<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
<TABLE>
<S> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996)
FOR THE YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
COMMISSION FILE NO. 1-10881
GAYLORD ENTERTAINMENT COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 73-0383730
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
ONE GAYLORD DRIVE, NASHVILLE, TENNESSEE 37214
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (615) 316-6000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
CLASS A COMMON STOCK -- $.01 PAR VALUE NEW YORK STOCK EXCHANGE
(Title of Class) (Name of exchange on which registered)
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. []
As of March 3, 1997, 45,256,310 shares of Class A Common Stock and
51,163,546 shares of Class B Common Stock were outstanding. The aggregate market
value of the shares of Class A Common Stock held by non-affiliates of the
registrant based on the closing price of the Class A Common Stock on the New
York Stock Exchange on March 3, 1997 was approximately $905,508,000. The
aggregate market value of the shares of Class B Common Stock held by
non-affiliates of the registrant (assuming the market value of each share of
Class B Common Stock is equivalent to that of each share of the Class A Common
Stock) was approximately $235,829,000. Shares of Class A Common Stock and Class
B Common Stock held by non-affiliates exclude only those shares beneficially
owned by officers and directors.
================================================================================
<PAGE> 2
GAYLORD ENTERTAINMENT COMPANY
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I
Item 1 Business.................................................... 1
Item 2 Properties.................................................. 12
Item 3 Legal Proceedings........................................... 12
Item 4 Submission of Matters to a Vote of Security Holders......... 14
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 14
Item 6 Selected Financial Data..................................... 15
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 16
Item 8 Financial Statements and Supplementary Data................. 24
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 44
PART III
Item 10 Directors and Executive Officers of the Registrant.......... 44
Item 11 Executive Compensation...................................... 46
Item 12 Security Ownership of Certain Beneficial Owners and
Management.................................................. 52
Item 13 Certain Relationships and Related Transactions.............. 55
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 56
SIGNATURES........................................................... 57
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
INTRODUCTION
The Company is a diversified entertainment and communications company
operating principally in three industry segments: cable networks, entertainment,
and broadcasting. In February 1997, the Company entered into an agreement with
Westinghouse Electric Corporation ("Westinghouse") whereby Westinghouse will
acquire substantially all of the Company's cable networks segment. Following the
completion by the Company of a spin-off of its entertainment and broadcasting
segments and certain other businesses, the remainder of the Company will merge
with a subsidiary of Westinghouse (the "Westinghouse Merger"). See
"Restructuring and Merger."
The Company was founded in 1903 in the Oklahoma Territory as a newspaper
publishing business by a group including the Gaylord and Dickinson families. The
Company was incorporated under the laws of the State of Delaware in 1925. In
1928, the Company entered the radio broadcasting business and, in 1949, expanded
its broadcasting interests to include television stations. The Company currently
owns two television stations that are affiliated with the CBS television network
and three radio stations. In January 1997, the Company entered into an agreement
to sell KSTW, its Seattle, Washington television station. See "Broadcasting."
In 1983, the Company acquired an interrelated group of businesses
("Opryland USA") that became the cornerstone of the Company's cable networks and
entertainment businesses. Opryland USA traces its origins to the Grand Ole Opry,
a live country music radio show created in 1925. Opryland USA has developed an
entertainment and convention/resort complex in Nashville, Tennessee, that is
anchored by the Opry House, the Opryland Hotel, which is one of the nation's
largest convention/resort hotels, and the Opryland theme park.
The Company currently owns and operates The Nashville Network ("TNN"), a
cable network with a national audience featuring country lifestyles,
entertainment, and sports, and owns a 67% interest in Country Music Television
("CMT"), a cable network with a 24-hour country music video format. Both TNN and
CMT will be acquired by Westinghouse in the Westinghouse Merger. See
"Restructuring and Merger." In 1992, the Company launched the first of its CMT
International cable networks in Europe. CMT International, which programs
primarily country music videos, was later expanded into Asia, the South Pacific
and Latin America. In 1994, the Company acquired an option to purchase 95% of
the outstanding common stock of Z Music, Inc. ("Z Music"), a cable network that
currently programs contemporary Christian music videos. The Company currently
manages the operations of Z Music. In January 1997, the Company acquired Word
Records and Music, a record and music publishing company which features
primarily contemporary Christian music.
RESTRUCTURING AND MERGER
The Company will be restructured immediately prior to the Westinghouse
Merger so that all of the assets and liabilities relating to the Company's
broadcasting and entertainment businesses, including all of the Company's
long-term debt, will be held, directly or indirectly, by a separate wholly-owned
subsidiary of the Company ("New GET"). New GET will then be spun off (the
"Spin-off") to the Company's stockholders, each of whom will receive one share
of New GET common stock (the "Distribution") for every three shares of Class A
or Class B Common Stock of the Company. Immediately prior to the Distribution,
Westinghouse will transfer its 33% interest in CMT International to New GET.
Immediately following the Distribution, the Westinghouse Merger will be
consummated, which will result in the acquisition by Westinghouse of all of the
Company's cable networks business (other than CMT International and Z Music). In
the Westinghouse Merger the Company's stockholders will receive Westinghouse
common stock with an aggregate value of $1.55 billion based upon a per share
exchange ratio determined by reference to the market price of Westinghouse
common stock at the time of the merger, subject to certain limits on the total
number of shares to be issued. The Spin-off, Distribution, and Westinghouse
Merger are expected to occur during 1997, subject
1
<PAGE> 4
to a number of conditions, including Company stockholder approval of the
Westinghouse Merger and certain regulatory approvals, including an Internal
Revenue Service ruling that the Distribution, Westinghouse Merger, and certain
of the transactions comprising the restructuring will be tax-free transactions.
