purposes.
The fiscal year of the Partnership shall be a calendar year. The books
and records of the Partnership shall be maintained in accordance with generally
accepted accounting principles and Section 704(b) of the Internal Revenue Code
and the Regulations.
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<PAGE> 5
All items of Partnership income, gain, loss, deduction, credit or the
like shall be allocated among the Partners in accordance with their respective
Percentage Interests as set forth in Schedule I.
9. ASSIGNMENTS OF PARTNERSHIP INTEREST; SUBSTITUTED PARTNERS.
No Limited Partner may sell, assign, pledge or otherwise transfer or
encumber (collectively "transfer") all or any part of his Interest in the
Partnership, and no transferee of all or any part of the Interest of a Limited
Partner shall be admitted as a substituted Limited Partner, without, in either
event, having obtained the prior written consent of all of the General Partners.
No General Partner may transfer all or any part of his Interest in the
Partnership, and no transferee of all or any part of the Interest of a General
Partner shall be admitted as a substituted General Partner, without, in either
event, having obtained the consent of all other General Partners or, if none,
the consent of a Majority in Interest of the Limited Partners.
The General Partners shall amend Schedule I hereto from time to time to
reflect transfers made in accordance with, and as permitted under, this Section
9. Any purported transfer in violation of this Section 9 shall be null and void
and shall not be recognized by the Partnership.
10. WITHDRAWAL. No Partner shall have the right to withdraw from the
Partnership except with the consent of all of the General Partners and upon such
terms and conditions as may be specifically agreed upon between the General
Partners and the withdrawing Partner. The provisions hereof with respect to
distributions upon withdrawal are exclusive and no Partner shall be entitled to
claim any further or different distribution upon withdrawal under Section 17-604
of the LP Act or otherwise.
11. ADDITIONAL PARTNERS. The Partners, acting unanimously, shall have the
right to admit additional General Partners and additional Limited Partners upon
such terms and conditions, at such time or times, and for such capital
contributions as shall be determined by all of the Partners; and in connection
with any such admission, the General Partners shall amend Schedule I hereof to
reflect the name, address and Capital Contribution of the additional Partner and
any agreed upon changes in the Partner's respective Percentage Interests.
12. DISTRIBUTIONS. Distributions of cash or other assets of the
Partnership shall be made at such times and in such amounts as the General
Partners may determine from time to time. Distributions shall be made to (and
profits and losses shall be allocated among) Partners PRO RATA in accordance
with their respective Percentage Interests.
13. RETURN OF CAPITAL. No Partner has the right to receive, and the
General Partners have absolute discretion to make, any distributions to a
Partner which include a return of all or any part of such Partner's Capital
Contribution, provided that upon the dissolution of the Partnership, the assets
of the Partnership shall be distributed as provided in Section 17-804 of the LP
Act. No Partner shall have any personal liability for the return of any
Partner's Capital Contribution. Any return of capital to the Partners shall be
payable solely from the assets of the Partnership.
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<PAGE> 6
14. DISSOLUTION. Subject to the provisions of Section 15 of this
Agreement, the Partnership shall be dissolved and its affairs wound up and
terminated upon the first to occur of the following:
December 31, 2098;
The determination of all of the General Partners to dissolve the
Partnership; or
The occurrence of an Event of Withdrawal of a General Partner or any
other event causing a dissolution of the Partnership under Section 17-801 of the
LP Act.
15. CONTINUATION OF THE PARTNERSHIP. Notwithstanding the provisions of
Section 14(c) hereof, the occurrence of an Event of Withdrawal of a General
Partner shall not dissolve the Partnership if at such time there are one or more
remaining General Partners and any one or more of such remaining General
Partners continue the business of the Partnership (any and all such remaining
General Partners being hereby authorized to continue the business of the
Partnership without dissolution). If upon the occurrence of an Event of
Withdrawal of a General Partner there shall be no remaining General Partner (or
if no remaining General Partner elects to continue the business of the
Partnership as provided in the preceding sentence), the Partnership nonetheless
shall not be dissolved and shall not be required to be wound up if, within
ninety (90) days after the occurrence of such event of withdrawal, all remaining
Partners agree in writing to continue the business of the Partnership and, if
necessary or desired, to the appointment, effective as of the date of
withdrawal, of one or more additional General Partners.
16. AMENDMENTS. This Agreement may be amended only upon the written
consent of all Partners.
17. STANDARD OF CARE; INDEMNIFICATION OF GENERAL PARTNERS, OFFICERS,
EMPLOYEES AND AGENTS.
No General Partner shall have any personal liability whatsoever to the
Partnership or any other Partner by reason of such General Partner's acts or
omissions in connection with the conduct of the business of the Partnership;
provided, however, that nothing contained herein shall protect any General
Partner against any liability to the Partnership or the Partners to which such
General Partner would otherwise be subject by reason of (i) any act or omission
of such Partner that involves actual fraud or willful misconduct or (ii) any
transaction from which such General Partner derived improper personal benefit.
Except as may be limited by mandatory provisions of applicable law, the
Partnership shall indemnify and hold harmless each General Partner and the
officers, directors, stockholders, members, managers or partners of any
non-individual Partner (each an "Indemnified Person") against any and all
losses, claims, damages, expenses and liabilities (including, but not limited
to, any investigation, legal and other reasonable expenses incurred in
connection with, and any amounts paid in settlement of, any action, suit,
proceeding or claim) of any kind or nature whatsoever that such Indemnified
Person may at any time become subject to or liable for by reason of the
formation, operation or termination of the Partnership, or the Indemnified
Person's acting as a Partner under this Agreement, or the authorized actions of
such Indemnified Person in
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<PAGE> 7
connection with the conduct of the affairs of the Partnership (including,
without limitation, indemnification against negligence, gross negligence or
breach of duty); provided, however, that no Indemnified Person shall be entitled
to indemnification if and to the extent that the liability otherwise to be
indemnified for results from (i) any act or omission of such Indemnified Person
that involves actual fraud or willful misconduct or (ii) any transaction from
which such Indemnified Person derived improper personal benefit. The indemnities
provided hereunder shall survive termination of the Partnership and this
Agreement. Each Indemnified Person shall have a claim against the property and
assets of the Partnership for payment of any indemnity amounts from time to time
due hereunder, which amounts shall be paid or properly reserved for prior to the
making of distributions by the Partnership to Partners. Costs and expenses that
are subject to indemnification hereunder shall, at the request of any
Indemnified Person, be advanced by the Partnership to or on behalf of such
Indemnified Person prior to final resolution of a matter, so long as such
Indemnified Person shall have provided the Partnership with a written
undertaking to reimburse the Partnership for all amounts so advanced if it is
ultimately determined that the Indemnified Person is not entitled to
indemnification hereunder.
The contract rights to indemnification and to the advancement of expenses
conferred in this Section 17 shall not be exclusive of any other right that any
person may have or hereafter acquire under any statute, agreement, vote of the
Partners or otherwise.
The Partnership may maintain insurance, at its expense, to protect itself
and any Partner, employee or agent of the Partnership or another partnership,
limited liability company, corporation, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Partnership would
have the power to indemnify such person against such expense, liability or loss
under the LP Act.
The Partnership may, to the extent authorized from time to time by the
General Partners, grant rights to indemnification and to advancement of expenses
to any employee or agent of the Partnership to the fullest extent of the
provisions of this Section 17 with respect to the indemnification and
advancement of expenses of General Partners of the Partnership.
18. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware.
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<PAGE> 8
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of April 13, 1998.
GENERAL PARTNER
BCLP II GP, Inc.
By: /s/ Richard G. Pond
------------------------------
Name: Richard G. Pond
Title: Chief Financial Officer
LIMITED PARTNER
BOSTON CELTICS LIMITED PARTNERSHIP
By: /s/ RICHARD G. POND
------------------------------
Name: Richard G. Pond
Title: Executive Vice President,
Chief Operating Officer,
Treasurer and Secretary
-8-
<PAGE> 9
SCHEDULE I
A. General Partner
Capital Percentage
Name & Address Contribution Interest
BCLP II GP, Inc. $10.00 1%
151 Merrimac Street
Boston, Massachusetts 02114
B. Limited Partner
Capital Percentage
Name & Address Contribution Interest
Boston Celtics Limited Partnership $990.00 99%
33 East 63rd Street
New York, New York 10021
TOTAL $1,000.00 100%
<PAGE> 1
EXHIBIT 3.2
AGREEMENT OF LIMITED PARTNERSHIP
OF
CASTLE CREEK PARTNERS, L.P.
THE UNDERSIGNED are executing this Agreement of Limited Partnership
("Agreement") for the purpose of forming a limited partnership (the
"Partnership") pursuant to the provisions of the Delaware Revised Uniform
Limited Partnership Act, 6 DEL. C. secs. 17-101 ET SEQ. (the "LP Act"), and do
hereby certify and agree as follows:
1. NAME. The name of the Partnership shall be Castle Creek Partners,
L.P., or such other name as the General Partners may from time to time hereafter
designate.
2. DEFINITIONS. In addition to terms otherwise defined herein, the
following terms are used herein as defined below:
"Capital Contribution" means, with respect to any Partner, the amount of
capital contributed by such Partner to the Partnership in accordance with
Section 8 hereof.
"Event of Withdrawal of a General Partner" means an event that causes a
person or entity to cease to be a General Partner as provided in Section 17-402
of the LP Act.
"General Partners" means the Initial General Partners and any or all
other persons or entities admitted as General Partners pursuant to the
provisions of this Agreement, so long as they remain General Partners. Reference
to a "General Partner" means any one of the General Partners.
"Initial General Partner" means Castle Creek Partners GP, Inc.
"Initial Limited Partner" means Boston Celtics Limited Partnership.
"Interest" means the ownership interest of a Partner in the Partnership
(which shall be considered personal property for all purposes), consisting of
(i) such Partner's Percentage Interest in profits, losses, allocations and
distributions, (ii) such Partner's right to vote or grant or withhold consents
with respect to Partnership matters as provided herein or in the LP Act, and
(iii) such Partner's other rights and privileges as herein provided.
"Limited Partners" means the Initial Limited Partners and all other
persons or entities admitted as additional or substituted Limited Partners
pursuant to this Agreement, so long as they remain Limited Partners. Reference
to a "Limited Partner" means any one of the Limited Partners.
"Majority in Interest of the Limited Partners" means Limited Partners
whose Percentage Interests aggregate to greater than 50% of the Percentage
Interests of all Limited Partners.
"Partners" means those persons or entities who from time to time are the
General Partners and the Limited Partners. Reference to a "Partner" means any
one of the Partners.
<PAGE> 2
"Percentage Interest" means a Partner's share of the profits and losses
of the Partnership and the Partner's percentage right to receive distributions
of Partnership assets. The Percentage Interest of each Partner shall be the
percentage set forth opposite such Partner's name on Schedule I hereto, as such
schedule shall be amended from time to time in accordance with the provisions
hereof. The combined Percentage Interest of all Partners shall at all times
equal 100%.
Words used herein, regardless of the number and gender used, shall be
deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires, and, as
used herein, unless the context clearly requires otherwise, the words "hereof,"
"herein," and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provisions hereof.
3. PURPOSE. The purposes of the Partnership shall be
(a) the acquisition, ownership and operation of the Boston Celtics
professional basketball team of the NBA, including the management and operation
of basketball games, the licensing and exploitation of television, cable,
network and radio rights to broadcast basketball games, the acquisition and
disposition of player contracts, the leasing, licensing, construction and/or
acquisition of facilities, properties and/or space in which to play basketball
games and conduct the Partnership's operations, the licensing and use of the
Boston Celtics name for promotional and other purposes, and the participation in
the NBA as an NBA member; the carrying on of any other business relating or
incidental to the ownership and operation of the Boston Celtics professional
basketball team; the entering into any partnership, joint venture or other
similar arrangement to engage in any of the foregoing activities; and any
activities incidental or related to the foregoing activities;
(b) the development, acquisition, ownership and operation of other
businesses and activities, including without limitation the ownership and
operation of other sports teams, over-the-air or cable television stations or
networks, radio stations or networks, or other entertainment or communications
businesses; the carrying on of any other business relating or incidental to such
activities; the entering into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing activities; and any activities
incidental or related to the foregoing activities; and
(c) engaging in such additional or other businesses as may be agreed upon
by all of the General Partners and a Majority in Interest of the Limited
Partners from time to time. In addition to the foregoing business activities,
the Partnership may engage in businesses and activities incidental thereto, so
far as such businesses and activities are necessary or convenient to the
conduct, promotion or attainment of the stated purposes of the Partnership.
4. OFFICES.
The principal office of the Partnership, and such additional offices as
the General Partners may determine to establish, shall be located at such place
or places inside or outside the State of Delaware as the General Partners may
designate from time to time.
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<PAGE> 3
The registered office of the Partnership in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The registered agent of the Partnership for service of
process at such address is The Corporation Trust Company.
5. PARTNERS. The name and business or residence address of each Partner
of the Partnership, the General Partners and the Limited Partners being
separately designated, are as set forth on Schedule I attached hereto, as the
same may be amended from time to time.
6. TERM. The Partnership shall continue until dissolved and terminated in
accordance with Section 14 of this Agreement.
7. MANAGEMENT OF THE PARTNERSHIP.
The General Partners shall have the exclusive right to manage the
business of the Partnership, and shall have all powers and rights necessary,
appropriate or advisable to effectuate and carry out the purposes and business
of the Partnership and, in general, all powers permitted to be exercised by a
general partner under the LP Act. The General Partners may appoint, employ, or
otherwise contract with any persons or entities for the transaction of the
business of the Partnership or the performance of services for or on behalf of
the Partnership, and the General Partners may delegate to any such person (who
may be designated an officer of the Partnership) or entity such authority to act
on behalf of the Partnership as the General Partners may from time to time deem
appropriate.
Except as to actions herein specified to be taken by all the General
Partners or by the General Partners acting unanimously, whenever there is more
than one General Partner of the Partnership, the duties and powers of the
General Partners may be exercised by any one of the General Partners acting
alone.
No Limited Partner, in his status as such, shall have the right to take
part in the management or control of the business of the Partnership or to act
for or bind the Partnership or otherwise to transact any business on behalf of
the Partnership.
Any action to approve or consent to any matter hereunder or pursuant to
the LP Act by the General Partners, the Limited Partners or all Partners may be
accomplished at a meeting of the applicable Partners, held at such time and
place as shall have been agreed on by them, or by written consent executed by at
least such number or percentage in interest of Partners as is required hereunder
or under the LP Act to approve the matter at issue. Written consents may be
executed and delivered by telecopy or like electronic means.
8. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; ADMINISTRATIVE MATTERS.
The Initial General Partners and the Initial Limited Partners have each
contributed to the Partnership in cash the respective amount set forth on
Schedule I hereto. Except as otherwise consented to by all Partners, the Initial
General Partners and the Initial Limited Partners shall not be required to make
any further contributions to the capital of the Partnership. Persons or entities
hereafter admitted as General Partners or Limited Partners of the Partnership
shall make such
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<PAGE> 4
contributions of cash (or promissory obligations), property or services to the
Partnership as shall be determined by the General Partners, acting unanimously,
at the time of each such admission.
A single, separate capital account shall be maintained for each Partner.
Each Partner's capital account shall be credited with the amount of money and
the fair market value of property (net of any liabilities secured by such
contributed property that the Partnership assumes or takes subject to)
contributed by that Partner to the Partnership; the amount of any Partnership
liabilities assumed by such Partner (other than in connection with a
distribution of Partnership property), and such Partner's distributive share of
Partnership profits (including tax exempt income). Each Partner's capital
account shall be debited with the amount of money and the fair market value of
property (net of any liabilities that such Partner assumes or takes subject to)
distributed to such Partner; the amount of any liabilities of such Partner
assumed by the Partnership (other than in connection with a contribution); and
such Partner's distributive share of Partnership losses (including items that
may be neither deducted nor capitalized for federal income tax purposes).
Notwithstanding any provision of this Agreement to the contrary, each
Partner's capital account shall be maintained and adjusted in accordance with
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and
the regulations thereunder (the "Regulations"), including, without limitation,
(i) the adjustments permitted or required by Internal Revenue Code Section
704(b) and, to the extent applicable, the principles expressed in Internal
Revenue Code Section 704(c) and (ii) adjustments required to maintain capital
accounts in accordance with the "substantial economic effect test" set forth in
the Regulations under Internal Revenue Code Section 704(b).
Any Partner, including any substitute Partner, who shall receive an
Interest (or whose Interest shall be increased) by means of a transfer to him of
all or a part of the Interest of another Partner, shall have a capital account
that reflects the capital account associated with the transferred Interest (or
the applicable percentage thereof in case of a transfer of a part of an
Interest).
The Partnership hereby designates Castle Creek Partners GP, Inc. as "Tax
Matters Partner" for purposes of Internal Revenue Code Section 6231 and the
Regulations promulgated thereunder. The Tax Matters Partner shall promptly
advise each Partner of any audit proceedings proposed to be conducted with
respect to the Partnership.
It is the intention of the Partners that the Partnership shall be taxed
as a "partnership" for federal, state, local and foreign income tax purposes.
The Partners agree to take all reasonable actions, including the execution of
such documents, as may reasonably be required in order for the Partnership to
qualify for and receive "partnership" treatment for federal, state, local and
foreign income tax purposes.