The assets of New GET will include the Grand Ole Opry, the Opryland Hotel,
the Opryland theme park, broadcasting operations comprised of Dallas
CBS-affiliate television station KTVT and three Nashville-based radio stations,
as well as interests in country and Christian music publishing and recording
with the Opryland Music Group and Word Records and Music. New GET's remaining
cable networks operations will consist of CMT International and the management
of Z Music. New GET is expected to be a publicly traded, NYSE-listed company.
At the closing of the Westinghouse Merger, New GET and Westinghouse will
enter into a number of ancillary agreements that are intended to provide for
minimal disruption of the businesses during a transition period. These
agreements are generally for five year terms and are intended to provide for the
use of facilities and services consistent with past practices, including leases
to Westinghouse of certain real property to be owned by New GET currently used
in the cable networks business. New GET will also provide continued access to
production locations, will maintain and provide use of joint facilities, and
will provide security, janitorial, and telecommunications services. Westinghouse
will provide continued weekly airing of the Grand Ole Opry Live show on TNN, a
minimum of four annual specials promoting the Wildhorse Saloon to be aired on
TNN, ongoing promotion of the Wildhorse Saloon on TNN and CMT, commercial
announcements on TNN and CMT promoting the businesses of New GET, and continued
access to programming as well as operating and management services for CMT
International.
CABLE NETWORKS
The Company's cable networks operations consist primarily of TNN, CMT, CMT
International, and the management of Z Music, all of which, other than CMT
International and Z Music, will be acquired by Westinghouse in the Westinghouse
Merger. See Note 14 to the Company's Consolidated Financial Statements for the
amounts of revenues, operating income, and identifiable assets attributable to
the Company's cable networks operations.
TNN. TNN is an advertiser-supported cable network featuring country
lifestyles and entertainment. TNN's programming is offered mainly through
contracts with cable television system operators as part of their basic
programming and is transmitted by way of communications satellites to these
cable systems. According to a December 1996 report issued by the A.C. Nielsen
Company ("Nielsen"), TNN served approximately 68.3 million subscribers
(representing virtually all cable households and approximately 70.4% of all
television households in the United States). TNN's programming includes country
music performances, interviews with country music artists and personalities,
specials, variety shows, talk shows, news, and sports programming that is of
interest to its general audience. TNN's weekend programming focuses on outdoor
sports, such as hunting and fishing, and motor sports, some of which, including
a portion of the NASCAR Winston Cup Series, is broadcast live. TNN telecasts 18
hours of programming per day, which consists of an average of approximately 11
hours of first-run programming. A significant portion of TNN's programming
(approximately 2,450 hours in 1996) is produced by, or specifically for, the
Company.
The following table sets forth sources of revenues and certain other
information concerning TNN for each of the five years in the period ended
December 31, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1996 1995 1994 1993 1992
--------------- --------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues (in thousands)
Advertising............................. $139,921 $116,979 $103,995 $96,159 $83,961
Subscriber fees......................... $111,638 $ 99,532 $ 91,758 $85,650 $73,868
Number of U.S. subscribers (in
thousands)*............................. 68,308 64,360 58,685 59,164 56,892
Percent of total cable households*........ 101.2% 98.9% 94.4% 94.9% 93.2%
</TABLE>
- ---------------
* According to Nielsen data. Percent of total cable households exceeds 100% in
1996 due to satellite and other forms of distribution.
2
<PAGE> 5
Since it was launched in 1983, TNN has been marketed by Group W Satellite
Communications, Inc. ("Group W"), a subsidiary of Westinghouse. Pursuant to an
agreement with Group W and certain of its affiliates (the "Group W Distribution
Agreement"), Group W has the exclusive right to market carriage of TNN to cable
television systems in the United States and Canada, and is primarily responsible
for promoting, marketing, and selling advertising time on TNN, as well as
providing a satellite transponder to deliver TNN's programming to cable systems.
The Company is responsible for providing original, quality, first-run
programming and a satellite uplink (or alternative means of transmission). Under
the Group W Distribution Agreement, Group W is entitled to receive a commission
of 33% of TNN's gross receipts, net of agency commissions.
CMT. In 1991, the Company acquired a 67% interest in CMT, an
advertiser-supported 24-hour basic cable network with a country music video
format which broadcasts in the United States and Canada. At the same time, an
affiliate of Group W acquired a 33% interest in CMT. The country music video
format of CMT is directed primarily to a younger audience, 18 to 34 years of
age, which is of particular interest to certain advertisers. As of December
1996, CMT had approximately 37.3 million subscribers according to Nielsen.
Group W provides sales and marketing services for CMT similar to those
provided to TNN. Group W currently receives a commission of 10% of gross
receipts, net of agency commissions, up to a current maximum of $3.8 million
annually. The Company also receives a commission equal to 5% of gross receipts,
net of agency commissions.
The revenues derived by TNN and CMT from the sale of advertising time
depend upon the amount of available time that is sold and the rates at which
such time is sold. Advertising rates are based upon viewer demographics and
audience size, as reflected in Nielsen surveys, whose audience estimates are
widely accepted by advertisers as a basis for determining advertising placement
strategy and rates. TNN's and CMT's subscriber fee revenues are primarily
generated under contracts with cable systems that carry TNN and/or CMT. Pursuant
to these contracts, TNN and CMT charge the cable systems monthly fees based upon
the number of cable subscribers receiving the services. In the past, TNN's and
CMT's contracts with cable systems generally have had three to ten year terms.
CMT International. In October 1992, CMT launched its international
operations through a new cable network, CMT Europe. CMT International expanded
the international reach of CMT to include portions of Asia and the South
Pacific, including Australia and New Zealand, in 1994. In 1995, CMT expanded
into Latin America, allowing CMT's satellite signals to potentially reach an
estimated 90% of the world's homes with televisions. The programming for CMT
International currently consists primarily of country music videos. At December
31, 1996, CMT International had 6.8 million subscribers.
Z Music. In 1994, the Company entered into an agreement to manage, and
acquired an option to purchase 95% of the outstanding common stock of, Z Music,
a cable network currently featuring contemporary Christian music videos. The
Company believes that Z Music is currently available to approximately 18 million
broadcast and cable homes in the U.S.
ENTERTAINMENT
The Company's entertainment operations consist primarily of an interrelated
group of businesses including the Grand Ole Opry, the Opryland Hotel, the
Opryland theme park, the Wildhorse Saloon, the Ryman Auditorium, the General
Jackson (an entertainment showboat), as well as a music publishing business and
other related businesses. See Note 14 to the Company's Consolidated Financial
Statements for the amounts of revenues, operating income, and identifiable
assets attributable to the Company's entertainment operations.
3
<PAGE> 6
Convention/Resort Hotel Operations
The Opryland Hotel. The Opryland Hotel, situated on approximately 120
acres in the Opryland complex, is the seventh largest hotel in the United States
in terms of number of guest rooms and has more exhibit space per room than any
other convention hotel in the world. The Opryland Hotel attracts convention
business, which accounted for approximately 78% of the hotel's revenues in 1996,
from major trade associations and corporations. It also serves as a destination
resort for vacationers seeking accommodations in close proximity to the Opryland
theme park and the Grand Ole Opry as well as to other attractions in the
Nashville area. The Company believes that the ambience created at the Opryland
Hotel by combining a state of the art convention facility, live musical
entertainment, and old-fashioned Southern hospitality and charm are factors that
differentiate it from other convention/resort hotels.
The following table sets forth information concerning the Opryland Hotel
for each of the five years in the period ended December 31, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average number of guest rooms............... 2,613 1,907 1,878 1,891 1,891
Occupancy rate.............................. 84.7% 87.5% 87.9% 85.5% 85.5%
Average room rate........................... $ 131.21 $ 132.99 $ 130.15 $ 126.27 $ 121.09
Food and beverage revenues (in thousands)... $ 59,904 $ 50,418 $ 48,694 $ 46,870 $ 45,702
Total revenues (in thousands)............... $196,226 $153,062 $147,049 $140,573 $133,288
</TABLE>
To serve conventions, the Opryland Hotel has 2,883 guest rooms, four
ballrooms with approximately 123,900 square feet, 85 banquet/meeting rooms, and
total dedicated exhibition space of approximately 289,000 square feet. In
addition to extensive convention facilities, the Opryland Hotel features the
Delta addition's 4.5 acre atrium containing a New Orleans street scene with
shops, a 1.5 acre garden conservatory, a 1.5 acre water-oriented interior space
called the Cascades, six restaurants, a food court featuring a variety of
cuisines, three swimming pools, and twenty-nine retail shops. In the Delta,
hotel guests and visitors can take boat rides on the Delta's indoor river. Live
entertainment is featured in the Cascades and in the hotel's restaurants and
lounges, and special productions for conventions are often staged in the hotel
or on the General Jackson showboat. Springhouse Golf Club, the Company's 18-hole
championship golf course, attracts conventions requiring the availability of
golf and makes the hotel more attractive to vacationers. The Springhouse Golf
Club also hosts an annual Senior PGA Tour event, the BellSouth Senior Classic at
Opryland, which is televised on NBC.
The Company directs its convention marketing efforts primarily to major
trade, industry, and professional associations and corporations. The Company
typically enters into contracts for conventions several years in advance. To
date, the Company has experienced a minimal number of cancellations. Conventions
that cancel are contractually required to pay certain penalties and face the
possible loss of future convention space at the hotel. As of December 31, 1996,
convention bookings for 1997 were for approximately 832,000 guest room nights,
representing 79% of the available guest room nights for the year. As of March
26, 1997, the Company had not experienced the cancellation of any material
commitment.
The Company also markets the Opryland Hotel as a destination resort through
national and local advertising and a variety of promotional activities. As part
of its marketing activities, the Company advertises promotional "packages" on
TNN and through other media. Such promotions include a "Country Winter
Celebration," "Spring into Summer," the International Country Music Fan Fair
Celebration in June of each year, and "A Country Christmas," which runs each
year from early November through Christmas Day. The Country Christmas program
has contributed to the hotel's high occupancy rate during the month of December
(approximately 84% of available guest room nights during December 1996),
traditionally a slow period for the hotel industry.
The General Jackson. The General Jackson, a 300-foot, four-deck paddle
wheel showboat, operates on the Cumberland River, which flows past the Opryland
complex. Its Victorian Theatre can seat 620 people for banquets and 1,000 people
for theater-style presentations. The showboat stages Broadway-style shows and
4
<PAGE> 7
other theatrical productions. It is one of many sources of entertainment that
the Company makes available to conventions held at the Opryland Hotel and
contributes to the Company's revenues from convention participants. During the
day it serves primarily tourists visiting the Opryland complex and the Nashville
area.