The fiscal year of the Partnership shall be a calendar year. The books
and records of the Partnership shall be maintained in accordance with generally
accepted accounting principles and Section 704(b) of the Internal Revenue Code
and the Regulations.
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<PAGE> 5
All items of Partnership income, gain, loss, deduction, credit or the
like shall be allocated among the Partners in accordance with their respective
Percentage Interests as set forth in Schedule I.
9. ASSIGNMENTS OF PARTNERSHIP INTEREST; SUBSTITUTED PARTNERS.
No Limited Partner may sell, assign, pledge or otherwise transfer or
encumber (collectively "transfer") all or any part of his Interest in the
Partnership, and no transferee of all or any part of the Interest of a Limited
Partner shall be admitted as a substituted Limited Partner, without, in either
event, having obtained the prior written consent of all of the General Partners.
No General Partner may transfer all or any part of his Interest in the
Partnership, and no transferee of all or any part of the Interest of a General
Partner shall be admitted as a substituted General Partner, without, in either
event, having obtained the consent of all other General Partners or, if none,
the consent of a Majority in Interest of the Limited Partners.
The General Partners shall amend Schedule I hereto from time to time to
reflect transfers made in accordance with, and as permitted under, this Section
9. Any purported transfer in violation of this Section 9 shall be null and void
and shall not be recognized by the Partnership.
10. WITHDRAWAL. No Partner shall have the right to withdraw from the
Partnership except with the consent of all of the General Partners and upon such
terms and conditions as may be specifically agreed upon between the General
Partners and the withdrawing Partner. The provisions hereof with respect to
distributions upon withdrawal are exclusive and no Partner shall be entitled to
claim any further or different distribution upon withdrawal under Section 17-604
of the LP Act or otherwise.
11. ADDITIONAL PARTNERS. The Partners, acting unanimously, shall have the
right to admit additional General Partners and additional Limited Partners upon
such terms and conditions, at such time or times, and for such capital
contributions as shall be determined by all of the Partners; and in connection
with any such admission, the General Partners shall amend Schedule I hereof to
reflect the name, address and Capital Contribution of the additional Partner and
any agreed upon changes in the Partner's respective Percentage Interests.
12. DISTRIBUTIONS. Distributions of cash or other assets of the
Partnership shall be made at such times and in such amounts as the General
Partners may determine from time to time. Distributions shall be made to (and
profits and losses shall be allocated among) Partners PRO RATA in accordance
with their respective Percentage Interests.
13. RETURN OF CAPITAL. No Partner has the right to receive, and the
General Partners have absolute discretion to make, any distributions to a
Partner which include a return of all or any part of such Partner's Capital
Contribution, provided that upon the dissolution of the Partnership, the assets
of the Partnership shall be distributed as provided in Section 17-804 of the LP
Act. No Partner shall have any personal liability for the return of any
Partner's Capital Contribution. Any return of capital to the Partners shall be
payable solely from the assets of the Partnership.
-5-
<PAGE> 6
14. DISSOLUTION. Subject to the provisions of Section 15 of this
Agreement, the Partnership shall be dissolved and its affairs wound up and
terminated upon the first to occur of the following:
December 31, 2098;
The determination of all of the General Partners to dissolve the
Partnership; or
The occurrence of an Event of Withdrawal of a General Partner or any
other event causing a dissolution of the Partnership under Section 17-801 of the
LP Act.
15. CONTINUATION OF THE PARTNERSHIP. Notwithstanding the provisions of
Section 14(c) hereof, the occurrence of an Event of Withdrawal of a General
Partner shall not dissolve the Partnership if at such time there are one or more
remaining General Partners and any one or more of such remaining General
Partners continue the business of the Partnership (any and all such remaining
General Partners being hereby authorized to continue the business of the
Partnership without dissolution). If upon the occurrence of an Event of
Withdrawal of a General Partner there shall be no remaining General Partner (or
if no remaining General Partner elects to continue the business of the
Partnership as provided in the preceding sentence), the Partnership nonetheless
shall not be dissolved and shall not be required to be wound up if, within
ninety (90) days after the occurrence of such event of withdrawal, all remaining
Partners agree in writing to continue the business of the Partnership and, if
necessary or desired, to the appointment, effective as of the date of
withdrawal, of one or more additional General Partners.
16. AMENDMENTS. This Agreement may be amended only upon the written
consent of all Partners.
17. STANDARD OF CARE; INDEMNIFICATION OF GENERAL PARTNERS, OFFICERS,
EMPLOYEES AND AGENTS.
No General Partner shall have any personal liability whatsoever to the
Partnership or any other Partner by reason of such General Partner's acts or
omissions in connection with the conduct of the business of the Partnership;
provided, however, that nothing contained herein shall protect any General
Partner against any liability to the Partnership or the Partners to which such
General Partner would otherwise be subject by reason of (i) any act or omission
of such Partner that involves actual fraud or willful misconduct or (ii) any
transaction from which such General Partner derived improper personal benefit.
Except as may be limited by mandatory provisions of applicable law, the
Partnership shall indemnify and hold harmless each General Partner and the
officers, directors, stockholders, members, managers or partners of any
non-individual Partner (each an "Indemnified Person") against any and all
losses, claims, damages, expenses and liabilities (including, but not limited
to, any investigation, legal and other reasonable expenses incurred in
connection with, and any amounts paid in settlement of, any action, suit,
proceeding or claim) of any kind or nature whatsoever that such Indemnified
Person may at any time become subject to or liable for by reason of the
formation, operation or termination of the Partnership, or the Indemnified
Person's acting as a Partner under this Agreement, or the authorized actions of
such Indemnified Person in
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<PAGE> 7
connection with the conduct of the affairs of the Partnership (including,
without limitation, indemnification against negligence, gross negligence or
breach of duty); provided, however, that no Indemnified Person shall be entitled
to indemnification if and to the extent that the liability otherwise to be
indemnified for results from (i) any act or omission of such Indemnified Person
that involves actual fraud or willful misconduct or (ii) any transaction from
which such Indemnified Person derived improper personal benefit. The indemnities
provided hereunder shall survive termination of the Partnership and this
Agreement. Each Indemnified Person shall have a claim against the property and
assets of the Partnership for payment of any indemnity amounts from time to time
due hereunder, which amounts shall be paid or properly reserved for prior to the
making of distributions by the Partnership to Partners. Costs and expenses that
are subject to indemnification hereunder shall, at the request of any
Indemnified Person, be advanced by the Partnership to or on behalf of such
Indemnified Person prior to final resolution of a matter, so long as such
Indemnified Person shall have provided the Partnership with a written
undertaking to reimburse the Partnership for all amounts so advanced if it is
ultimately determined that the Indemnified Person is not entitled to
indemnification hereunder.
The contract rights to indemnification and to the advancement of expenses
conferred in this Section 17 shall not be exclusive of any other right that any
person may have or hereafter acquire under any statute, agreement, vote of the
Partners or otherwise.
The Partnership may maintain insurance, at its expense, to protect itself
and any Partner, employee or agent of the Partnership or another partnership,
limited liability company, corporation, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Partnership would
have the power to indemnify such person against such expense, liability or loss
under the LP Act.
The Partnership may, to the extent authorized from time to time by the
General Partners, grant rights to indemnification and to advancement of expenses
to any employee or agent of the Partnership to the fullest extent of the
provisions of this Section 17 with respect to the indemnification and
advancement of expenses of General Partners of the Partnership.
18. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware.
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<PAGE> 8
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of April 13, 1998.
GENERAL PARTNER
CASTLE CREEK PARTNERS GP, Inc.
By: /s/ Richard G. Pond
------------------------------
Name: Richard G. Pond
Title: Chief Financial Officer
LIMITED PARTNER
BOSTON CELTICS LIMITED PARTNERSHIP
By: /s/ Richard G. Pond
------------------------------
Name: Richard G. Pond
Title: Executive Vice President,
Chief Operating Officer,
Treasurer and Secretary
-8-
<PAGE> 9
SCHEDULE I
A. General Partner
Capital Percentage
Name & Address Contribution Interest
Castle Creek Partners GP, Inc. $10.00 1%
151 Merrimac Street
Boston, Massachusetts 02114
B. Limited Partner
Capital Percentage
Name & Address Contribution Interest
Boston Celtics Limited Partnership $990.00 99%
33 East 63rd Street
New York, New York 10021
TOTAL $1,000.00 100%
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
BCLP II GP, INC.
ARTICLE I
NAME OF CORPORATION
The name of this corporation
is:
BCLP II GP, INC.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the corporation in the State of
Delaware is 9 East Loockerman Street, in the City of Dover 19901, County of
Kent, and the name of its registered agent at that address is National
Registered Agents, Inc.
ARTICLE III
PURPOSE
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The corporation shall be authorized to issue one class of stock, to be
designated "Common Stock"; the total number of shares that the corporation shall
have authority to issue is One Million (1,000,000); all such shares shall have a
par value of one cent ($0.01).
<PAGE> 2
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator of the corporation is:
Tami Gerardi
c/o National Corporate Research, LTD.
9 East Loockerman Street
Dover, Delaware 19901
ARTICLE VI
BOARD POWER REGARDING BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, repeal, alter, amend and
rescind the bylaws of the corporation.
ARTICLE VII
ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless the bylaws of
the corporation shall so provide.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the Delaware General Corporation Law
as the same exists or may hereafter be amended, a director of the corporation
shall not be liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. If the Delaware General Corporation
Law is amended after the date of the filing of this Certificate of Incorporation
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended from time to time. No repeal or
modification of this Article VIII by the stockholders shall adversely affect any
right or protection of a director of the corporation existing by virtue of this
Article VIII at the time of such repeal or modification.
2
<PAGE> 3
ARTICLE IX
CORPORATE POWER
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE X
CREDITOR COMPROMISE OR ARRANGEMENT
Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation to do business both within and without the
State of Delaware, and in pursuance of the Delaware General Corporation Law,
does make and file this Certificate.
Dated: April 13, 1998
/s/ Tami Gerardi
--------------------
Tami Gerardi
Incorporator
3
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF INCORPORATION
OF
CASTLE CREEK PARTNERS GP, INC.
ARTICLE I
NAME OF CORPORATION
The name of this corporation
is:
CASTLE CREEK PARTNERS GP, INC.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the corporation in the State of
Delaware is 9 East Loockerman Street, in the City of Dover 19901, County of
Kent, and the name of its registered agent at that address is National
Registered Agents, Inc.
ARTICLE III
PURPOSE
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The corporation shall be authorized to issue one class of stock, to be
designated "Common Stock"; the total number of shares that the corporation shall
have authority to issue is One Million (1,000,000); all such shares shall have a
par value of one cent ($0.01).
<PAGE> 2
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator of the corporation is:
Tami Gerardi
c/o National Corporate Research, LTD.
9 East Loockerman Street
Dover, Delaware 19901
ARTICLE VI
BOARD POWER REGARDING BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, repeal, alter, amend and
rescind the bylaws of the corporation.
ARTICLE VII
ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless the bylaws of
the corporation shall so provide.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the Delaware General Corporation Law
as the same exists or may hereafter be amended, a director of the corporation
shall not be liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. If the Delaware General Corporation
Law is amended after the date of the filing of this Certificate of Incorporation
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended from time to time. No repeal or
modification of this Article VIII by the stockholders shall adversely affect any
right or protection of a director of the corporation existing by virtue of this
Article VIII at the time of such repeal or modification.
2
<PAGE> 3
ARTICLE IX
CORPORATE POWER
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE X
CREDITOR COMPROMISE OR ARRANGEMENT
Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation to do business both within and without the
State of Delaware, and in pursuance of the Delaware General Corporation Law,
does make and file this Certificate.
Dated: April 13, 1998
/s/ Tami Gerardi
----------------------
Tami Gerardi
Incorporator
3
<PAGE> 1
EXHIBIT 3.5
BCLP II GP, INC.
(a Delaware corporation)
BYLAWS
ARTICLE I
OFFICES
SECTION 1.01 REGISTERED OFFICE. The registered office of BCLP II GP,
Inc. (the "Corporation") in the State of Delaware shall be at 9 East Loockerman
Street, City of Dover, County of Kent, and the name of the registered agent in
charge thereof shall be National Registered Agents, Inc.
SECTION 1.02 OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (the "Board") may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01 ANNUAL MEETINGS. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 SPECIAL MEETINGS. A special meeting of the stockholders
for the transaction of any proper business may be called at any time by the
Board or by the President.
SECTION 2.03 PLACE OF MEETINGS. All meetings of the stockholders shall
be held at such places, within or without the State of Delaware, as may from
time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 NOTICE OF MEETINGS. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder of record entitled to vote at such meeting by delivering a
typewritten or printed notice thereof to him personally, or by depositing such
notice in the United States mail, in a postage prepaid envelope, directed to him
at his post office address furnished by him to the Secretary of the Corporation
for such purpose or, if he shall not have furnished to the Secretary of the
Corporation his address for such purpose, then at his post office address last
known to the Secretary of the Corporation, or by transmitting a notice thereof
to him at such address by telegraph, cable or wireless. Except as otherwise
expressly required by law, no publication of any notice of a meeting of the
stockholders shall be required. Every notice of a meeting of the stockholders
shall state the place, date and hour of the
<PAGE> 2
meeting and, in the case of a special meeting, shall also state the purpose or
purposes for which the meeting is called. Notice of any meeting of stockholders
shall not be required to be given to any stockholder who shall have waived such
notice and such notice shall be deemed waived by any stockholder who shall
attend such meeting in person or by proxy, except as a stockholder who attends
such meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Except as otherwise expressly required by law, notice of any
adjourned meeting of the stockholders need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken.
SECTION 2.05 QUORUM. Except in the case of any meeting for the election
of directors summarily ordered as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence of all the stockholders, any officer entitled to preside at, or to
act as secretary of, such meeting may adjourn such meeting from time to time. At
any such adjourned meeting at which a quorum is present any business may be
transacted that might have been transacted at the meeting as originally called.
SECTION 2.06 VOTING.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question, and
that shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws
as the record date for the determination of stockholders
entitled to notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at
the close of business on the day next preceding the day on
which notice of the meeting shall be given or (b) if notice
of the meeting shall be waived, at the close of business on
the day next preceding the day on which the meeting shall be
held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in
2
<PAGE> 3
common, tenants by entirety or otherwise, or with respect to which two or more
persons have the same fiduciary relationship, shall be voted in accordance with
the provisions of the Delaware General Corporation Law.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless that proxy
provides for a longer period. The attendance at any meeting by a stockholder who
may theretofore have given a proxy shall not have the effect of revoking that
proxy unless the stockholder in writing so notifies the secretary of the meeting
prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 2.07 LIST OF STOCKHOLDERS. The Secretary of the Corporation
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 2.08 JUDGES. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such
meeting may appoint a judge or judges to act with respect to such vote. Each
judge so appointed shall first subscribe an oath to faithfully execute the
duties of a judge at such meeting with strict impartiality and according to the
best of his ability. Such judges shall decide upon the qualification of the
voters and shall report the number of shares represented at the meeting and
entitled to vote on such question, shall conduct and accept the votes, and, when
the voting is completed, shall ascertain and report the number of shares voted
respectively for and against the question. Reports of judges shall be in writing
and subscribed and delivered by them to the Secretary of the Corporation. The
judges need not be stockholders of the Corporation, and any officer of the
Corporation may be a judge on any question other than a vote for or against a
proposal in which he has a material interest.
SECTION 2.09 ACTION WITHOUT MEETING. Any action required to be taken at
any annual or special meeting of stockholders of the Corporation, or any action
that may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that
3
<PAGE> 4
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01 GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by the Board.
SECTION 3.02 NUMBER AND TERM OF OFFICE. The number of directors shall
be five. Directors need not be stockholders. Each of the directors of the
Corporation shall hold office until his successor has been duly elected and
qualified or until he resigns or has been removed in the manner hereinafter
provided.
SECTION 3.03 ELECTION OF DIRECTORS. Subject to the provisions of the
Certificate of Incorporation, the directors shall be elected annually by the
stockholders of the Corporation and the persons receiving the greatest number of
votes, up to the number of directors to be elected, shall be the directors.
SECTION 3.04 RESIGNATIONS. Any director of the Corporation may resign
at any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, immediately upon receipt of its
notice. Unless otherwise specified therein, the acceptance of such resignation
is not necessary to make it effective.
SECTION 3.05 VACANCIES. Except as otherwise provided in the Certificate
of Incorporation, any vacancy on the Board, whether because of death,
resignation, disqualification, an increase in the number of directors or any
other cause, may be filled by vote of the majority of the remaining directors,
although less than a quorum. Each director so chosen to fill a vacancy shall
hold office until his successor has been elected and qualified or until he
resigns or has been removed in the manner hereinafter provided.
SECTION 3.06 PLACE OF MEETING, ETC. The Board may hold any of its
meetings at such place or places, within or without the State of Delaware, as
the Board may from time to time by resolution designate, or as is designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special meeting
of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 FIRST MEETING. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting is not
required.