Opryland Theme Park
The Opryland theme park is a musical show park that emphasizes live
productions of country, rock 'n' roll, gospel, bluegrass, and Broadway show
tunes. The 218-acre park consists of approximately 80 acres of developed in-park
entertainment area, 30 acres of support facilities, 70 acres of parking lot, and
38 acres of contiguous undeveloped land. The park has 11 theaters, bandstands,
and other facilities where it can stage musical productions. These facilities,
including a 4,000-seat amphitheater and an additional 2,200-seat theater, have a
total seating capacity of approximately 12,000. The park can simultaneously
stage up to 11 musical shows and, during the summer months, presents up to 50
shows each day. The amphitheater is also used regularly for television
productions and other events. "Nashville On Stage," a series of live concerts,
is slated for its fourth year of operation during the 1997 season. For 26
concerts, from May to August 1997, top-name, major-label music stars, including
The Oak Ridge Boys, Billy Ray Cyrus, The Temptations, and Sandi Patty are
scheduled to perform at the park.
The Company believes that its attention to, and emphasis on, live
entertainment productions are the principal factors that differentiate the
Opryland theme park from other amusement and theme parks. In addition to
offering shows and other live entertainment, the park operates 21 rides as well
as shops, restaurants, children's play areas, and other facilities. The Company
makes regular capital improvements in the form of new rides and attractions. The
park also features the Grand Ole Opry Museum and other museums containing
memorabilia collections of country music legends Roy Acuff and Minnie Pearl.
These museums are located in the Opry Plaza area of the park, which remains open
year round. The park has a broadcast studio from which the Company's radio
station WSM-FM is broadcast and a studio from which TNN produces a nightly cable
network show. With certain exceptions, visitors to the park purchase a single
ticket for a full day's admission to all of the park's entertainment and
attractions.
The park operates on weekends in the spring and the autumn and seven days a
week in the summer. In recent years, the "Christmas in the Park" program during
November and December has provided an additional attraction for the Country
Christmas program at the Opryland Hotel, extending the park's operating season.
The following table sets forth certain information concerning the park.
"Revenues per visitor" include revenues from tickets, food and beverage sales
and sales of retail merchandise. "Total attendance" and "Revenues per visitor"
include paying and non-paying visitors. "Average ticket price" includes paying
visitors only. The data set forth for 1993 through 1996 below includes results
of the "Christmas in the Park" program during which the revenues per visitor and
ticket prices were significantly less than during the park's other operating
periods.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total attendance (in thousands)....................... 1,980 2,100 2,266 2,247 2,023
Revenues per visitor.................................. $26.73 $27.66 $26.52 $24.11 $25.49
Average ticket price.................................. $15.60 $16.34 $15.15 $14.01 $15.05
Number of operating days.............................. 190 197 218 190 147
</TABLE>
Country Music Entertainment
The Grand Ole Opry. The Grand Ole Opry is a live country music show with
performances every Friday and Saturday night and frequent summer matinees. The
Opry House, home of the Grand Ole Opry, is located in the Opryland complex. The
show is radio broadcast by WSM-AM every Friday and Saturday night from the Opry
House, and TNN telecasts a 30-minute live segment every Saturday night together
with a 30-minute live segment of the warm-up preceding the show. The show has
been radio broadcast since 1925 on WSM-AM, making it the longest running live
radio program in the world. During the summer months, the Grand
5
<PAGE> 8
Ole Opry, which requires the purchase of a separate admission ticket, is a major
attraction in addition to the live shows in the Opryland theme park.
The Grand Ole Opry currently has 72 performing members who are stars or
other notables in the country music field. Members perform on the Grand Ole
Opry, and there are no financial inducements attached to membership in the Grand
Ole Opry other than the prestige associated with membership. In addition, the
Grand Ole Opry presents performances by many other country music artists. The
following is a list of the members of the Grand Ole Opry (including year of
membership) as of March 26, 1997.
MEMBERS OF THE GRAND OLE OPRY
<TABLE>
<S> <C> <C>
Bill Anderson-1961 Jan Howard-1972 Charley Pride-1993
Ernie Ashworth-1964 Alan Jackson-1991 Jeanne Pruett-1973
Clint Black-1991 Stonewall Jackson-1956 Del Reeves-1966
Garth Brooks-1990 Jim & Jesse-1964 Riders In The Sky-1982
Jim Ed Brown-1963 George Jones*-1969 Johnny Russell-1985
The Carlisles-1953 Grandpa Jones*-1947 Jeannie Seely-1967
Roy Clark-1987 Hal Ketchum-1994 Ricky Van Shelton-1988
Jerry Clower-1973 Pete Kirby ("Bashful Jean Shepard-1955
John Conlee-1981 Brother Oswald")-1995 Ricky Skaggs-1982
Wilma Lee Cooper-1957 Alison Krauss-1993 Melvin Sloan Dancers-1957
Skeeter Davis-1959 Hank Locklin-1960 Connie Smith-1971
Little Jimmy Dickens*-1948 Charlie Louvin-1955 Mike Snider-1990
Joe Diffie-1993 Patty Loveless-1988 Hank Snow*-1950
Roy Drusky-1958 Loretta Lynn*-1962 Marty Stuart-1992
Holly Dunn-1989 Martina McBride-1995 Randy Travis-1986
The 4 Guys-1967 Mel McDaniel-1986 Travis Tritt-1992
Larry Gatlin & The Gatlin Reba McEntire-1985 Justin Tubb-1955
Brothers Band-1976 Barbara Mandrell-1972 Porter Wagoner-1957
Don Gibson-1958 Ronnie Milsap-1976 Billy Walker-1960
Vince Gill-1991 Lorrie Morgan-1984 Charlie Walker-1967
Billy Grammar-1959 Jimmy C. Newman-1956 Steve Wariner-1996
Jack Greene-1967 Osborne Brothers-1964 The Whites-1984
Tom T. Hall-1980 Dolly Parton-1969 Teddy Wilburn-1953
George Hamilton IV-1960 Stu Phillips-1967 Boxcar Willie-1981
Emmylou Harris-1992 Ray Pillow-1966
</TABLE>
- ---------------
* Members of the Country Music Hall of Fame.