SECTION 3.08 REGULAR MEETINGS. Regular meetings of the Board may be
held at such times as the Board from time to time by resolution determines. If
any day fixed for a
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regular meeting is a legal holiday at the place where the meeting is to be held,
then the meeting shall be held at the same hour and place on the next succeeding
business day not a legal holiday. Except as provided by law, notice of regular
meetings need not be given.
SECTION 3.09 SPECIAL MEETINGS. Special meetings of the Board shall be
held whenever called by the President or a majority of the authorized number of
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least five (5)
days before the day on which the meeting is to be held, or shall be sent to him
or her at such place by telegraph or cable or be delivered personally not less
than forty-eight hours before the time at which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the purpose
of a special meeting need not be given. Notice of any meeting of the Board is
not required to be given to any director who is present at such meeting, except
a director who attends such meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
SECTION 3.10 QUORUM AND MANNER OF ACTING. Except as otherwise provided
in these Bylaws or by law, the presence of a majority of the authorized number
of directors is required to constitute a quorum for the transaction of business
at any meeting of the Board, and all matters shall be decided at any such
meeting, a quorum being present, by the affirmative votes of a majority of the
directors present. In the absence of a quorum, a majority of directors present
at any meeting may adjourn the meeting from time to time until a quorum is
present. Notice of any adjourned meeting need not be given. The directors shall
act only as a Board, and the individual directors shall have no power as such.
SECTION 3.11 ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board or of any committee of the Board may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.12 REMOVAL OF DIRECTORS. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
SECTION 3.13 COMPENSATION. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him because of his attendance at any
meetings of the Board or committees of the Board. Neither the payment of such
compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.14 COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one
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or more of the directors of the Corporation. Any such committee, to the extent
provided in the resolution of the Board and except as otherwise limited by law,
shall have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers that may require it. Any
such committee shall keep written minutes of its meetings and report the same to
the Board at the next regular meeting of the Board. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE IV
OFFICERS
SECTION 4.01 NUMBER. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof and their respective
titles to be determined by the Board), a Secretary and a Chief Financial
Officer. A Chief Executive Officer may be elected by the Board and the Board may
elect such other officers as the Board deems necessary to the Corporation.
SECTION 4.02 ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers
of the Corporation, except such officers as may be appointed in accordance with
Section 4.03, shall be elected annually by the Board at the first meeting
thereof held after the election thereof. Each officer shall hold office until
his successor has been duly chosen and qualified or until his resignation or
removal in the manner hereinafter provided.
SECTION 4.03 ASSISTANTS, AGENTS AND EMPLOYEES, ETC. In addition to the
officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
SECTION 4.04 REMOVAL. Any officer, assistant, agent or employee of the
Corporation may be removed, with or without cause, at any time: (i) in the case
of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of an officer, assistant, agent or
employee not appointed by the Board, by any officer of the Corporation or
committee of the Board upon whom or which such power of removal may be conferred
by the Board.
SECTION 4.05 RESIGNATIONS. Any officer or assistant may resign at any
time by giving written notice of his resignation to the Board or the Secretary
of the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, upon receipt of its notice. Unless
otherwise specified therein, the acceptance of such resignation is not necessary
to make it effective.
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SECTION 4.06 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07 THE PRESIDENT. The President of the Corporation shall be
the chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.08 THE VICE PRESIDENTS. Each Vice President shall have such
powers and perform such duties as the Board may from time to time prescribe. At
the request of the President, or in case of the President's absence or inability
to act upon the request of the Board, a Vice President shall perform the duties
of the President, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the President.
SECTION 4.09 THE SECRETARY. The Secretary shall, if present, record the
proceedings of all meetings of the Board, of the stockholders and of all
committees of which a secretary shall not have been appointed, in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
SECTION 4.10 THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall have the general care and custody of the funds and securities of the
Corporation, and shall deposit all such funds in the name of the Corporation in
such banks, trust companies or other depositories as shall be selected by the
Board. He shall receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever. He shall exercise general supervision
over expenditures and disbursements made by officers, agents and employees of
the Corporation and the preparation of such records and reports in connection
therewith as may be necessary or desirable. He shall, in general, perform all
other duties incident to the office of Chief Financial Officer and such other
duties as from time to time may be assigned to him by the Board.
SECTION 4.11 COMPENSATION. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of the officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
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ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 5.01 EXECUTION OF CONTRACTS. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 5.02 CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
SECTION 5.03 DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Chief Financial Officer (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of the
Corporation who shall from time to time be determined by the Board) may endorse,
assign and deliver checks, drafts and other orders for the payment of money that
are payable to the order of the Corporation.
SECTION 5.04 GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from time
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may select
or as may be selected by any officer or officers, assistant or assistants, agent
or agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 6.01 CERTIFICATES FOR STOCK. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the Chief
Executive Officer, President or a Vice President, and by the Secretary or an
Assistant Secretary or by the Chief Financial Officer or an Assistant Treasurer.
Any of or all of the signatures on the certificates may be a facsimile. In case
any officer, transfer agent or registrar who has signed, or
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whose facsimile signature has been placed upon, any such certificate, shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, such certificate may nevertheless be issued by the Corporation with
the same effect as though the person who signed such certificate, or whose
facsimile signature shall have been placed thereupon, were such officer,
transfer agent or registrar at the date of issue. A record shall be kept of the
respective names of the persons, firms or corporations owning the stock
represented by such certificates, the number and class of shares represented by
such certificates, respectively, and the respective dates thereof, and in case
of cancellation, the respective dates of cancellation. Every certificate
surrendered to the Corporation for exchange or transfer shall be canceled, and
no new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so canceled, except
in cases provided for in Section 6.04.
SECTION 6.02 TRANSFERS OF STOCK. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates are presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.03 REGULATIONS. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these Bylaws, concerning the
issue, transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
SECTION 6.04 LOST, STOLEN, DESTROYED, AND MUTILATED CERTIFICATES. In
any case of loss, theft, destruction or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
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stockholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
stockholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 ACTION, ETC. OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation, to the fullest extent permitted by Section 145 of
the General Corporation Law of Delaware, as that Section may be amended and
supplemented from time to time ("Section 145"), shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, liabilities or other
matters referred to in or covered by Section 145. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person was not entitled to indemnification under Section 145. The right
to indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law of Delaware requires, the payment
of such expenses incurred by a director, officer or trustee in his or her
capacity as a director, officer or trustee (and not in any other capacity in
which services was or is rendered by such person while a director, officer or
trustee, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding shall be made only upon
delivery to the corporation of an undertaking, by or on behalf of such director,
officer or trustee, to repay all amounts so advanced if it shall ultimately be
determined that such director, officer or trustee is not entitled to be
indemnified under this Article or otherwise.
SECTION 7.02 ACTIONS, ETC., BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation, to the fullest extent permitted by Section 145, shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit. The right to indemnification conferred in this Article shall be a contract
right and shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if the General Corporation Law of Delaware requires,
the payment of such expenses incurred by a director, officer or trustee in his
or her capacity as a director, officer or trustee (and not in any other capacity
in which
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services was or is rendered by such person while a director, officer or trustee,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such director, officer or
trustee, to repay all amounts so advanced if it shall ultimately be determined
that such director, officer or trustee is not entitled to be indemnified under
this Article or otherwise.
SECTION 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any
indemnification under Section 7.01 or 7.02 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 145. Such determination shall be made (i) by the
Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
SECTION 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article VII, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.01 or 7.02, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 7.05 PREPAID EXPENSES. Expenses incurred by other employees and
agents in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding upon such terms and conditions, if any, as the Board deems
appropriate.
SECTION 7.06 OTHER RIGHTS AND REMEDIES. The indemnification provided by
this Article VII shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any Bylaws, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
their official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and inure to the benefit of the heirs, executors and
administrators of such a person.
SECTION 7.07 INSURANCE. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VII.
SECTION 7.08 CONSTITUENT CORPORATIONS. For the purposes of this Article
VII, references to "the Corporation" include all constituent corporations
absorbed in a
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consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article VII with respect to the resulting
or surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
SECTION 7.09 OTHER ENTERPRISES, FINES, AND SERVING AT CORPORATION'S
REQUEST. For purposes of this Article VII, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and action taken or omitted by a person with respect to an
employee benefit plan in the performance of such person's duties for a purpose
reasonably believed by such person to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 SEAL. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation,
words and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 8.02 WAIVER OF NOTICES. Whenever notice is required to be given
by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to notice may waive such notice in writing, either before or after the
time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 AMENDMENTS. These Bylaws, or any of them, may be altered,
amended or repealed, and new Bylaws may be made, (i) by the Board, by vote of a
majority of the number of directors then in office as directors, acting at any
meeting of the Board or by written consent, or (ii) by the stockholders, at any
annual meeting of stockholders, without previous notice, or at any special
meeting of stockholders, provided that notice of such proposed amendment,
modification, repeal or adoption is given in the notice of special meeting. Any
Bylaws made or altered by the stockholders may be altered or repealed by either
the Board or the stockholders.
SECTION 8.04 VOTING OF SECURITIES. Except as the directors may
otherwise designate, the President or Treasurer may waive notice of, and act as,
or appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
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SECTION 8.05 TRANSACTIONS WITH INTERESTED PARTIES. No contract or
transaction between the corporation and one or more of the directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
of the Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to be Board of
Directors or the committee, and the Board of committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
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CERTIFICATE OF SECRETARY
The undersigned, being the duly elected Secretary of BCLP II GP, Inc., a
Delaware corporation (the "Corporation"), hereby certifies that the Bylaws to
which this Certificate is attached were duly adopted by the Board of Directors
of the Corporation as of the 14th day of April, 1998.
/s/ Richard G. Pond
--------------------------
Richard G. Pond, Secretary
<PAGE> 1
EXHIBIT 3.6
CASTLE CREEK GP, INC.
(a Delaware corporation)
BYLAWS
ARTICLE I
OFFICES
SECTION 1.01 REGISTERED OFFICE. The registered office of Castle Creek
GP, Inc. (the "Corporation") in the State of Delaware shall be at 9 East
Loockerman Street, City of Dover, County of Kent, and the name of the registered
agent in charge thereof shall be National Registered Agents, Inc.
SECTION 1.02 OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (the "Board") may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01 ANNUAL MEETINGS. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 SPECIAL MEETINGS. A special meeting of the stockholders
for the transaction of any proper business may be called at any time by the
Board or by the President.
SECTION 2.03 PLACE OF MEETINGS. All meetings of the stockholders shall
be held at such places, within or without the State of Delaware, as may from
time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 NOTICE OF MEETINGS. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder of record entitled to vote at such meeting by delivering a
typewritten or printed notice thereof to him personally, or by depositing such
notice in the United States mail, in a postage prepaid envelope, directed to him
at his post office address furnished by him to the Secretary of the Corporation
for such purpose or, if he shall not have furnished to the Secretary of the
Corporation his address for such purpose, then at his post office address last
known to the Secretary of the Corporation, or by transmitting a notice thereof
to him at such address by telegraph, cable or wireless. Except as otherwise
expressly required by law, no publication of any notice of a meeting of the
stockholders shall be required. Every notice of a meeting of the stockholders
shall state the place, date and hour of the
<PAGE> 2
meeting and, in the case of a special meeting, shall also state the purpose or
purposes for which the meeting is called. Notice of any meeting of stockholders
shall not be required to be given to any stockholder who shall have waived such
notice and such notice shall be deemed waived by any stockholder who shall
attend such meeting in person or by proxy, except as a stockholder who attends
such meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Except as otherwise expressly required by law, notice of any
adjourned meeting of the stockholders need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken.
SECTION 2.05 QUORUM. Except in the case of any meeting for the
election of directors summarily ordered as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders present in person or by proxy and entitled to vote thereat
or, in the absence of all the stockholders, any officer entitled to preside at,
or to act as secretary of, such meeting may adjourn such meeting from time to
time. At any such adjourned meeting at which a quorum is present any business
may be transacted that might have been transacted at the meeting as originally
called.
SECTION 2.06 VOTING.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question, and
that shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws
as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a)
at the close of business on the day next preceding the day on which
notice of the meeting shall be given or (b) if notice of the meeting
shall be waived, at the close of business on the day next preceding the
day on which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in
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common, tenants by entirety or otherwise, or with respect to which two or more
persons have the same fiduciary relationship, shall be voted in accordance with
the provisions of the Delaware General Corporation Law.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless that proxy
provides for a longer period. The attendance at any meeting by a stockholder who
may theretofore have given a proxy shall not have the effect of revoking that
proxy unless the stockholder in writing so notifies the secretary of the meeting
prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 2.07 LIST OF STOCKHOLDERS. The Secretary of the Corporation
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 2.08 JUDGES. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath to faithfully execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The judges
need not be stockholders of the Corporation, and any officer of the Corporation
may be a judge on any question other than a vote for or against a proposal in
which he has a material interest.
SECTION 2.09 ACTION WITHOUT MEETING. Any action required to be taken
at any annual or special meeting of stockholders of the Corporation, or any
action that may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding stock having not less than the minimum number of votes that
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would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01 GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by the Board.
SECTION 3.02 NUMBER AND TERM OF OFFICE. The number of directors shall
be five. Directors need not be stockholders. Each of the directors of the
Corporation shall hold office until his successor has been duly elected and
qualified or until he resigns or has been removed in the manner hereinafter
provided.
SECTION 3.03 ELECTION OF DIRECTORS. Subject to the provisions of the
Certificate of Incorporation, the directors shall be elected annually by the
stockholders of the Corporation and the persons receiving the greatest number of
votes, up to the number of directors to be elected, shall be the directors.
SECTION 3.04 RESIGNATIONS. Any director of the Corporation may resign
at any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, immediately upon receipt of its
notice. Unless otherwise specified therein, the acceptance of such resignation
is not necessary to make it effective.
SECTION 3.05 VACANCIES. Except as otherwise provided in the
Certificate of Incorporation, any vacancy on the Board, whether because of
death, resignation, disqualification, an increase in the number of directors or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum. Each director so chosen to fill a
vacancy shall hold office until his successor has been elected and qualified or
until he resigns or has been removed in the manner hereinafter provided.
SECTION 3.06 PLACE OF MEETING, ETC. The Board may hold any of its
meetings at such place or places, within or without the State of Delaware, as
the Board may from time to time by resolution designate, or as is designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special meeting
of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 FIRST MEETING. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting is not required.
SECTION 3.08 REGULAR MEETINGS. Regular meetings of the Board may be
held at such times as the Board from time to time by resolution determines. If
any day fixed for a
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regular meeting is a legal holiday at the place where the meeting is to be held,
then the meeting shall be held at the same hour and place on the next succeeding
business day not a legal holiday. Except as provided by law, notice of regular
meetings need not be given.
SECTION 3.09 SPECIAL MEETINGS. Special meetings of the Board shall be
held whenever called by the President or a majority of the authorized number of
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least five (5)
days before the day on which the meeting is to be held, or shall be sent to him
or her at such place by telegraph or cable or be delivered personally not less
than forty-eight hours before the time at which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the purpose
of a special meeting need not be given. Notice of any meeting of the Board is
not required to be given to any director who is present at such meeting, except
a director who attends such meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
SECTION 3.10 QUORUM AND MANNER OF ACTING. Except as otherwise provided
in these Bylaws or by law, the presence of a majority of the authorized number
of directors is required to constitute a quorum for the transaction of business
at any meeting of the Board, and all matters shall be decided at any such
meeting, a quorum being present, by the affirmative votes of a majority of the
directors present. In the absence of a quorum, a majority of directors present
at any meeting may adjourn the meeting from time to time until a quorum is
present. Notice of any adjourned meeting need not be given. The directors shall
act only as a Board, and the individual directors shall have no power as such.
SECTION 3.11 ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board or of any committee of the Board may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.12 REMOVAL OF DIRECTORS. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
SECTION 3.13 COMPENSATION. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him because of his attendance at any
meetings of the Board or committees of the Board. Neither the payment of such
compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.14 COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one
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or more of the directors of the Corporation. Any such committee, to the extent
provided in the resolution of the Board and except as otherwise limited by law,
shall have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers that may require it. Any
such committee shall keep written minutes of its meetings and report the same to
the Board at the next regular meeting of the Board. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE IV
OFFICERS
SECTION 4.01 NUMBER. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof and their respective
titles to be determined by the Board), a Secretary and a Chief Financial
Officer. A Chief Executive Officer may be elected by the Board and the Board may
elect such other officers as the Board deems necessary to the Corporation.
SECTION 4.02 ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers
of the Corporation, except such officers as may be appointed in accordance with
Section 4.03, shall be elected annually by the Board at the first meeting
thereof held after the election thereof. Each officer shall hold office until
his successor has been duly chosen and qualified or until his resignation or
removal in the manner hereinafter provided.
SECTION 4.03 ASSISTANTS, AGENTS AND EMPLOYEES, ETC. In addition to the
officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
SECTION 4.04 REMOVAL. Any officer, assistant, agent or employee of the
Corporation may be removed, with or without cause, at any time: (i) in the case
of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of an officer, assistant, agent or
employee not appointed by the Board, by any officer of the Corporation or
committee of the Board upon whom or which such power of removal may be conferred
by the Board.
SECTION 4.05 RESIGNATIONS. Any officer or assistant may resign at any
time by giving written notice of his resignation to the Board or the Secretary
of the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, upon receipt of its notice. Unless
otherwise specified therein, the acceptance of such resignation is not necessary
to make it effective.