The Opry House, which was built in 1974 to replace the Ryman Auditorium as
the home of the Grand Ole Opry, contains a 45,000 square foot auditorium with
4,400 seats, a television production center that includes a 300-seat studio as
well as lighting, audio, and video control rooms, and set design and scenery
shops. The Opry House is used by the Company for the production of television
and other programming for TNN and for third parties such as national television
networks and the Public Broadcasting System. It is also rented for concerts,
theatrical productions, and special events.
The Wildhorse Saloon. The Company has operated the Wildhorse Saloon since
1994 as a country music dance club on historic Second Avenue in downtown
Nashville. The three-story, 56,000 square-foot facility includes a 3,000 square
foot dance floor, a 190-seat restaurant and banquet facility, and a 15 x 22 foot
television screen featuring, among other things, country music videos. The club
also has a broadcast-ready stage and facilities to house mobile production units
from which broadcasts of live concerts may be distributed nationwide. TNN
produces a country music dance show at the club, which is broadcast weekdays on
TNN.
6
<PAGE> 9
The Company owns 51% of a joint venture with Levy Restaurants Group ("Levy")
which was established to expand the Wildhorse Saloon concept to major,
high-profile tourism cities around the country. Levy will provide restaurant
management expertise and oversee day-to-day operations, site selections, and
lease negotiations for the restaurants.
Ryman Auditorium. In 1994, the Company re-opened the renovated Ryman
Auditorium, the former home of the Grand Ole Opry, for concerts and musical
productions. The Ryman, built in 1892, is listed on the National Register of
Historic Places and seats approximately 2,100. During 1997, the musical
production, "Lost Highway," which explores the life and music of Hank Williams,
Sr., is scheduled to return for a second season. TNN broadcasts musical shows
taped at the Ryman Auditorium.
Opryland Music Group. Opryland Music Group ("OMG") is primarily engaged in
the music publishing business and owns one of the world's largest catalogs of
copyrighted country music songs. In addition to commercially recorded music, OMG
issues licenses for the use of its songs in films, plays, print, commercials,
videos, cable, and television. Through various subsidiaries and sub-publishers,
OMG collects royalties on licenses granted in a number of foreign countries in
addition to its U.S.-based business.
BROADCASTING
The Company's radio stations WSM-AM and WSM-FM commenced broadcasting in
1925 and 1967, respectively. Opryland USA's involvement with country music dates
back to the creation of the Grand Ole Opry, which has been broadcast live on
WSM-AM since 1925. The Company has been engaged in television broadcasting since
1949, at one time owning as many as seven television stations. See Note 14 to
the Company's Consolidated Financial Statements for the amounts of revenues,
operating income, and identifiable assets attributable to the Company's
broadcasting operations.
Television Stations
As of December 31, 1996, the Company owned and operated two television
stations: KTVT (Fort Worth-Dallas, Texas), and KSTW (Tacoma-Seattle,
Washington). During 1995, KTVT and KSTW affiliated with the CBS television
network. In January 1997, the Company announced a definitive agreement to sell
KSTW for $160 million, excluding cash and accounts receivable at the time of
closing. In January 1996, the Company sold television station KHTV in Houston to
the Tribune Company for $97.8 million, including certain working capital and
other adjustments of approximately $4.3 million.
The following table sets forth certain information about KTVT and KSTW, as
of November 1996, based on the Nielsen Station Index. All information regarding
"DMA" refers to Designated Market Area, which is an exclusive geographic area
consisting of all counties in which the local stations receive a preponderance
of total viewing hours. Rank of DMA refers to the size of a particular DMA
relative to all United States DMAs.
<TABLE>
<CAPTION>
TV TOTAL EXPIRATION
CHANNEL RANK HOUSEHOLDS COMMERCIAL RANK OF DATE OF FCC
STATION NUMBER MARKET OF DMA IN DMA STATIONS IN DMA STATION IN DMA LICENSE
------- ------- ------------------ ------ ---------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
KTVT 11 Fort Worth-Dallas 8 1,848,550 13 4 08/01/98
KSTW 11 Tacoma-Seattle 12 1,492,300 8 5 02/01/99
</TABLE>
Pursuant to affiliation agreements with CBS, KTVT and KSTW receive cash
compensation and network programming from CBS (which represents the majority of
the programming for KTVT and KSTW). In turn, the affiliation agreements entitle
CBS to a portion of the advertising spots on KTVT and KSTW. Accordingly, KTVT
and KSTW have fewer advertising spots to sell than when they were independent
television stations.
KTVT and KSTW have historically generated revenues from local, regional,
and national spot advertising. The majority of local, regional, and national
spot advertising contracts are short-term, generally running
7
<PAGE> 10
for only a few weeks. Advertising rates charged by a television station are
based primarily upon the demographics and number of television households in the
area served by the station, as well as the station's ability to attract
audiences as reflected in surveys made by Nielsen. DMA data, which is published
by Nielsen, is a significant factor in determining television advertising rates.
Rates are highest during the most desirable viewing hours (generally between
5:00 p.m. and 12:00 a.m.). The rates for local and national advertising are
determined by each station. Local advertising spots are sold by each station's
sales personnel and national advertising spots are sold by HRP, Inc., the
national advertising sales agent for KTVT and KSTW.
Radio Stations
WSM-AM and WSM-FM. WSM-AM and WSM-FM are each broadcast from the Opryland
complex and have country music formats. WSM-AM broadcasts the Grand Ole Opry
live every Friday and Saturday night. WSM-AM went on the air in 1925 and is one
of the nation's 25 "clear channel" stations, meaning that no other station in a
750-mile radius uses the same frequency for nighttime broadcasts. As a result,
the station's signal, transmitted by a 50,000 watt transmitter, can be heard at
night in much of the United States and parts of Canada. The Company has radio
broadcast studios in the Opryland Hotel, at the Opryland theme park, and at the
Wildhorse Saloon.
WWTN-FM. In 1995, the Company acquired the assets of radio station
WWTN-FM, which is operated out of Nashville, Tennessee with a news/talk/sports
format.
ADDITIONAL INTERESTS
Word Records and Music. In January 1997, the Company acquired the assets
of Word Records and Music ("Word") for $120 million, which included
approximately $40 million of working capital. Word is one of the largest
contemporary Christian music companies in the world, with nine recording labels
featuring artists such as Amy Grant, Shirley Caesar, Sandi Patty, and Point of
Grace. Other significant Word operations include print and hymnal music sales,
distribution of music and video products owned by third parties, and music
publishing, including a 40,000 song catalog. Word produces a wide variety of
traditional and contemporary Christian inspirational music, including adult
contemporary, pop, country, rock, gospel, praise and worship, rap, metal, and
rhythm and blues, with an emphasis on positive, inspirational, and family value
themes. In addition, Word produces master recordings of classical music and is a
leading supplier of value-priced Christmas music to mass market, convenience,
and specialty stores.
Bass Pro Shops. In 1993, the Company purchased a minority interest in a
partnership that owns and operates Bass Pro Shops, a leading retailer of premium
outdoor sporting goods and fishing tackle. Bass Pro Shops serves its customers
through an extensive mail order catalog operation, a 185,000-square-foot retail
center in Springfield, Missouri and an additional retail store in Atlanta,
Georgia. Bass Pro Shops currently has four new stores under construction,
including one in Nashville adjacent to the Opryland Hotel, which the Company
expects will open in the spring of 1998. The partnership also owns a two-thirds
interest in Tracker Marine, a manufacturer of fiberglass and aluminum fishing
boats, which are sold through the Bass Pro Shops catalogs and by means of
wholesale distribution to authorized dealers. The Company's properties are
featured in the approximately 40 million Bass Pro Shops catalogs published
annually. The Company also provides hotel consulting services to Bass Pro Shops'
Big Cedar Lodge, a 1,250 acre resort development on Table Rock Lake located in
the Ozark Mountains in southern Missouri.
Texas Rangers Baseball Club. The Company owns a 10% interest in B/R
Rangers Associates, Ltd., a limited partnership that owns the Texas Rangers
major league baseball club, the American League West Division Champions in 1996.
8
<PAGE> 11
COMPETITION
Cable Networks
TNN, CMT, CMT International, and Z Music compete for viewer acceptance with
all forms of video entertainment, including other basic cable services, premium
cable services, commercial television networks, independent television stations,
and products distributed for the home video markets, in addition to the motion
picture industry and other communications, media, and entertainment services.
TNN, CMT, and Z Music are delivered to subscribers primarily by cable television
systems. CMT International is carried in many different ways depending on the
technology available in the country where it is carried. TNN, CMT, CMT
International, and Z Music compete with other nationally and internationally
distributed cable networks and local broadcast television stations for available
channel space on cable television systems, with other cable networks for
subscriber fees from cable systems operators, and with all forms of
advertiser-supported media for advertising revenues. The Company also competes
to obtain creative talents, properties, and market share, which are essential to
the success of its cable networks business.
The principal competitive factors in obtaining viewer acceptance, on which
cable subscriber fees and advertiser support ultimately depend, are the appeal
of the networks' programming focus and the quality of their programming. TNN
produces or arranges for the production of the major portion of its programming.
Music videos constitute substantially all of CMT's, CMT International's, and Z
Music's programming. These videos are currently provided to the Company in the
domestic market for promotional purposes by record companies and may also be
distributed to other programming services as well as to other media.
Entertainment
The Company's entertainment operations compete with all other forms of
entertainment, lodging, and recreational activities. In addition to the
competitive factors outlined below for each of the Company's businesses within
the entertainment segment, the success of the entertainment segment is dependent
upon certain factors beyond the Company's control including economic conditions,
amount of available leisure time, transportation costs, public taste, and
weather conditions.