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SECTION 4.06 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07 THE PRESIDENT. The President of the Corporation shall be
the chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.08 THE VICE PRESIDENTS. Each Vice President shall have such
powers and perform such duties as the Board may from time to time prescribe. At
the request of the President, or in case of the President's absence or inability
to act upon the request of the Board, a Vice President shall perform the duties
of the President, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the President.
SECTION 4.09 THE SECRETARY. The Secretary shall, if present, record
the proceedings of all meetings of the Board, of the stockholders and of all
committees of which a secretary shall not have been appointed, in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
SECTION 4.10 THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall have the general care and custody of the funds and securities of the
Corporation, and shall deposit all such funds in the name of the Corporation in
such banks, trust companies or other depositories as shall be selected by the
Board. He shall receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever. He shall exercise general supervision
over expenditures and disbursements made by officers, agents and employees of
the Corporation and the preparation of such records and reports in connection
therewith as may be necessary or desirable. He shall, in general, perform all
other duties incident to the office of Chief Financial Officer and such other
duties as from time to time may be assigned to him by the Board.
SECTION 4.11 COMPENSATION. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of the officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
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ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 5.01 EXECUTION OF CONTRACTS. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 5.02 CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
SECTION 5.03 DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Chief Financial Officer (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of the
Corporation who shall from time to time be determined by the Board) may endorse,
assign and deliver checks, drafts and other orders for the payment of money that
are payable to the order of the Corporation.
SECTION 5.04 GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 6.01 CERTIFICATES FOR STOCK. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the Chief
Executive Officer, President or a Vice President, and by the Secretary or an
Assistant Secretary or by the Chief Financial Officer or an Assistant Treasurer.
Any of or all of the signatures on the certificates may be a facsimile. In case
any officer, transfer agent or registrar who has signed, or
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whose facsimile signature has been placed upon, any such certificate, shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, such certificate may nevertheless be issued by the Corporation with
the same effect as though the person who signed such certificate, or whose
facsimile signature shall have been placed thereupon, were such officer,
transfer agent or registrar at the date of issue. A record shall be kept of the
respective names of the persons, firms or corporations owning the stock
represented by such certificates, the number and class of shares represented by
such certificates, respectively, and the respective dates thereof, and in case
of cancellation, the respective dates of cancellation. Every certificate
surrendered to the Corporation for exchange or transfer shall be canceled, and
no new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so canceled, except
in cases provided for in Section 6.04.
SECTION 6.02 TRANSFERS OF STOCK. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates are presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.03 REGULATIONS. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 6.04 LOST, STOLEN, DESTROYED, AND MUTILATED CERTIFICATES. In
any case of loss, theft, destruction or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
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stockholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
stockholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 ACTION, ETC. OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation, to the fullest extent permitted by Section 145 of
the General Corporation Law of Delaware, as that Section may be amended and
supplemented from time to time ("Section 145"), shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, liabilities or other
matters referred to in or covered by Section 145. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person was not entitled to indemnification under Section 145. The right
to indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law of Delaware requires, the payment
of such expenses incurred by a director, officer or trustee in his or her
capacity as a director, officer or trustee (and not in any other capacity in
which services was or is rendered by such person while a director, officer or
trustee, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding shall be made only upon
delivery to the corporation of an undertaking, by or on behalf of such director,
officer or trustee, to repay all amounts so advanced if it shall ultimately be
determined that such director, officer or trustee is not entitled to be
indemnified under this Article or otherwise.
SECTION 7.02 ACTIONS, ETC., BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation, to the fullest extent permitted by Section 145, shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit. The right to indemnification conferred in this Article shall be a contract
right and shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if the General Corporation Law of Delaware requires,
the payment of such expenses incurred by a director, officer or trustee in his
or her capacity as a director, officer or trustee (and not in any other capacity
in which
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services was or is rendered by such person while a director, officer or trustee,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such director, officer or
trustee, to repay all amounts so advanced if it shall ultimately be determined
that such director, officer or trustee is not entitled to be indemnified under
this Article or otherwise.
SECTION 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any
indemnification under Section 7.01 or 7.02 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 145. Such determination shall be made (i) by the
Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
SECTION 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article VII, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.01 or 7.02, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 7.05 PREPAID EXPENSES. Expenses incurred by other employees
and agents in defending a civil or criminal action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon such terms and conditions, if any, as the Board deems
appropriate.
SECTION 7.06 OTHER RIGHTS AND REMEDIES. The indemnification provided
by this Article VII shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any Bylaws, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
their official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and inure to the benefit of the heirs, executors and
administrators of such a person.
SECTION 7.07 INSURANCE. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VII.
SECTION 7.08 CONSTITUENT CORPORATIONS. For the purposes of this
Article VII, references to "the Corporation" include all constituent
corporations absorbed in a
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consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article VII with respect to the resulting
or surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
SECTION 7.09 OTHER ENTERPRISES, FINES, AND SERVING AT CORPORATION'S
REQUEST. For purposes of this Article VII, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and action taken or omitted by a person with respect to an
employee benefit plan in the performance of such person's duties for a purpose
reasonably believed by such person to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 SEAL. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation,
words and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 8.02 WAIVER OF NOTICES. Whenever notice is required to be
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to notice may waive such notice in writing, either before or after the
time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 AMENDMENTS. These Bylaws, or any of them, may be altered,
amended or repealed, and new Bylaws may be made, (i) by the Board, by vote of a
majority of the number of directors then in office as directors, acting at any
meeting of the Board or by written consent, or (ii) by the stockholders, at any
annual meeting of stockholders, without previous notice, or at any special
meeting of stockholders, provided that notice of such proposed amendment,
modification, repeal or adoption is given in the notice of special meeting. Any
Bylaws made or altered by the stockholders may be altered or repealed by either
the Board or the stockholders.
SECTION 8.04 VOTING OF SECURITIES. Except as the directors may
otherwise designate, the President or Treasurer may waive notice of, and act as,
or appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
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SECTION 8.05 TRANSACTIONS WITH INTERESTED PARTIES. No contract or
transaction between the corporation and one or more of the directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
of the Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to be Board of
Directors or the committee, and the Board of committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
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CERTIFICATE OF SECRETARY
The undersigned, being the duly elected Secretary of Castle Creek GP,
Inc., a Delaware corporation (the "Corporation"), hereby certifies that the
Bylaws to which this Certificate is attached were duly adopted by the Board of
Directors of the Corporation as of the 14th day of April, 1998.
/s/ Richard G. Pond
--------------------------
Richard G. Pond, Secretary
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<PAGE> 1
EXHIBIT 4.1
------------------------------
BOSTON CELTICS LIMITED PARTNERSHIP
AND
________________________, TRUSTEE
-------------------
6%
SUBORDINATED DEBENTURES
DUE 2038
INDENTURE
DATED AS OF ____________, 1998
------------------------------
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TABLE OF CONTENTS
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ARTICLE ONE Definitions and Other Provisions of General Application.............................1
Section 1.1 Definitions......................................................................1
Section 1.2 Compliance Certificates and Opinions............................................10
Section 1.3 Form of Documents Delivered to Trustee..........................................10
Section 1.4 Acts of Holders, Record Dates...................................................11
Section 1.5 Notices, Etc., to Trustee and Company...........................................12
Section 1.6 Notice to Holders; Waiver.......................................................13
Section 1.7 Conflict with Trust Indenture Act...............................................13
Section 1.8 Effect of Headings and Table of Contents........................................13
Section 1.9 Successors and Assigns..........................................................13
Section 1.10 Separability Clause............................................................13
Section 1.11 Benefits of Indenture..........................................................14
Section 1.12 Governing Law; Choice of Forum.................................................14
Section 1.13 Legal Holidays.................................................................15
Section 1.14 No Security Interest...........................................................15
ARTICLE TWO Debenture Forms....................................................................15
Section 2.1 Forms Generally.................................................................15
Section 2.2 Form of Face of Debenture.......................................................16
Section 2.3 Form of Reverse of Debenture....................................................17
Section 2.4 Form of Legend for Global Debentures............................................19
Section 2.5 Form of Trustee's Certificate of Authentication.................................19
Section 2.6 Form of Assignment and Election to Purchase.....................................19
ARTICLE THREE The Debentures...................................................................20
Section 3.1 Global Debenture; Depositary....................................................20
Section 3.2 Amount..........................................................................20
Section 3.3 Denominations...................................................................20
Section 3.4 Execution, Authentication, Delivery and Dating..................................21
Section 3.5 Temporary Debentures............................................................21
Section 3.6 Registration; Registration of Transfer and Exchange.............................22
Section 3.7 Mutilated, Destroyed, Lost and Stolen Debentures................................23
Section 3.8 Payment of Interest; Interest Rights Preserved..................................23
Section 3.9 Persons Deemed Owners...........................................................24
Section 3.10 Cancellation...................................................................25
Section 3.11 Computation of Interest........................................................25
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ARTICLE FOUR Book Entry Provisions for Global Debentures.......................................25
Section 4.1 Applicability of Article........................................................25
Section 4.2 Book-Entry Provisions For Global Debenture......................................25
ARTICLE FIVE Remedies..........................................................................28
Section 5.1 Events of Default...............................................................28
Section 5.2 Acceleration of Maturity; Rescission and Annulment..............................29
Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.................30
Section 5.4 Trustee May File Proofs of Claim................................................30
Section 5.5 Trustee May Enforce Claims Without Possession of Debentures.....................31
Section 5.6 Application of Money Collected..................................................31
Section 5.7 Limitation on Suits.............................................................31
Section 5.8 Unconditional Right of Holders to Receive Principal, Premium
and Interest....................................................................32
Section 5.9 Restoration of Rights and Remedies..............................................32
Section 5.10 Rights and Remedies Cumulative.................................................32
Section 5.11 Delay or Omission Not Waiver...................................................33
Section 5.12 Control by Holders.............................................................33
Section 5.13 Waiver of Past Defaults........................................................33
Section 5.14 Undertaking for Costs..........................................................34
Section 5.15 Waiver of Usury, Stay or Extension Laws........................................34
ARTICLE SIX The Trustee........................................................................34
Section 6.1 Certain Duties and Responsibilities.............................................34
Section 6.2 Notice of Defaults..............................................................35
Section 6.3 Certain Rights of Trustee.......................................................35
Section 6.4 Not Responsible for Recitals or Issuance of Debentures..........................36
Section 6.5 May Hold Debentures.............................................................36
Section 6.6 Money Held in Trust.............................................................36
Section 6.7 Compensation and Reimbursement..................................................36
Section 6.8 Disqualification; Conflicting Interests.........................................37
Section 6.9 Corporate Trustee Required; Eligibility.........................................37
Section 6.10 Resignation and Removal; Appointment of Successor..............................37
Section 6.11 Acceptance of Appointment by Successor.........................................39
Section 6.12 Merger, Conversion, Consolidation or Succession to Business....................39
Section 6.13 Preferential Collection of Claims Against Company..............................40
Section 6.14 Appointment of Authenticating Agent............................................40
ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company................................41
Section 7.1 Company to Furnish Trustee Names and Addresses of Holders.......................41
Section 7.2 Preservation of Information; Communications to Holders..........................42
Section 7.3 Reports by Trustee..............................................................42
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Section 7.4 Reports by Company..............................................................43
ARTICLE EIGHT [Reserved].......................................................................43
ARTICLE NINE Amendments, Supplements and Waivers...............................................43
Section 9.1 Supplemental Indentures Without Consent of Holders..............................43
Section 9.2 Supplemental Indentures with Consent of Holders.................................44
Section 9.3 Execution of Supplemental Indentures............................................45
Section 9.4 Effect of Supplemental Indentures...............................................45
Section 9.5 Conformity with Trust Indenture Act.............................................45
Section 9.6 Reference in Debentures to Supplemental Indentures..............................45
Section 9.7 Notice of Supplemental Indenture................................................45
ARTICLE TEN Covenants..........................................................................46
Section 10.1 Payment of Principal, Premium and Interest.....................................46
Section 10.2 Maintenance of Office or Agency................................................46
Section 10.3 Money for Debentures Payments to Be Held in Trust..............................46
Section 10.4 Statement by Officers as to Default............................................48
Section 10.5 Payment of Taxes and Other Claims..............................................48
Section 10.6 Maintenance of Properties......................................................48
Section 10.7 Corporate Existence; Keeping of Books..........................................49
ARTICLE ELEVEN Merger, Consolidation and Transfer of Assets...................................49
Section 11.1 Merger, Consolidation or Transfer of Assets of the Company.....................49
ARTICLE TWELVE Subordination..................................................................49
Section 12.1 Debentures Subordinate to Senior Indebtedness..................................49
Section 12.2 Payment Over of Proceeds upon Dissolution, Etc.................................50
Section 12.3 No Payment When Indebtedness In Default........................................50
Section 12.4 Payment Permitted if No Default................................................51
Section 12.5 Subrogation to Rights of Holders of Senior Indebtedness........................51
Section 12.6 Provisions Solely to Define Relative Rights....................................51
Section 12.7 Trustee to Effectuate Subordination............................................52
Section 12.8 No Waiver of Subordination Provisions..........................................52
Section 12.9 Notice to Trustee..............................................................52
Section 12.10 Reliance on Judicial Order or Certificate of Liquidating Agent................53
Section 12.11 Trustee Not Fiduciary for Holders of Senior Indebtedness......................53
Section 12.12 Rights of Trustee as Holder of Senior Indebtedness............................54
Section 12.13 Article Applicable to Paying Agents...........................................54
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ARTICLE THIRTEEN Redemption of Debentures......................................................54
Section 13.1 Applicability of Article......................................................54
Section 13.2 Optional Redemption...........................................................54
Section 13.3 Election to Redeem; Selection by Trustee of Debentures to Be Redeemed.........54
Section 13.4 Notice of Redemption..........................................................55
Section 13.5 Deposit of Redemption Price...................................................55
Section 13.6 Debentures Payable on Redemption Date.........................................56
Section 13.7 Debentures Redeemed in Part...................................................56
ARTICLE FOURTEEN Defeasance and Covenant Defeasance............................................56
Section 14.1 Option to Effect Legal Defeasance or Covenant Defeasance.......................56
Section 14.2 Legal Defeasance and Discharge.................................................56
Section 14.3 Covenant Defeasance............................................................57
Section 14.4 Conditions to Legal or Covenant Defeasance.....................................57
Section 14.5 Deposited Money and U.S. Government Obligations To Be Held in Trust;
Other Miscellaneous Provisions..............................................58
Section 14.6 Repayment to Company...........................................................59
Section 14.7 Reinstatement..................................................................59
ARTICLE FIFTEEN Miscellaneous..................................................................59
Section 15.1 No Recourse Against Others....................................................59
Section 15.2 Execution in Counterparts.....................................................60
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INDENTURE, dated as of ____________, 1998, between BOSTON CELTICS
LIMITED PARTNERSHIP, a limited partnership duly organized and existing under the
laws of the State of Delaware (herein called the "COMPANY"), having its
principal office at 33 East 63rd Street, New York, NY 10021, and
______________________________________, a _________ corporation, as Trustee
(herein called the "TRUSTEE").
RECITALS OF THE COMPANY
A. The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance of $__________ in principal amount of
its 6% Subordinated Debentures due 2038 (herein called the "DEBENTURES"), to be
issued as in this Indenture provided.
B. All things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Debentures by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Debentures, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
Section 1.1 DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article One have the meanings
assigned to them in this Article One and include the plural as well as
the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting determinations hereunder shall be made, and
all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
(4) the words "HEREIN", "HEREOF" and "HEREUNDER" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
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<PAGE> 7
(5) the word "INCLUDING" is not limiting;
(6) references in this Indenture to any agreement, other document
or law "AS AMENDED" or "AS AMENDED FROM TIME TO TIME," or to
"AMENDMENTS" of any document or law, shall include any amendments,
supplements, replacements, renewals or other modifications from time to
time, provided in the case of modifications to documents, such
modifications are permissible under this Indenture; and
(7) references in this Indenture to any law include regulations
promulgated thereunder from time to time.
"ACT", when used with respect to any Holder, has the meaning
specified in Section 1.4.
"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 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 the Company 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 the Company 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.
"AGENT MEMBERS" has the meaning specified in Section 4.2.
"APPLICABLE LAW" means all applicable provisions of all (i)
constitutions, treaties, statutes, laws, rules, regulations and
ordinances of any Governmental Authority, (ii) Governmental Approvals
and (iii) orders, decisions, judgments, awards and decrees of any
Governmental Authority.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Debentures.
"AUTHORIZED OFFICER" means any officer of the Company designated
by a resolution of the Board of Directors to take certain actions as
specified in this Indenture.
"BANKRUPTCY CODE" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"BOARD OF DIRECTORS" means either the board of directors of the
General Partner or (except for purposes of Section 10.7) any duly
authorized committee of that board. Unless otherwise indicated, "BOARD
OF DIRECTORS" or "BOARD" means the Board of Directors of the General
Partner.