The Opryland Hotel competes with other hotels throughout the United States
and abroad, including many hotels operated by companies with greater financial,
marketing, and human resources than the Company. Principal factors affecting
competition within the convention/resort hotel industry include the hotel's
reputation, quality of facilities, location and convenience of access, price,
and entertainment. The hotel business is management and marketing intensive, and
the Opryland Hotel competes with other hotels throughout the United States for
high quality management and marketing personnel. Although the Opryland Hotel has
historically enjoyed a relatively low rate of turnover among its managerial and
marketing personnel, there can be no assurance that it will continue to be able
to attract and retain high quality employees with managerial and marketing
skills. The hotel also competes with other employers for nonmanagerial employees
in the Middle Tennessee labor market, which recently has had a low level of
unemployment. The low unemployment rate has made it difficult to attract
qualified nonmanagerial employees and has been a substantial factor in the high
turnover rate among those employees.
The principal competitive factors in the amusement park industry generally
include the uniqueness and perceived quality of the rides and attractions in a
particular park; its proximity to densely populated areas; the atmosphere,
cleanliness, and safety of a park; the quality of food and beverages; and
available entertainment. The Company believes that its attention to, and
emphasis on, live musical productions is one of the factors that differentiates
the Opryland theme park from other amusement and theme parks. Opryland's
emphasis on live musical entertainment requires that it compete with other show
parks, concert halls, and other forums for live entertainment for musical talent
as well as creative and production personnel, who are essential to the Company's
operations. In addition, the same factors affecting the hotel's ability to
recruit and retain qualified nonmanagerial employees also affect the park.
9
<PAGE> 12
Broadcasting
KTVT and KSTW compete for advertising revenues primarily with television
stations serving the same markets, including both independent stations and
network-affiliated stations. Advertising rates of KTVT and KSTW are based
principally on the size, market share, and demographic profile of their viewing
audience. WSM-AM, WSM-FM, and WWTN-FM similarly compete for advertising revenues
with other radio stations in the same market area on the basis of formats,
ratings, market share and the demographic make up of their audiences. The
Company's television and radio stations also compete with cable networks and
local cable channels for both audience share and advertising revenues and with
radio, newspapers, billboards, and magazines for advertising revenues. Other
sources of present and potential competition are prerecorded video cassettes,
direct broadcast satellite services, and multi-channel, multi-point distribution
services ("MMDS" also known as "wireless cable"). Management competence and
experience, station frequency signal coverage, network affiliation, format
effectiveness of programming, sales effort, and level of customer service are
all important factors in determining competitive position.
REGULATION AND LEGISLATION
Cable Networks
Although the operations of the Company's cable networks are not directly
subject to regulation, the Cable Television Consumer Protection and Competition
Act of 1992 (the "1992 Act") and the regulations thereunder have required the
Company to, in certain instances, lower charges for its programming for certain
distributors. Although the recently enacted Telecommunications Act of 1996 (the
"1996 Communications Act Amendments") did not have such an effect, any future
legislation or regulatory actions that increase rate regulation or effect
structural changes in the Company's cable networks could have such an effect.
For example, increased rate regulation could, among other things, affect the
ability or willingness of cable system operators to establish or retain TNN,
CMT, or Z Music as a basic tier cable service.
CMT International's programming and uplink services are handled in the
United States. The network has no employees abroad and any contracts between the
network and cable systems are executed in the United States. The network
generally does not require a license or authorization from the British
government to conduct its business. The Company's management is currently
studying the regulatory frameworks of certain other European countries and at
this time is not aware of any material regulation that would prevent it from
delivering the network into such countries. There currently exists a European
Community Directive requiring that a majority of programming delivered to
European countries be locally originated, where practicable. Representatives of
the British government have informed the Company that this would not impact the
network with respect to the United Kingdom as there currently is no
locally-originated country music programming available. The Company does not
expect the European Community Directive will be a material obstacle to entering
other European countries for the foreseeable future.
Entertainment
The Opryland Hotel is subject to certain federal, state, and local
governmental regulations including, without limitation, health, safety, and
environmental regulations applicable to hotel and restaurant operations. The
Company believes that it is in substantial compliance with such regulations. In
addition, the sale of alcoholic beverages by the Opryland Hotel requires a
license and is subject to regulation by the applicable state and local
authorities. The agencies involved have full power to limit, condition, suspend,
or revoke any such license, and any disciplinary action or revocation could have
an adverse effect upon the results of the operations of the Company's
entertainment segment.
The Opryland theme park is subject to certain federal, state, and local
governmental regulations including, without limitation, health, safety, and
environmental regulations applicable to amusement park operations, and state and
local regulations applicable to restaurant operations at the park. The Company
believes that it is in substantial compliance with such regulations. The park's
rides are not subject to federal regulations although bills have been introduced
in Congress at various times proposing such regulation. The
10
<PAGE> 13
park's rides are inspected frequently by the Company's own maintenance
personnel. These inspections include safety checks as well as regular
maintenance.
Broadcasting
Radio and television broadcasting is subject to regulation under the
Communications Act of 1934, as amended (the "Communications Act"). Under the
Communications Act, the FCC, among other things, assigns frequency bands for
broadcasting; determines the frequencies, location, and signal strength of
stations; issues, renews, revokes, and modifies station licenses; regulates
equipment used by stations; and adopts and implements regulations and policies
which directly or indirectly affect the ownership, operation, and employment
practices of broadcasting stations.
Under the 1996 Communications Act Amendments, television and radio
broadcast licenses are now granted for a maximum period of eight years. (The
maximum periods were formerly five years and seven years, respectively.)