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<PAGE> 8
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the General Partner to have been
duly adopted by the Board of Directors, or by action of an Authorized
Officer designated as such pursuant to a resolution of the Board of
Directors, and to be in full force and effect on the date of such
certification, and delivered to the Trustee. Unless otherwise indicated,
"BOARD RESOLUTION" means a Board Resolution of the General Partner.
"BUSINESS DAY" means each day that is not a Legal Holiday.
"CAPITAL STOCK" of any Person means any and all shares,
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.
"COMPANY" means the Person named as the "COMPANY" in the first
paragraph of this instrument until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "COMPANY" shall mean such successor Person.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or
order signed in the name of the Company by the Chairman of the Board or
Vice Chairman of the Board, the Company's President, its Chief Financial
Officer or a Vice President, and by its Controller, an Assistant
Controller, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which
at any particular time its corporate trust business shall be principally
administered, which office as of the date hereof is located at
______________________________________.
"DEBENTURES" has the meaning specified in the recitals.
"DEBENTURE REGISTER" has the meaning specified in Section 3.6.
"DEBENTURE REGISTRAR" has the meaning specified in Section 3.6.
"DEFAULT" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"DEFAULTED INTEREST" has the meaning specified in Section 3.8.
"DEPOSITARY" has the meaning specified in Section 3.1.
"EVENT OF DEFAULT" has the meaning specified in Section 5.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
3
<PAGE> 9
"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 SEC 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 SEC and releases of the Emerging Issues Task Force.
"GENERAL PARTNER" means Celtics, Inc. or any Person that succeeds
Celtics, Inc. as the general partner of the Company.
"GLOBAL DEBENTURE" means a Debenture bearing the legend
prescribed in Section 2.4 evidencing all or part of the Debentures,
authenticated and delivered to the Depositary or its custodian, and
registered in the name of such Depositary or its nominee.
"GLOBAL DEBENTURE HOLDER" has the meaning specified in
Section 3.1.
"GOVERNMENTAL APPROVAL" means an authorization, consent,
approval, permit, license, registration or filing with any Governmental
Authority.
"GOVERNMENTAL AUTHORITY" with respect to any Person, means any
nation (including an Indian nation), any state or other political
subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, including any government authority, agency, department,
board, commission or instrumentality of the United States, any state of
the United States or any political subdivision thereof, and any tribunal
or arbitrator(s) of competent jurisdiction, in each case, having
jurisdiction or authority over such Person.
"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.
"GUARANTOR" means any person Guaranteeing any obligation.
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<PAGE> 10
"HOLDERS" or "DEBENTUREHOLDERS" means the Person in whose name a
Debenture is registered on the Registrar's books.
"INCUR" means issue, assume, Guarantee, incur or otherwise become
liable for. The term "INCURRENCE" when used as a noun shall have a
correlative meaning. The accretion of principal of a non-interest
bearing or other discount security shall be deemed the Incurrence of
Indebtedness.
"INDEBTEDNESS" means, with respect to any Person on any date of
determination (without duplication): (i) the principal of and premium,
if any, in respect of (A) indebtedness of such Person for money borrowed
and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible
or liable; (ii) all capital lease obligations of such Person; (iii) all
obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement
(including any such obligations under repurchase agreements, but
excluding trade accounts payable and expense accruals arising in the
ordinary course of business not overdue by more than 60 days); (iv) all
obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction; (v)
all obligations of the type referred to in clauses (i) through (iv) of
other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of
any Guarantee; and (vi) all obligations of the type referred to in
clauses (i) through (v) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is
assumed by such Person), the amount of such obligation being deemed to
be the lesser of the value of such property or assets or the amount of
the obligation so secured. The amount of any Indebtedness under clause
(v) of this definition shall be equal to the amount of the outstanding
obligation for which such Person is responsible or liable, directly or
indirectly, including by way of Guarantee.
"INDENTURE" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof, including, for all purposes of this instrument, and
any such supplemental indenture, the provisions of the Trust Indenture
Act that are deemed to be a part of and govern this instrument and any
such supplemental indenture, respectively.
"ISSUE DATE" means the date on which the Debentures are
originally issued.
"LEGAL DEFEASANCE" has the meaning specified in Section 14.2.
"LEGAL HOLIDAY" means any Saturday, Sunday or other day on which
banks in the State of New York or the Commonwealth of Massachusetts are
authorized or obligated by law to be closed for business.
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<PAGE> 11
"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).
"MATURITY", when used with respect to any Debenture, means the
date on which the principal of such Debenture or an installment of
principal becomes due and payable as therein or herein provided, whether
at the Stated Maturity or by declaration of acceleration, call for
redemption, upon repurchase or otherwise.
"OFFICERS' CERTIFICATE" means a certificate signed by the
Chairman of the Board, a Vice Chairman of the Board, the Company's
President, the Chief Financial Officer or a Vice President, and by the
Company's Treasurer, an Assistant Treasurer, the Controller, an
Assistant Controller, the Secretary or an Assistant Secretary, and
delivered to the Trustee. Unless otherwise indicted, "OFFICERS'
CERTIFICATE" means an Officers' Certificate of the Company.
"OPINION OF COUNSEL" means a written opinion of counsel, who may
be counsel for the Company and who shall be acceptable to the Trustee.
"ORIGINAL DEBENTURE" means each Debenture initially issued on
_________, 1998.
"OUTSTANDING", when used with respect to Debentures, means, as of
the date of determination, all Debentures theretofore authenticated and
delivered under this Indenture, except:
(i) Debentures theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Debentures for whose payment or redemption money
in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such
Debentures; provided that, if such Debentures are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has
been made; and
(iii) Debentures in exchange for or in lieu of which
other Debentures have been authenticated and delivered pursuant
to this Indenture, other than any such Debentures in respect of
which there shall have been presented to the Trustee proof
satisfactory to it that such Debentures are held by a bona fide
purchaser in whose hands such Debentures are valid obligations of
the Company
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Debentures have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, Debentures owned by the Company or any Affiliate of the
Company shall be disregarded and deemed not to be Outstanding, except
6
<PAGE> 12
that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent
or waiver, only Debentures which the Trustee knows to be so owned shall
be so disregarded. Debentures so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect
to such Debentures and that the pledgee is not the Company or any
Affiliate of the Company.
"PAYING AGENT" means any Person authorized by the Company to pay
the principal of or any premium or interest on any Debentures on behalf
of the Company or, if the Company is acting as its own Paying Agent, the
Company.
"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.
"PLACE OF PAYMENT" means the place or places where the principal
of and any premium and interest on the Debentures are payable as
specified in Section 10.2.
"PREDECESSOR DEBENTURE" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture; and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 3.7
in exchange for or in lieu of a mutilated, destroyed, lost or stolen
Debenture shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Debenture.
"PRINCIPAL" of a 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.
"REDEMPTION DATE", when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to
this Indenture.
"REDEMPTION PRICE", when used with respect to any Debenture to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"REGULAR RECORD DATE" for the interest payable on any Interest
Payment Date on the Debentures means the June 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment
Date.
"REPRESENTATIVE" means, with respect to any Indebtedness, any
holder thereof or any agent, trustee or other representative for any
such holder.
"RESPONSIBLE OFFICER", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the
chairman or any vice-chairman of the executive committee of the board of
directors, the chairman of the trust committee, the president, any vice
president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any
assistant
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cashier, any senior trust officer, trust officer or assistant trust
officer, the controller or any assistant controller or any other officer
of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity
with the particular subject.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR INDEBTEDNESS" means the principal of and premium, if any,
and interest on (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, plan 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 issue of preferred securities by such financing vehicle, or
(iii) any indebtedness of BCLP to a subsidiary of BCLP.
"SENIOR OFFICER" means the Chairman of the Board, a Vice Chairman
of the Board, the President, the Chief Financial Officer, a Vice
President, the Treasurer, the Controller, or the Secretary of the
Company,
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.8.
"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
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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
the Company 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 the Company) 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.
"TRUSTEE" means the Person named as the "TRUSTEE" in the first
paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "TRUSTEE" shall mean or include each Person who is then a
Trustee hereunder, and if at any time there is more than one such
Person, "TRUSTEE" as used with respect to the Debentures shall mean the
Trustee with respect to the Debentures.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended
after such date, "TRUST INDENTURE ACT" means, to the extent required by
any such amendment, the Trust Indenture Act of 1939 as so amended.
"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
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.
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"VICE PRESIDENT", when used with respect to the Company or the
Trustee, means any vice president (but shall not include any assistant
vice president), whether or not designated by a number or a word or
words added before or after the title "vice president".
"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.
Section 1.2 COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall furnish
to the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion (other than the Officers'
Certificate delivered under Section 10.4 hereof) with respect to compliance with
a condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.3 FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
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Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4 ACTS OF HOLDERS, RECORD DATES.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective upon action by the requisite percentage of Holders
when such instrument or instruments are delivered to the Trustee and, where it
is hereby expressly required, to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "ACT" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 6.1) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section 1.4.
Without limiting the generality of the foregoing, a Holder,
including a Depositary that is a Holder of a Global Debenture, may make, give or
take, by a proxy, or proxies, duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted in this Indenture to be made, given or taken by Holders, and a
Depositary that is a Holder of a Global Debenture may provide its proxy or
proxies to the beneficial owners of interest in any such Global Debenture.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
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(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders of Debentures entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted to be given or taken by Holders of
Debentures. If not set by the Company prior to the first solicitation of a
Holder of Debentures made by any Person in respect of any such action, or, in
the case of any such vote, prior to such vote, the record date for any such
action or vote shall be the 30th day (or, if later, the date of the most recent
list of Holders required to be provided pursuant to Section 7.1) prior to such
first solicitation or vote, as the case may be. With regard to any record date
for action to be taken by the Holders of Debentures, only the Holders of
Debentures on such date (or their duly designated proxies) shall be entitled to
give or take, or vote on, the relevant action.
(d) The ownership of Debentures shall be proved by the Debenture
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Debenture shall bind every
future Holder of the same Debenture and the Holder of every Debenture issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Debenture.
(f) Without limiting the foregoing, a Holder entitled hereunder
to give or take any action hereunder with regard to any particular Debenture may
do so with regard to all or any part of the principal amount of such Debenture
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such principal amount.
Section 1.5 NOTICES, ETC., TO TRUSTEE AND COMPANY.
Except as otherwise expressly provided herein, any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of the its
principal office specified in the first paragraph of this instrument or
at any other address previously furnished in writing to the Trustee by
the Company, Attention: Chief Financial Officer.
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Section 1.6 NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Debenture Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
If by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 1.7 CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
Section 1.8 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
Section 1.9 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
Section 1.10 SEPARABILITY CLAUSE.
If any provision in this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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Section 1.11 BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Debentures, express or
implied, shall give to any Person, other than (a) the parties hereto and their
successors hereunder and (b) the Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
Section 1.12 GOVERNING LAW; CHOICE OF FORUM.
(a) THIS INDENTURE AND THE 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.
(b) EACH OBLIGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF
NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF
NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS INDENTURE AND THE DEBENTURES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. EACH OBLIGOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THEY
MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) The Company hereby irrevocably appoints _____________________
(the "PROCESS AGENT," which has consented thereto) with offices on the date
hereof at ______________________________________, as Process Agent to receive
for and on behalf of the Company service of process in the County of New York
relating to this Indenture and the Debentures. SERVICE OF PROCESS IN ANY SUIT,
ACTION OR PROCEEDING AGAINST THE COMPANY MAY BE MADE ON THE PROCESS AGENT BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY ANY OTHER METHOD
OF SERVICE PROVIDED FOR UNDER APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW
YORK, AND THE PROCESS AGENT IS HEREBY AUTHORIZED AND DIRECTED TO ACCEPT SUCH
SERVICE FOR AND ON BEHALF OF THE COMPANY AND TO ADMIT SERVICE WITH RESPECT
THERETO. SUCH SERVICE UPON THE PROCESS AGENT SHALL BE DEEMED EFFECTIVE PERSONAL
SERVICE ON THE COMPANY, SUFFICIENT FOR PERSONAL JURISDICTION, 10 DAYS AFTER
MAILING, AND SHALL BE LEGAL AND BINDING UPON THE COMPANY FOR ALL PURPOSES,
NOTWITHSTANDING ANY FAILURE OF THE PROCESS AGENT TO MAIL COPIES OF SUCH LEGAL
PROCESS TO THE COMPANY OR ANY FAILURE ON THE PART OF THE COMPANY TO RECEIVE THE
SAME. The Company confirms that it has instructed the Process Agent to mail to
it, upon service of process being made on the Process Agent pursuant to
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this Section, a copy of the summons and complaint or other legal process served
upon it, by registered mail, return receipt requested, at the Company's address
set forth in Schedule ____, or to such other address as the Company may notify
the Process Agent in writing. The Company agrees that it will at all times
maintain a process agent to receive service of process in the County of New York
on its behalf with respect to this Indenture and the Debentures. If for any
reason the Process Agent or any successor thereto shall no longer serve as such
process agent or shall have changed its address without notification thereof to
the Trustee, the Company, immediately after gaining knowledge thereof,
irrevocably shall appoint a substitute process agent acceptable to the Trustee
in the County of New York and advise the Trustee thereof.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
Section 1.13 LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Debenture shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Debentures (other than a provision of the Debentures which specifically states
that such provision shall apply in lieu of this Section)) payment of interest or
principal (and premium, if any) need not be made at such Place of Payment on
such date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date, or at the Stated Maturity, provided that no interest shall
accrue with respect to such payment for the period from and after such Interest
Payment Date, Redemption Date or Stated Maturity, as the case may be.
Section 1.14 NO SECURITY INTEREST.
Nothing in this Indenture or in the Debentures, express or
implied, shall be construed to constitute a security interest under the Uniform
Commercial Code or similar legislation, as now or hereafter enacted and in
effect in any jurisdiction where property of the Company is or may be located.
ARTICLE TWO
DEBENTURE FORMS
Section 2.1 FORMS GENERALLY.
The Debentures shall be in substantially the form set forth in
this Article Two, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of
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any securities exchange or as may, consistently herewith, be determined by the
officers executing such Debentures, as evidenced by their execution of the
Debentures.
The definitive Debentures shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers of the Company executing such Debentures, as
evidenced by their execution of such Debentures.
Section 2.2 FORM OF FACE OF DEBENTURE.
BOSTON CELTICS LIMITED PARTNERSHIP
6% SUBORDINATED DEBENTURES DUE 2038
No................... $..............
Boston Celtics Limited Partnership, a limited partnership duly
organized and existing under the laws of Delaware (herein called the "COMPANY"),
for value received, hereby promises to pay to .........................., or
registered assigns, the principal sum of ....................... Dollars on June
30, 2038, and to pay interest thereon from ___________, 1998 or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, annually on June 30 in each year (each an "INTEREST PAYMENT DATE"),
commencing June 30, 1999, at the rate of 6% per annum, until the principal
hereof is paid or made available for payment, and at the rate of 1% over the
rate set forth above per annum on any overdue principal and (to the extent that
the payment of such interest shall be legally enforceable) on any overdue
installment of interest. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Debenture (or one or more Predecessor
Debentures) is registered at the close of business on the Regular Record Date
for such interest, which shall be the June 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date. Any such interest
not so punctually paid or duly provided for will forthwith cease to be payable
to the Holder on such Regular Record Date and may either be paid to the Person
in whose name this Debenture (or one or more Predecessor Debentures) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Debentures not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Debentures may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
Payment of the principal of (and premium, if any) and any such
interest on this Debenture will be made at the office or agency of the Company
maintained for that purpose in the City of New York, Borough of Manhattan, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts.
Reference is hereby made to the further provisions of this
Debenture set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
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Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Debenture shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated:
BOSTON CELTICS LIMITED PARTNERSHIP
By................................
Attest:
...............................
Section 2.3 FORM OF REVERSE OF DEBENTURE.
This Debenture is one of a duly authorized issue of securities of
the Company (herein called the "DEBENTURES"), issued under an Indenture, dated
as of _________, 1998 (herein called the "INDENTURE"), between the Company and
_______________________, as Trustee (herein called the "TRUSTEE", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Debentures and of the terms upon
which the Debentures are, and are to be, authenticated and delivered. This
Debenture is one of the Debentures designated on the face hereof, limited in
aggregate principal amount to $__________.
The Company may redeem, at its option, up to ___% of the original
aggregate principal amount of the Debentures at any time and from time to time
at a redemption price of ____% of the principal amount of the Debentures
redeemed, plus accrued and unpaid interest thereon. In the event of redemption
of this Debenture in part only, a new Debenture or Debentures of like tenor for
the unredeemed portion hereof will be issued in the name of the Holder hereof
upon the cancellation hereof.
The Debentures are subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full of all Senior Indebtedness of the Company, whether outstanding on the date
of the Indenture or thereafter created, incurred, assumed or guaranteed. Each
Holder by his acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on his behalf, to take such action
as may be necessary or appropriate to effectuate the subordination provided for
in the Indenture and appoints the Trustee his attorney-in-fact for such
purposes.
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The Indenture contains provisions for defeasance at any time of
(a) the entire indebtedness evidenced by this Debenture and (b) certain
restrictive covenants, in each case upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Debenture.
If an Event of Default with respect to Debentures shall occur and
be continuing, the principal of the Debentures may be declared due and payable
in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Debentures to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Debentures at
the time Outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Debentures at the
time Outstanding, on behalf of the Holders of all Debentures, to waive certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Debenture shall be conclusive and binding upon such
Holder and upon all future Holders of this Debenture and of any Debenture issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest on this Debenture at the times, place and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Debenture is registrable in the
Debenture Register, upon surrender of this Debenture for registration of
transfer at the office or agency of the Company in any place where the principal
of and any premium and interest on this Debenture are payable, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Debenture Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Debentures of
like tenor, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Debentures are issuable only in registered form without
coupons in denominations of $20 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth,
Debentures are exchangeable for a like aggregate principal amount of Debentures
of like tenor of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
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Prior to due presentment of this Debenture for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Debenture is registered as the owner
hereof for all purposes, whether or not this Debenture be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Debenture which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
Section 2.4 FORM OF LEGEND FOR GLOBAL DEBENTURES.
Any Global Debenture authenticated and delivered hereunder shall
bear a legend in substantially the following form:
"This Debenture is a Global Debenture within the meaning of the
Indenture hereinafter referred to and is registered in the name of a
Depositary or a nominee thereof. This Debenture may not be transferred
to, or registered or exchanged for Debentures registered in the name of,
any Person other than the Depositary or a nominee thereof or a successor
of such Depositary or a nominee of such successor and no such transfer
may be registered, except in the limited circumstances described in the
Indenture. Every Debenture authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, this Debenture shall
be a Global Debenture subject to the foregoing, except in such limited
circumstances."
Section 2.5 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in
substantially the following form:
This is one of the Debentures designated and referred to in the
within-mentioned Indenture.
________________________________, as Trustee
By__________________________________________
Authorized Officer
Section 2.6 FORM OF ASSIGNMENT AND ELECTION TO PURCHASE.
Each Debenture shall include the following form of Assignment and
Option of Holder to Elect Purchase:
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ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER
IF SUCH HOLDER DESIRES TO TRANSFER THIS DEBENTURE)
FOR VALUE RECEIVED _________________ hereby sells, assigns and
transfers unto __________________________________________________.
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
this Debenture, together with all right, title and interest herein, and does
hereby irrevocably constitute and appoint ___________________ Attorney to
transfer this Debenture on the Debenture Register, with full power of
substitution.
Dated:
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the name
as written upon the face of this Debenture in every particular, without
alteration or any change whatsoever.
ARTICLE THREE
THE DEBENTURES
Section 3.1 GLOBAL DEBENTURE; DEPOSITARY.
The Debentures will initially be issued in the form of one or more
Global Debentures. Each Global Debenture will be deposited on the Issue Date
with The Depository Trust Company (the "DEPOSITARY"), or the Trustee on its
behalf, and registered in the name of Cede & Co., as nominee of the Depositary
(such nominee being referred to herein as the "GLOBAL DEBENTURE Holder").
Section 3.2 AMOUNT.
The aggregate principal amount of Debentures that may be authenticated
and delivered under this Indenture is $__________ (___________________________),
except for Debentures authenticated and delivered pursuant to Section 3.5, 3.6,
3.7, 4.2 or 13.7.
Section 3.3 DENOMINATIONS.
The Debentures shall be issuable in registered form without coupons in
denominations of $20 and any integral multiple thereof.
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Section 3.4 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Debentures shall be executed on behalf of the Company by the
Chairman of the Board, the Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Debentures may be manual or facsimile.
Debentures bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the date of such Debentures.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Debentures executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Debentures, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Debentures.
Each Debenture shall be dated the date of its authentication.
No Debenture shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Debenture a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an Responsible Officer, and such
certificate upon any Debenture shall be conclusive evidence, and the only
evidence, that such Debenture has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any Debenture shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Debenture to the Trustee for cancellation as
provided in Section 3.10, for all purposes of this Indenture such Debenture
shall be deemed never to have been authenticated and delivered hereunder and
shall never be entitled to the benefits of this Indenture.
Section 3.5 TEMPORARY DEBENTURES.
Pending the preparation of definitive Debentures, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Debentures which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Debentures in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Debentures may determine, as evidenced by their
execution of such Debentures.
If temporary Debentures are issued, the Company will cause definitive
Debentures to be prepared without unreasonable delay. After the preparation of
definitive Debentures, the temporary Debentures shall be exchangeable for
definitive Debentures upon surrender of the temporary Debentures at the office
or agency of the Company in a Place of Payment, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary Debentures
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the Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor one or more definitive Debentures of any authorized
denominations and of a like aggregate principal amount and tenor. Until so
exchanged the temporary Debentures shall in all respects be entitled to the same
benefits under this Indenture as definitive Debentures of such tenor.
Section 3.6 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office being herein
sometimes collectively referred to as the "DEBENTURE REGISTER") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Debentures and of transfers of Debentures. The
Trustee is hereby appointed "Debenture Registrar" for the purpose of registering
Debentures and transfers of Debentures as herein provided.
Upon surrender for registration of transfer of any Debenture at the
office or agency in a Place of Payment, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Debentures of any authorized denominations and
of a like aggregate principal amount and tenor.
At the option of the Holder, Debentures may be exchanged for other
Debentures of any authorized denominations and of a like aggregate principal
amount and tenor, upon surrender of the Debentures to be exchanged at such
office or agency. Whenever any Debentures are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Debentures which the Holder making the exchange is entitled to receive.
All Debentures issued upon any registration of transfer or exchange of
Debentures shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Debentures
surrendered upon such registration of transfer or exchange.
Every Debenture presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Debenture Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Debentures, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Debentures, other than
exchanges pursuant to Section 3.5, 3.6, 3.7, 4.2 or 13.7 not involving any
transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Debentures during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Debentures
selected for redemption under Section 13.3 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or
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exchange any Debenture so selected for redemption in whole or in part, except
the unredeemed portion of any Debenture being redeemed in part.
Section 3.7 MUTILATED, DESTROYED, LOST AND STOLEN DEBENTURES.
If any mutilated Debenture is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Debenture of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Debenture and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Debenture has been acquired by a
bona fide purchaser, the Company shall execute and the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Debenture, a new Debenture of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debenture has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Debenture, pay such Debenture.
Upon the issuance of any new Debenture under this Section 3.7, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Debenture issued pursuant to this Section 3.7 in lieu of any
destroyed, lost or stolen Debenture shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debenture shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder.
The provisions of this Section 3.7 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Debentures.
Section 3.8 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Debenture which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid in immediately
available funds to the Person in whose name that Debenture (or one or more
Predecessor Debentures) is registered at the close of business on the Regular
Record Date for such interest.
Any interest on any Debenture which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"DEFAULTED INTEREST") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been
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such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Debentures (or their respective Predecessor
Debentures) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Debenture and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder of Debentures at his address as it appears in the Debenture
Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid
to the Persons in whose names the Debentures (or their respective
Predecessor Debentures) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Debentures in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Debentures may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section 3.8, each
Debenture delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Debenture shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Debenture.
Section 3.9 PERSONS DEEMED OWNERS.
Prior to due presentment of a Debenture for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Debenture is registered as the owner of such
Debenture for the purpose of receiving payment of principal of and any premium
and (subject to Section 3.8) any interest on such
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Debenture and for all other purposes whatsoever, whether or not such Debenture
be overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
So long as the Global Debenture Holder is the registered owner of any
Debentures, the Global Debenture Holder will be considered the sole Holder under
this Indenture of any Debentures evidenced by the Global Debenture for the
purposes of receiving payment on the Debentures, receiving notices, and for all
other purposes under this Indenture and the Debentures. Beneficial owners of
Debentures evidenced by the Global Debenture will not be considered the owners
or Holders thereof under this Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company 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
Debentures.
Section 3.10 CANCELLATION.
All Debentures surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Debentures previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Debentures previously authenticated hereunder which the Company
has not issued and sold, and all Debentures so delivered shall be promptly
canceled by the Trustee. No Debentures shall be authenticated in lieu of or in
exchange for any Debentures canceled as provided in this Section 3.10, except as
expressly permitted by this Indenture. All canceled Debentures held by the
Trustee shall be disposed of as directed by a Company Order.
Section 3.11 COMPUTATION OF INTEREST.
Interest on the Debentures shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
BOOK ENTRY PROVISIONS FOR GLOBAL DEBENTURES
Section 4.1 APPLICABILITY OF ARTICLE
Each Global Debenture shall be subject to this Article Four.
Section 4.2. BOOK-ENTRY PROVISIONS FOR GLOBAL DEBENTURE
(a) Members of, or participants in, the Depositary ("AGENT MEMBERS")
shall have no rights under this Indenture with respect to any Global Debenture
held on their behalf by the
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Depositary or under the Global Debenture, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Debenture for all purposes whatsoever. Any Holder
of the Global Debenture shall, by acceptance of such Global Debenture, agree
that the transfers of beneficial interests in such Global Debenture may be
effected only through a book-entry system maintained by the Holder of such
Global Debenture (or its agent), and that ownership of a beneficial interest in
the Global Debenture shall be required to be reflected in a book-entry system.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or an agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Debenture.
(b) The Depositary must, at the time of its designation and at all
times while it serves as Depositary, be a clearing agency registered under the
Exchange Act and any other applicable statute or regulation.
(c) Notwithstanding any other provision of this Section, unless and
until it is exchanged in whole or in part for individual Debentures represented
thereby, a Global Debenture representing all or a portion of the Debentures may
not be transferred except as a whole by the Depositary to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Interests of
beneficial owners in the Global Debentures (each an "INTEREST") may be
transferred to one beneficial owner or to another Agent Member or exchanged for
definitive Debentures in accordance with the rules and procedures of the
Depositary and the provisions of this Indenture. In addition, definitive
Debentures shall be transferred to all beneficial owners in exchange for their
beneficial interests in Global Debentures if (i) the Depositary for the
Debentures notifies the Company that the Depositary is unwilling or unable to
continue as Depositary for the Global Debentures or is no longer eligible to
serve as Depositary pursuant to the terms of this Indenture and a successor
Depositary is not appointed by the Company within 90 days after delivery of such
notice; (ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of definitive Debentures under this
Indenture, then the Company shall execute; or (iii) there shall have occurred
and be continuing a Default with respect to any Debentures represented by the
Global Debentures; and the Trustee shall, upon receipt of a Company Order in
accordance with Section 3.4, authenticate and deliver, definitive Debentures in
an aggregate principal amount equal to the principal amount of the Global
Debentures in exchange for such Global Debentures. If specified by the Company
pursuant to Section 3.4, the Depositary may surrender a Global Debenture in
exchange in whole or in part for Debentures of like tenor and terms and in
definitive form on such terms as are acceptable to the Company, the Trustee and
the Depositary.
(d) In connection with the transfer of any Interest from one
beneficial owner to another Agent Member not taking a definitive Debenture, but
an Interest, pursuant to paragraph (c) of this Section 4.2, the Depositary shall
reflect on its books and records the date, the name of the transferor and
transferee, and the amount of the Interest transferred.
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(e) In connection with the transfer of Global Debentures to beneficial
owners pursuant to the third sentence of paragraph (c) or (h) of this Section
4.2, the Global Debentures shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute and the Trustee upon receipt of a
Company Order for the authentication and delivery of definitive Debentures shall
authenticate and deliver, without service charge:
(i) to the Depositary or to each Person specified by such
Depositary a new Debenture or Debentures of like tenor and terms and of any
authorized denomination as requested by such Person in aggregate principal
amount equal to and in exchange for such Person's beneficial interest in
the Global Debenture; and
(ii) to such Depositary a new Global Debenture of like tenor
and terms and in an authorized denomination equal to the difference, if
any, between the principal amount of the surrendered Global Debenture and
the aggregate principal amount of Debentures delivered to Holders thereof.
Notwithstanding any other provision of this Indenture, any Debenture
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any Global Debenture shall also be a Global Debenture and
shall bear the legend specified in Section 2.4 hereof except for any Debenture
authenticated and delivered in exchange for, or upon registration of transfer
of, a Global Debenture pursuant to the preceding sentence.
(f) The Holder of any Global Debenture may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Debentures.
(g) Upon the exchange of a Global Debenture in its entirety for
Debentures in definitive form, such Global Debenture shall be canceled by the
Trustee.
(h) Notwithstanding anything herein to the contrary, if at any time
the Depositary for the Debentures notifies the Company that it is unwilling or
unable to continue as a Depositary for the Debentures or if at any time the
Depositary for the Debentures shall no longer be registered or in good standing
under the Exchange Act, or other applicable statute or regulation, the Company
shall appoint a successor Depositary with respect to the Debentures. If a
successor Depositary for the Debentures is not appointed by the Company within
90 days after the Company receives such notice or becomes aware of such
condition, the Company will execute, and the Trustee, upon Company Request, will
authenticate and deliver Debentures in definitive form in an aggregate principal
amount equal to the principal amount of the Global Debenture or Global
Debentures representing Debentures in exchange for such Global Debenture or
Global Debentures.
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ARTICLE FIVE
REMEDIES
Section 5.1 EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" as used herein is any one of the following:
(a) a default in the payment of interest on the Debentures when due,
continued for 30 days;
(b) 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;
(c) [Intentionally omitted.]
(d) the failure by the Company to comply with any of its obligations
in Section 7.4 and 30 days or more shall have expired after a Senior
Officer of the Company first becomes aware of such failure;
(e) the failure by the Company to comply, for 30 days after the notice
specified below, in any material respect in the performance of or to breach
any covenant, representation or warranty contained in this Indenture; or
(f) a decree, judgment or order by a court of competent jurisdiction
shall have been entered adjudging the Company as bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of the
Company under any bankruptcy or similar law, and such decree or order shall
have continued undischarged and unstayed for a period of 60 days; or a
decree or order of a court of competent jurisdiction over the appointment
of a receiver, liquidator, trustee or assignee in bankruptcy or insolvency
of the Company, or of the property of any such person, or for the winding
up for liquidation of the affairs of any such person, shall have been
entered, and such decree, judgment or order shall have remained in force
undischarged and unstayed for a period of 60 days; or the Company shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall
consent to the filing of a bankruptcy proceeding against it, or shall file
a petition or answer or consent seeking reorganization under any bankruptcy
or similar law or similar statute, or shall consent to the filing of any
such petition, or shall consent to the appointment of a custodian,
receiver, liquidator, trustee or assignee in bankruptcy or insolvency of it
or any of its assets or property, or shall make a general assignment for
the benefit of creditors, or shall admit in writing its inability to pay
its debts generally as they become due, or shall become insolvent or fail
generally to pay its debts as they become due.
A Default under subsection (e) is not an Event of Default until the
Trustee or the Holders of at least 25% in principal amount of the Outstanding
Debentures notify the Company of the Default and the Company does not cure the
Default within 30 days after receipt of the notice.
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The notice must specify the Default, demand that it be remedied and state that
the notice is a "NOTICE OF DEFAULT."
Section 5.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
clause (f) of Section 5.1) with respect to Debentures at the time Outstanding
occurs and is continuing, then in every such case the Trustee or the Holders of
not less than 25% in principal amount of the Outstanding Debentures may declare
the principal amount of all of the Debentures to be due and payable immediately,
by a notice in writing to the Company (and to the Trustee if given by Holders),
and upon any such declaration such principal amount (or specified amount) shall
become immediately due and payable. If any Event of Default specified in clause
(g) of Section 5.1 occurs, such principal amount shall automatically become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder.
At any time after such a declaration of acceleration with respect to
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article Five
provided, the Holders of a majority in principal amount of the Outstanding
Debentures, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Debentures,
(B) the principal of (and premium, if any, on) any Debentures
which have become due otherwise than by such declaration of
acceleration and any interest thereon at the rate or rates prescribed
therefor in such Debentures,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Debentures, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Debentures, other than the
non-payment of the principal of Debentures which have become due solely by
such declaration of acceleration, have been cured or waived as provided in
Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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Section 5.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any Debenture
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Debenture at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Debentures, the whole amount then due and payable on such
Debentures for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Debentures, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may (or, at the
direction of Holders of not less than 25% of the Outstanding Debentures shall),
in addition to any other remedies available to it, institute a judicial
proceeding for the collection of the sums so due and unpaid and may prosecute
such proceeding to judgment or final decree, and may enforce the same against
the Company or any other obligor upon the Debentures and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or any other obligor upon the Debentures, wherever
situated. If an Event of Default with respect to Debentures occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Debentures by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
Section 5.4 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company, its
property or its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all actions
authorized under the Trust Indenture Act in order to have claims of the Holders
and the Trustee allowed in any such proceeding. In particular, the Trustee shall
be authorized to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
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advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 6.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Debentures or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, the Trustee may vote on behalf of the Holders for the election of a
trustee in bankruptcy or similar official and may be a member of a creditors' or
other similar committee.
Section 5.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
DEBENTURES.
All rights of action and claims under this Indenture or the Debentures
may be prosecuted and enforced by the Trustee without the possession of any of
the Debentures or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Debentures in respect of which such
judgment has been recovered.
Section 5.6 APPLICATION OF MONEY COLLECTED.
Subject to Article Twelve of this Indenture, any money collected by
the Trustee pursuant to this Article Five shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal or any premium or interest,
upon presentation of the Debentures and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 6.7; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Debentures in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Debentures for principal and any premium and interest,
respectively.
Section 5.7 LIMITATION ON SUITS.
No Holder of any Debenture shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Debentures;
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(2) the Holders of not less than 25% in principal amount of the
Outstanding Debentures shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Debentures;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 5.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Debenture shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section 3.8)
any interest on such Debenture on the Stated Maturity or maturities expressed in
such Debenture (or, in the case of redemption or repurchase, on the Redemption
Date or Repurchase Date), and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
Section 5.9 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 5.10 RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures in the last paragraph
of Section 3.7, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be
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exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.11 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Debentures
to exercise any right or remedy accruing upon any Default shall impair any such
right or remedy or constitute a waiver of any such Default or an acquiescence
therein. Every right and remedy given by this Article Five or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders, as the case may be.
Section 5.12 CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Debentures shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Debentures,
provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow any such direction if the Trustee in good
faith shall, by a Responsible Officer or Officers of the Trustee, determine
that the proceeding so directed would be unduly prejudicial to the rights
of any other Holder or would involve the Trustee in personal liability.
Section 5.13 WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Debentures may on behalf of the Holders of all the Debentures waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of or any premium or interest on
any Debenture, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Debenture affected.
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Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 5.14 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Debentures
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Debentures, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of (or premium, if any) or
interest on any Debentures on or after the Stated Maturity or maturities
expressed in such Debentures (or, in the case of redemption or repurchase, on or
after the Redemption Date or Repurchase Date).
Section 5.15 WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 6.1 CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section 6.1. If an Event of Default occurs (and is not cured), the Trustee,
in the exercise of its power, must use the degree of care of a prudent man in
the conduct of his own affairs. Subject to the requirement in the foregoing
sentence, the Trustee is under no
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obligation to exercise any of its rights or powers under this 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 this Indenture.
Section 6.2 NOTICE OF DEFAULTS.
If a Default occurs and is continuing and is known to the Trustee, the
Trustee shall mail to each Holder 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 withholding notice is
not opposed to the interest of the Holders.
Section 6.3 CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, Debenture, other evidence of indebtedness or other paper
or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company shall be sufficiently
evidenced by a Company Request or Company Order and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, Debenture, other evidence of indebtedness or other paper
or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and,
if the
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Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
Section 6.4 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF DEBENTURES.
The recitals contained herein and in the Debentures, except the
Trustee's certificate of authentication, shall be taken as the statements of the
Company, and the Trustee or any Authenticating Agent assumes no responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Debentures. The Trustee or any
Authenticating Agent shall not be accountable for the use or application by the
Company of Debentures or the proceeds thereof.
Section 6.5 MAY HOLD DEBENTURES.
The Trustee, any Authenticating Agent, any Paying Agent, any Debenture
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Debentures and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Debenture
Registrar or such other agent.
Section 6.6 MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 6.7 COMPENSATION AND REIMBURSEMENT.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith;
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(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the reasonable costs and
expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder;
and
(4) when the Trustee incurs any expenses or renders any services after
the occurrence of an Event of Default specified in Section 5.1(g), such
expenses and the compensation for such services are intended to constitute
expenses of administration under the Bankruptcy Code or any similar federal
or state law for the relief of debtors.
As security for the performance of the obligations of the Company
under this Section 6.7, the Trustee shall have a lien prior to the Debentures
upon all property and funds held or collected by the Trustee as such, except
funds (i) held in trust for the payment of principal of and interest on
Debentures or (ii) held in the Trustee's capacity as Paying Agent.
The obligations of the Company under this Section 6.7 to compensate
and indemnify the Trustee and each predecessor Trustee and to pay or reimburse
the Trustee and each predecessor Trustee for expenses, disbursements and
advances shall constitute an additional obligation hereunder and shall survive
the satisfaction and discharge of this Indenture and the resignation or removal
of the Trustee and each predecessor Trustee.
Section 6.8 DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
Section 6.9 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $10,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of any supervising or examining authority, then for the purposes of
this Section 6.9, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.9, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article Six.
Section 6.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article Six shall become effective until the
acceptance of
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appointment by the successor Trustee in accordance with the applicable
requirements of Section 6.11.
(b) The Trustee may resign at any time with respect to the Debentures
by giving written notice thereof to the Company. If the instrument of acceptance
by a successor Trustee required by Section 6.11 shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Debentures.
(c) The Trustee may be removed at any time with respect to the
Debentures by Act of the Holders of a majority in principal amount of the
Outstanding Debentures, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Debenture for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide holder of a Debenture for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all securities, or (ii) subject to Section 5.14, any
Holder who has been a bona fide Holder of a Debenture for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Debentures and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Debentures, the Company, by a Board Resolution, shall promptly
appoint a successor Trustee or Trustees with respect to the Debentures and shall
comply with the applicable requirements of Section 6.11. If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee with respect to the Debentures shall be appointed
by Act of the Holders of a majority in principal amount of the Outstanding
Debentures delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment in
accordance with the applicable requirements of Section 6.11, become the
successor Trustee with respect to the Debentures and to that extent supersede
the successor Trustee appointed by the Company. If no successor Trustee with
respect to the Debentures shall have been so appointed by the Company or the
Holders and accepted appointment in the manner
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required by Section 6.11, any Holder who has been a bona fide Holder of a
Debenture for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Debentures.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Debentures and each appointment of a
successor Trustee with respect to the Debentures to all Holders of Debentures in
the manner provided in Section 1.6. Each notice shall include the name of the
successor Trustee with respect to the Debentures and the address of its
Corporate Trust Office.
Section 6.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee with
respect to the Debentures, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) of this Section 6.11.
(c) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article Six.
Section 6.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article Six,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Debentures shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Debentures so authenticated with the same effect
as if such successor Trustee had itself authenticated such Debentures.
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Section 6.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Debentures), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 6.14 APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents (which may
be an affiliate of the Company) with respect to the Debentures which shall be
authorized to act on behalf of the Trustee to authenticate Debentures issued
upon original issue and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 3.7, and Debentures so authenticated
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Debentures by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any state thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $500,000,000 and subject to supervision or examination
by federal or state authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section 6.14,
the combined capital and surplus of such Authenticating Agent shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section 6.14, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section 6.14.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 6.14, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders of Debentures with respect to which such Authenticating Agent
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will serve, as their names and addresses appear in the Debenture Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 6.14.
Unless the Authenticating Agent has been appointed by the Trustee at
the request of the Company, the Trustee agrees to pay to each Authenticating
Agent from time to time reasonable compensation for its services under this
Section 6.14, and the Trustee shall be entitled to be reimbursed for such
payments, subject to the provisions of Section 6.7.
If an appointment is made pursuant to this Section 6.14, the
Debentures may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternative certificate of authentication in the following
form:
This is one of the Debentures designated and referred to in the
within-mentioned Indenture.
----------------------------------,
as Trustee
By:
--------------------------------
as Authenticating Agent
By:
--------------------------------
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS.
(a) The Company will furnish or cause to be furnished
to the Trustee:
(i) semi-annually, not later than five Business Days after each
Regular Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Debentures as of such
Regular Record Date, and
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(ii) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list
of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Debenture Registrar.
(b) If and whenever the Company or any Affiliate acquires any
Debentures, the Company shall within 10 Business Days after such acquisition by
the Company and within 10 Business Days after the date on which it obtains
knowledge of any such acquisition by an Affiliate, provide the Trustee with
written notice of such acquisition, the aggregate principal amount acquired (to
the extent known by the Company), the Holder from whom such Debentures were
acquired and the date of such acquisition.
Section 7.2 PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Debenture
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of the Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Debentures, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Debentures, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 7.3 REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto. To
the extent that any such report is required by the Trust Indenture Act with
respect to any 12-month period, such report shall cover the 12-month period
ending December 31 and shall be transmitted by the next succeeding March 1.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Debentures are listed, with the SEC and with the Company. The Company will
notify the Trustee when any Debentures are listed on any stock exchange.
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Section 7.4 REPORTS BY COMPANY.
The Company shall file with the SEC and shall furnish to the Trustee,
within 15 days after it files them with the SEC, copies of its annual report and
the information, documents and other reports which the Company is required to
file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The
Company also shall comply with the provisions of Section 314(a) of the Trust
Indenture Act.
ARTICLE EIGHT
[RESERVED]
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto in form satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company herein
and in the Debentures;
(b) to provide for uncertificated Debentures in addition to or in
place of certificated Debentures (provided, that such uncertificated
Debentures are issued in registered form for purposes of Section 163(f) of
the Code, or in a manner such that the uncertificated Debentures are
described in Section 163(f)(2)(B) of the Code);
(c) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company or to add guarantees with respect to the Debentures;
(d) to cure any ambiguity, to correct or supplement any provision
herein that may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture that shall not be inconsistent with
the provisions of this Indenture; provided that, in each case, such
provisions shall not adversely affect the interests of the Holders;
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(e) to evidence, and provide for the acceptance of, the appointment
of a successor Trustee hereunder;
(f) to secure the Debentures; or
(g) to comply with any requirement of the SEC or state securities
regulators in connection with the qualification of this Indenture under the
Trust Indenture Act or any registration or qualification of the Debentures
under the Securities Act or state securities laws.
Section 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
(a) Except as otherwise provided in Section 9.2(b), with the written
consent of the Holders of a majority in principal amount of the Outstanding
Debentures, by Act of such Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or
eliminating or waiving any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Debenture affected thereby,
(A) extend the Stated Maturity of the principal of, or the stated
maturity of any installment of interest on, any Debenture, or reduce
the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption or repurchase thereof, or change
the coin or currency or property in which the principal of any
Debenture or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment
after the Stated Maturity or due date thereof (or, in the case of
redemption, after the Redemption Date), or affect the ranking (in
terms of right or time of payment) of the Debentures,
(B) [Intentionally omitted],
(C) reduce the percentage in principal amount of the Outstanding
Debentures the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with the provisions of this Indenture or
Defaults hereunder and their consequences) provided for in this
Indenture,
(D) modify any provision of Article Twelve with respect to the
subordination of the Debentures;
(E) modify any provision of Section 13.2 or the definitions used
therein if the effect of such modification or waiver is to decrease
the amount of any payment required to be made by the Company
thereunder or extend the maturity date of such payment, or
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(F) modify any of the provisions of this Section 9.2 or Section
5.13, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Debenture affected
thereby.
(b) It shall not be necessary for any Act of Holders under this
Section 9.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act and such notice shall
approve the substance thereof.
Section 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article Nine or the modifications
thereby of the trusts created by this Indenture, the Trustee shall receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Opinion of
Counsel stating that this Indenture, as amended by such supplemental indenture,
constitutes the legal, valid and binding obligation of the Company, enforceable
against each of them in accordance with its terms.
Section 9.4 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article
Nine, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Debentures theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby and entitled to the benefits thereof.
Section 9.5 CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.6 REFERENCE IN DEBENTURES TO SUPPLEMENTAL INDENTURES.
Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article Nine may, and shall if required
by the Trustee, bear a notation in form acceptable to the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Debentures so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Debentures.
Section 9.7 NOTICE OF SUPPLEMENTAL INDENTURE.
After an supplemental indenture hereunder becomes effective, the
Company shall mail to Holders a notice briefly describing such supplemental
indenture; provided, that the failure to give such notice to all Holders, or any
defect therein, will not impair or affect the validity of the supplemental
indenture.
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ARTICLE TEN
COVENANTS
Section 10.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company covenants and agrees for the benefit of the Debentures
that it will duly and punctually pay the principal of (and premium, if any, on)
and interest on the Debentures in accordance with the terms of the Debentures
and this Indenture.
All payments of principal, premium, if any, and interest will be made
by the Company in immediately available funds. The Debentures shall be included
in the Same-Day Funds Settlement System of The Depository Trust Company until
maturity.
Section 10.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, City of New
York, State of New York, an office or agency where Debentures may be presented
or surrendered for payment (a "PLACE OF PAYMENT"), where Debentures may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Debentures and this Indenture
may be served. Initially, the Company hereby designates the Corporate Trust
Office of the Trustee for all such purposes, and the Company hereby designates
the Trustee as the initial Paying Agent. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for Debentures for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
Section 10.3 MONEY FOR DEBENTURES PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent with
respect to the Debentures, it will, on or before each due date of the principal
of or any premium or interest on any of the Debentures, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal and any premium and interest so becoming due until such sums shall
be paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure to act.
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Whenever the Company shall have one or more Paying Agents for the
Debentures, it will, prior to each due date of the principal of or any premium
or interest on any Debentures, deposit with a Paying Agent, in immediately
available funds, a sum sufficient to pay such amount, such sum to be held as
provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.3
that such Paying Agent will:
(1) hold all sums held by it for the payment of principal of (and
premium, if any) or interest on Debentures in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Debentures) in the making of any such payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Debenture and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Debenture shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in The Wall Street Journal or The New York Times (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
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Section 10.4 STATEMENT BY OFFICERS AS TO DEFAULT.
(a) The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate (one of the signers of which shall be the principal
executive officer, principal financial officer or principal accounting officer
of the Company), stating whether or not to the best knowledge of the signers
thereof the Company is, or was during the preceding year, in default in the
performance and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and, if the Company shall be or shall have been in default,
specifying all such defaults and the nature and status thereof of which they may
have knowledge.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company gives notice or takes any other action with respect
to a claimed default, the Company shall deliver to the Trustee by registered or
certified mail, or by facsimile transmission, its status, and what action the
Company is taking or proposes to take in respect thereof within 30 days after a
Senior Officer of the Company becomes aware of the occurrence thereof, an
Officers' Certificate specifying such event, notice or other action.
Section 10.5 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or upon the income,
profits or property of the Company, and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which adequate
reserves (in the good faith judgment of the Board of Directors) have been made.
Section 10.6 MAINTENANCE OF PROPERTIES.
The Company will cause all properties owned by the Company or used or
held for use in the conduct of its business to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section 10.6 shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Board of Directors (or, in the case of real estate owned
properties, in the judgment of a Senior Officer), desirable in the conduct of
its business or the business of the Company and not disadvantageous in any
material respect to the Holders.
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Section 10.7 CORPORATE EXISTENCE; KEEPING OF BOOKS.
The Company will do or cause to be done all things necessary to
preserve and keep in full force and effect the existence, rights (charter and
statutory) and franchises of the Company; provided, however, that any such right
or franchise of the Company may be terminated if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and that the loss thereof is not, and is not
reasonably likely to be, disadvantageous in any material respect to the Holders.
The Company shall keep proper books and records, in which full and
correct entries shall be made of all financial transactions and the assets,
liabilities and business of the Company, in accordance with GAAP.
ARTICLE ELEVEN
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Section 11.1 MERGER, CONSOLIDATION OR TRANSFER OF ASSETS OF THE
COMPANY.
(a) The Company shall not consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of related
transactions, all or substantially all its assets to, any Person, unless: (i)
the resulting, surviving or transferee Person (the "SUCCESSOR COMPANY") shall be
a Person organized and existing under the laws of the United States of America
or any state thereof and the Successor Company (if not the Company) shall
expressly assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, all of the Company's
obligations under the Debentures and this Indenture; (ii) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with this Indenture.
(b) The Successor Company shall be the successor to the Company and
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture, but the predecessor Company, in the case
of a lease, shall not be released from the obligation to pay the principal of,
premium, if any, and interest on the Debentures.
ARTICLE TWELVE
SUBORDINATION
Section 12.1 DEBENTURES SUBORDINATE TO SENIOR INDEBTEDNESS.
(a) The Company covenants and agrees, and each Holder of a Debenture,
by his acceptance thereof, likewise covenants and agrees, that, to the extent
and in the manner
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hereinafter set forth in this Article Twelve, the Indebtedness represented by
the Debentures and the payment of the principal of and premium (if any) and
interest on each and all of the Debentures, are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of
existing and future Senior Indebtedness of the Company. If any Senior
Indebtedness is disallowed, avoided or subordinated pursuant to the provisions
of Section 548 of the Bankruptcy Code or any applicable state fraudulent
conveyance law, such Senior Indebtedness nevertheless will constitute Senior
Indebtedness for purposes of this Indenture. For purposes of this Article
Twelve, (i) a "PAYMENT" includes any payment with respect to principal of,
premium, if any, or interest on, the Debentures, including any deposit pursuant
to Article Fourteen and any repurchase, redemption, defeasance or other
retirement of any Debentures, and (ii) "PRINCIPAL", if used with respect to the
Debentures, shall include, without limitation, the principal portion of the
Redemption Price and Purchase Price of Debentures.
(b) Notwithstanding anything in this Article Twelve to the contrary,
nothing herein shall apply to any payments made out of the assets of any trust
referred to in paragraph (a) of Section 14.4.
Section 12.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of the assets of the Company to
creditors upon a total or partial liquidation or total or partial dissolution of
the Company or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or its property (whether voluntary or
involuntary), (i) the holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full before the holders of the Debentures are
entitled to receive any payment, and (ii) until the Senior Indebtedness of the
Company is paid in full, any payment to which the Holders of the Debentures
would be entitled but for this Section 12.2 will be made to holders of Senior
Indebtedness as their interests may appear, except that Holders may receive
shares of stock or Indebtedness of the Company that is subordinated to at least
the same extent as the Debentures.
(b) [Intentionally omitted].
(c) In the event that, notwithstanding the foregoing provisions of
this Section 12.2, the Trustee or the Holder of any Debenture shall have
received any payment or distribution of any kind or character, whether in cash,
securities or other property, before all Senior Indebtedness is paid in full,
then and in such event such payment or distribution shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other official for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
Section 12.3 NO PAYMENT WHEN INDEBTEDNESS IN DEFAULT.
(a) DEBENTURE PAYMENTS. The Company may not make any payment with
respect to the Debentures if (i) any Senior Indebtedness of the Company is not
paid when due or
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(ii) any other default on any such Senior Indebtedness occurs and the maturity
thereof has been accelerated in accordance with its terms, unless, in either
case, (x) the default has been cured or waived and any such acceleration has
been rescinded or (y) such Senior Indebtedness has been paid in full.
(b) [Intentionally omitted.]
(c) APPLICATION. The provisions of this Section 12.3 shall not apply
to any payment with respect to which Section 12.2 would be applicable.
Section 12.4 PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in any of the Debentures shall prevent (a) the Company, at any time
except during the pending of any liquidation, dissolution or proceeding referred
to in Section 12.2 or under the conditions described in Section 12.3, from
making payments at any time of principal of (or premium, if any) or interest on
the Debentures, or (b) the application by the Trustee of any money deposited
with it hereunder to the payment of or on account of the principal (and premium,
if any) or interest on the Debentures or the retention of such payment by the
Holders, if, at the time of such application by the Trustee, it did not have
knowledge that such payment would have been prohibited by the provisions of this
Article Twelve.
Section 12.5 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness, the Holders
of the Debentures shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article Twelve and to the rights of the holders of such
Senior Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of (and
premium, if any) and interest on the Debentures shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of
Senior Indebtedness of any cash, property or securities to which the Holders of
the Debentures or the Trustee would be entitled except for the provisions of
this Article Twelve shall, as among the Company, its creditors other than the
holders of Senior Indebtedness and the Holders of the Debentures, be deemed to
be payment or distribution by the Company to or on account of the Senior
Indebtedness.
Section 12.6 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article Twelve are and are intended solely for
the purpose of defining the relative rights of the Holders of the Debentures and
the holders of Senior Indebtedness. Nothing contained in this Article Twelve or
elsewhere in this Indenture or in the Debentures is intended to or shall (a)
impair, as among the Company, its creditors other than holders of Indebtedness
and the Holders of the Debentures, the obligations of the Company, which are
absolute and unconditional, to pay to the Holders of the Debentures the
principal of (and premium, if any) and interest on the Debentures as and when
the same shall become due and
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payable in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Debentures and creditors of the
Company other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or the Holder of any Debenture from exercising all remedies otherwise
permitted by applicable law upon an Event of Default, subject to the rights, if
any, under this Article Twelve of the holders of Senior Indebtedness to receive
cash, property and securities otherwise payable or deliverable to the Trustee or
such Holder.
Section 12.7 TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Debenture by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article Twelve and
appoints the Trustee his attorney-in-fact for any and all such purposes.
Section 12.8 NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Debentures, without incurring responsibility to the Holders of the Debentures
and any Beneficiaries and without impairing or releasing the subordination
provided in this Article Twelve or the obligations hereunder of the Holders of
the Debentures to the holders of Senior Indebtedness, do any one or more of the
following: (i) change the manner, place, amount or terms of payment or extend
the time of payment of, or renew or alter, Senior Indebtedness, or otherwise
amend or supplement in any manner Indebtedness or any instrument evidencing the
same or any agreement under which Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (iii) release any Person liable in any
manner for the collection of Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
Section 12.9 NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Debentures pursuant to this Article Twelve.
Notwithstanding the provisions of this Article Twelve or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts which would prohibit the making of any payment to or by the Trustee
in respect of the Debentures, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Indebtedness or from any
Representative thereof; and,
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prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Article Six, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have received
the notice provided for in this Section 12.9 at least three Business Days prior
to the date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal (and
premium, if any) or interest on any Debenture), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and authority
to receive such money and to apply the same to the purpose for which such money
was received and shall not be affected by any notice to the contrary which may
be received by it within three Business Days prior to such date.
Subject to the provisions of Article Six, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a Representative of Senior Indebtedness to establish
that such notice has been given by a holder of Senior Indebtedness (or a trustee
therefor or other representative thereof). In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article Twelve, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Article Twelve,
and if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment or distribution.
Section 12.10 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article Twelve, the Trustee, subject to the provisions of Article Six,
and the Holders of the Debentures shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Debentures, for the purpose of
ascertaining the Person entitled to participate in such payment or distribution,
the holders of the Senior Indebtedness and other indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Twelve.
Section 12.11 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Debentures
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
Twelve or otherwise.
53
<PAGE> 59
Section 12.12 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Twelve with respect to any Senior Indebtedness
that may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
Nothing in this Article Twelve shall apply to claims of, or payments
to, the Trustee pursuant to Section 6.7.
Section 12.13 ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "TRUSTEE"
as used in this Article Twelve shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article Twelve in addition to or in place of Trustee; provided,
however, that Section 12.12 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
ARTICLE THIRTEEN
REDEMPTION OF DEBENTURES
Section 13.1 APPLICABILITY OF ARTICLE.
Any redemption of Debentures before their Stated Maturity shall be in
accordance with their terms and in accordance with this Article Thirteen.
Section 13.2 OPTIONAL REDEMPTION.
The Debentures will not be redeemable prior to their Stated Maturity,
except as provided on the reverse of the Form of Debenture set forth in
Section 2.3.
Section 13.3 ELECTION TO REDEEM; SELECTION BY TRUSTEE OF DEBENTURES
TO BE REDEEMED.
Any election to redeem Debentures shall be evidenced by a Board
Resolution.
If less than all the Debentures are to be redeemed, the particular
Debentures to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Debentures not previously
called for redemption, on a pro rata basis, by lot or by such method as the
Trustee in its sole discretion shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to the minimum
authorized denomination for Debentures or any integral multiple thereof) of the
principal amount of Debentures of a denomination larger than the minimum
authorized denomination for Debentures.
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<PAGE> 60
The Trustee shall promptly notify the Company in writing of the
Debentures selected for redemption and, in the case of any Debentures selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Debentures shall relate,
in the case of any Debentures redeemed or to be redeemed only in part, to the
portion of the principal amount of such Debentures which has been or is to be
redeemed.
Section 13.4 NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Debentures to be redeemed, at his address appearing in
the Debenture Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and accrued interest, if any,
(3) if less than all the Outstanding Debentures are to be redeemed,
the identification (and, in the case of partial redemption of any
Debentures, the principal amounts) of the particular Debentures to be
redeemed,
(4) that on the Redemption Date the Redemption Price and accrued but
unpaid interest, if any, will become due and payable upon each such
Debenture to be redeemed and, if applicable, that interest thereon will
cease to accrue on and after said date,
(5) the place or places where such Debentures are to be surrendered
for payment of the Redemption Price and accrued interest, if any, and
(6) the CUSIP numbers, if any, of the Debentures to be redeemed.
Notice of redemption of Debentures to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
Section 13.5 DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money in immediately available funds sufficient to pay the Redemption Price of,
and (except if the Redemption Date shall be an Interest Payment Date) accrued
but unpaid interest on, all the Debentures which are to be redeemed on that
date.
55
<PAGE> 61
Section 13.6 DEBENTURES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Debentures so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Debentures shall cease to bear interest. Upon surrender of any
such Debenture for redemption in accordance with said notice, such Debenture
shall be paid by the Company at the Redemption Price, together with accrued but
unpaid interest to the Redemption Date; provided, however, that, installments of
interest whose stated maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Debentures, or one or more Predecessor
Debentures, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.8.
If any Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Debenture.
Section 13.7 DEBENTURES REDEEMED IN PART.
Any Debenture which is to be redeemed only in part shall be
surrendered at a Place of Payment therefor (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder of such Debenture
without service charge, a new Debenture or Debentures of like tenor, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Debenture so surrendered.
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
Section 14.1 OPTION TO EFFECT LEGAL DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by
a Board Resolution, at any time, elect to have Section 14.2 be applied to all
Outstanding Debentures upon compliance with the conditions set forth below in
this Article Fourteen.
Section 14.2 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 14.1 of the option
applicable to this Section 14.2, the Company shall, subject to the satisfaction
of the conditions set forth in Section 14.4, be deemed to have been discharged
from its obligations with respect to all Outstanding Debentures on the date the
conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For
this purpose, Legal Defeasance means that the Company shall be deemed to
56
<PAGE> 62
have paid and discharged the entire Indebtedness represented by the Outstanding
Debentures, which shall thereafter be deemed to be "OUTSTANDING" only for the
purposes of Section 14.5 and the other Sections of this Indenture referred to in
(a) and (b) below, and the Company shall be deemed to have satisfied all its
other obligations under the Debentures and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions, which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of Outstanding Debentures to receive solely from the trust fund
described in Section 14.4, and as more fully set forth in such Section, payments
in respect of the principal of, premium, if any, and interest on such Debentures
as and when such payments are due, (b) the Company's obligations with respect to
such Debentures under Articles One, Two, Three and Four and Section 10.3, (c)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
the Company's obligations in connection therewith and (d) of this Article
Fourteen. Subject to compliance with this Article Fourteen, the Company may
exercise its option under this Section 14.2 notwithstanding the prior exercise
of its option under Section 14.3.
Section 14.3 [Intentionally Omitted].
Section 14.4 CONDITIONS TO LEGAL DEFEASANCE.
The following shall be the conditions precedent to the effectiveness
of any Legal Defeasance:
(a) the Company shall (i) irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, unencumbered cash in United States
dollars, unencumbered U.S. Government Obligations, or a combination
thereof, in such amounts as will be sufficient, in a written opinion of a
nationally recognized firm of independent public accountants delivered to
the Trustee, to pay the principal of, premium, if any, and interest on the
outstanding Debentures on the stated date for payment thereof or on the
applicable Redemption Date, as the case may be, and the Company must
specify whether the Debentures are being defeased to maturity or to a
particular Redemption Date, and (ii) irrevocably instruct the Trustee to
apply such cash and U.S. Government Obligations to such payments with
respect to the Debentures;
(b) in the case of an election under Section 14.2, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service
a ruling or (B) since the date of this Indenture, there has been a change
in the applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that, the
Holders of the Outstanding Debentures will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
57
<PAGE> 63
(c) no Default or Event of Default shall have occurred and be
continuing on (i) the date of such deposit (other than a Default or Event
of Default resulting from the Incurrence of Indebtedness all or a portion
of the proceeds of which will be used to defease the Debentures pursuant to
this Article Fourteen concurrently with such Incurrence) and (ii) insofar
as Section 5.1(g) hereof is concerned, at any time during the period ending
on the 91st day after the date of deposit (such condition not being
satisfied until such 91st day);
(d) such Legal Defeasance shall not result in a breach or violation
of, or constitute a default under, any material agreement or instrument
(other than this Indenture) to which the Company is a party or by which the
Company is bound;
(e) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that on the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(g) the Company shall have delivered to the Trustee Officers'
Certificates and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance have been
complied with.
Section 14.5 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 14.6, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 14.5, the "TRUSTEE") pursuant
to Section 14.4 in respect of the Outstanding Debentures shall be held in trust
and applied by the Trustee, in accordance with the provisions of the Debentures
and this Indenture, to the payment, either directly or through any Paying Agent
(excluding the Company acting as Paying Agent) as the Trustee may determine, to
the Holders of such Debentures of all sums due and to become due thereon in
respect of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to Section 14.4 or the principal and interest
received in respect thereof.
Anything in this Article Fourteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or U.S. Government Obligations held by it as provided
in Section 14.4 which, in the opinion of a
58
<PAGE> 64
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 14.4), are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
Section 14.6 REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Debenture and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Debenture shall thereafter,
as a creditor, look only to the Company for payment thereof, and all liability
of the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in The New York Times and The Wall Street Journal (national edition),
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
Section 14.7 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
Dollars or U.S. Government Obligations in accordance with Section 14.2 or 14.3,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture, the Debentures
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 14.2 or 14.3 until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 14.2 or 14.3, as the case may
be; provided, however, that, if the Company makes any payment of principal of,
premium, if any, or interest on any Debenture following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Debentures to receive such payment from the money held by the Trustee or
Paying Agent.
ARTICLE FIFTEEN
MISCELLANEOUS
Section 15.1. NO RECOURSE AGAINST OTHERS.
The general partner of the Company, any officer, director, employee or
agent, as such, of the general partner or of Company, shall not have any
liability for any obligations of the Company under the Debentures or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Debenture waives and
releases all such liability.
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<PAGE> 65
Section 15.2. EXECUTION IN COUNTERPARTS.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
BOSTON CELTICS LIMITED PARTNERSHIP
By:_________________________________________
Name:
Title:
Attest:
By:________________________________
Title:
________________________________, as Trustee
By:_________________________________________
Name:
Title:
Attest:
By:________________________________
Title:
60
<PAGE> 66
STATE OF _________ )
) ss.:
COUNTY OF ________ )
On the ____ day of ___________, 1998, before me personally came ______
____________________, to me known, who, being by me duly sworn, did depose and
say that he is __________________ of Boston Celtics Limited Partnership, the
limited partnership described in and which executed the foregoing instrument;
that he knows the seal of said limited partnership; that the seal affixed to
said instrument is such seal; that it was so affixed by authority of the Board
of Directors of the general partner of said limited partnership, and that he
signed his name thereto by like authority.
--------------------------------------------
Notary Public
61
<PAGE> 67
STATE OF _________ )
) ss.:
COUNTY OF ________ )
On the ____ day of ___________, 1998 before me personally came _____
_________________, to me known, who, being by me duly sworn, did depose and say
that he is _______________ of _________________________, the corporation
described in and which executed the foregoing instrument, that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
--------------------------------------------
Notary Public
62
<PAGE> 1
EXHIBIT 12.1
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Boston Celtics Limited Partnership's ratio of earnings to fixed charges for each
of the periods indicated is as follows (amounts of thousands except ratio data):
<TABLE>
<CAPTION>
1997 1996 1997 1996 1995 1994 1993
------- -------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BCLP Historical Ratio of Earnings to Fixed
Charges
Earnings $ 3,390 $ 2,136 $1,820 $17,637 $ 5,172 $ 6,737 $10,378
Fixed Charges 3,004 3,076 5,970 6,482 9,930 4,516 2,244
------- -------- ------ ------- ------- ------- -------
Adjusted earnings $ 6,394 $ 5,213 $7,790 $24,118 $14,803 $11,252 $12,622
------- -------- ------ ------- ------- ------- -------
Ratio of earnings to fixed charges 2.13 1.69 1.30 3.72 1.54 2.49 5.62
BCLP and BCLP II Pro Forma Ratio of
Earnings to Fixed Charges
Pro Forma earnings (loss) ($2,251) ($ 8,097)
Pro Forma fixed charges 5,181 10,267
Pro Forma adjusted charges $ 2,930 $ 2,170
------- --------
Pro Forma ratio of earnings to fixed
charges 0.57 0.21
</TABLE>
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.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected
Historical Consolidated Financial Data" and "Experts" and to the use of our
report dated September 19, 1997, except for Note P as to which the date is
February 6, 1998, with respect to the consolidated financial statements of
Boston Celtics Limited Partnership included in the Registration Statement (Form
S-4) and related Prospectus of Boston Celtics Limited Partnership II, Boston
Celtics Limited Partnership and Castle Creek Limited Partnership dated April 17,
1998.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
April 15, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF BOSTON CELTICS LIMITED PARTNERSHIP AND ITS
SUBSIDIARIES AS OF JUNE 30, 1997 AND THE RELATED CONSOLIDATED STATEMENT OF
INCOME FOR THE YEAR ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996 JUN-30-1995
<PERIOD-END> JUN-30-1997 JUN-30-1996 JUN-30-1995
<EXCHANGE-RATE> 1 1 1
<CASH> 6,499 5,982 39,563
<SECURITIES> 42,573 46,764 45,133
<RECEIVABLES> 2,677 3,788 3,223
<ALLOWANCES> 10 10 10
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 103,801 135,903 165,515
<PP&E> 1,625 1,711 1,232
<DEPRECIATION> 716 526 386
<TOTAL-ASSETS> 119,200 145,234 184,065
<CURRENT-LIABILITIES> 39,139 40,289 118,482
<BONDS> 47,500 50,000 50,000
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (7,790) 16,520 (15,720)
<TOTAL-LIABILITY-AND-EQUITY> 119,200 145,233 184,065
<SALES> 62,998 64,780 52,325
<TOTAL-REVENUES> 62,998 64,780 52,325
<CGS> 0 0 0
<TOTAL-COSTS> 62,275 48,830 51,810
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 5,873 6,388 9,075
<INCOME-PRETAX> 1,820 17,637 5,172
<INCOME-TAX> 1,400 1,850 (345)
<INCOME-CONTINUING> 420 15,787 5,517
<DISCONTINUED> 0 38,414 10,639
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 420 54,201 16,156
<EPS-PRIMARY> 0.07 9.18 2.43
<EPS-DILUTED> 0.06 8.89 2.43
</TABLE>