Television and radio broadcast licenses are renewable upon application to the
FCC and in the past usually have been renewed except in rare cases. In a
departure from past practice, the 1996 Communications Act Amendments provide
that competing applications will not be accepted at the time of license renewal,
and will not be entertained at all unless the FCC first concludes that renewal
of the license would not serve the public interest. A station will be entitled
to renewal in the absence of serious violations of the Communications Act or the
FCC regulations or other violations which constitute a pattern of abuse. The
Company is aware of no reason why its radio and television station licenses
should not be renewed.
FCC regulations also prohibit concentrations of media ownership on both the
local and national levels. FCC regulations prohibit the common ownership or
control of most communications media serving the same market areas (i.e., (i)
television and radio ownership; (ii) television and daily newspapers; (iii)
radio and daily newspapers; and (iv) television and cable television). Pursuant
to the 1996 Communications Act Amendments, however, the FCC's liberal waiver
policy for joint television and radio ownership in the top 25 markets will be
expanded to include the top 50 markets. The 1996 Communications Act Amendments
also increase the number of radio stations a single entity may own in the same
market area (depending on the number of stations operating in the local radio
market), and the FCC is conducting a rulemaking to consider whether owning more
than one television station in the same market area may be permitted. The FCC
has also issued a notice of inquiry for the purpose of reevaluating the
restriction on radio/newspaper cross ownership. Pursuant to the 1996
Communications Act Amendments, FCC regulations no longer will limit the total
number of television broadcast stations held by any single entity so long as all
of the stations under common control do not attain an aggregate national
audience reach exceeding 35%, up from the prior cap of 25% and no more than 12
stations. The 1996 Communications Act Amendments also eliminated previous limits
on the total number of radio stations commonly owned on a national basis. The
FCC is in the process of amending certain of its regulations to implement the
1996 Communications Act Amendments.
The Communications Act also places certain limitations on alien ownership
or control of entities holding broadcast licenses. The Restated Certificate of
Incorporation of the Company contains a provision permitting the Company to
redeem common stock from certain holders if the Board of Directors deems such
redemption necessary to prevent the loss or secure the reinstatement of any of
its licenses or franchises. The 1996 Communications Act Amendments have deleted
existing restrictions on communications companies having non-citizen officers
and directors.
The foregoing is only a brief summary of certain provisions of the
Communications Act and FCC regulations. The Communications Act and FCC
regulations may be amended from time to time, and the Company cannot predict
whether any such legislation will be enacted or whether new or amended FCC
regulations will be adopted, or the effect on the Company of any such changes,
including those made by the 1996 Communications Act Amendments.
11
<PAGE> 14
EMPLOYEES
As of December 31, 1996, the Company had an aggregate of approximately
6,000 full-time and 3,100 part-time and seasonal employees. The Opryland theme
park employs approximately 1,700 additional seasonal employees during the summer
months. The Company believes that its relationship with its employees is good.
ITEM 2. PROPERTIES
The Company owns its executive offices and corporate headquarters located
at One Gaylord Drive, Nashville, Tennessee, which consists of a four-story
office building comprising approximately 80,000 square feet. The Company
believes that its present facilities for each of its business segments as
described below are generally well maintained and currently sufficient to serve
each segment's particular needs.
Cable Networks
The Company owns the offices and three television studios of TNN, all of
which are located within the Opryland complex and contain approximately 84,000
square feet of space. The transmitter used for satellite uplink is owned by the
Company and is located at the Opryland complex.
The Company owns the offices of CMT and CMT International which were added
to the offices of TNN and contain approximately 2,700 square feet of space. CMT
began using a Company-owned transmitter located on the Opryland complex during
1992. CMT International currently leases its transmitters.
Entertainment
The Company owns approximately 800 acres of land in Nashville, Tennessee
and the improvements thereon that comprise the Opryland complex including in
excess of 100 acres of undeveloped land. The Opryland complex is comprised of
the Opryland Hotel, the Opryland theme park, the General Jackson showboat's
docking facility, the TNN/CMT production and administration facilities, the Opry
House, and WSM Radio's offices and studios. The Company also owns an 18-hole
golf course situated on approximately 240 acres and a 26 acre KOA campground,
both of which are located near the Opryland complex. In addition, the Company
owns the Opryland Music Group building located on Nashville's "Music Row"
southwest of downtown as well as adjacent real estate; the Ryman Auditorium in
downtown Nashville; the Wildhorse Saloon, a dance hall/production facility, on
Company property in downtown Nashville; and a 100,000 square foot warehouse in
Old Hickory, Tennessee.
Broadcasting
The Company owns all of KTVT's and KSTW's business facilities which are
comprised of two offices and four studios containing an aggregate of
approximately 94,000 square feet. KTVT owns its transmitter facilities and
tower. KSTW's transmitter facilities and tower are located on its own property
at a separate 40-acre site. Both KTVT and KSTW lease additional space for sales
and news offices in Dallas and Seattle, respectively.
ITEM 3. LEGAL PROCEEDINGS
The Company maintains various insurance policies, including general
liability and property damage insurance, as well as product liability, workers'
compensation, business interruption and other policies, which it believes
provide adequate coverage for its operations. Various subsidiaries of the
Company are involved in lawsuits incidental to the ordinary course of their
businesses, such as personal injury actions by guests and employees and
complaints alleging employee discrimination. The Company believes that it is
adequately covered against these claims by its existing insurance and that the
outcome of any pending claims or proceedings will not have a material adverse
effect upon its business or financial condition.
Opryland USA Inc, a subsidiary of the Company, was a defendant in a lawsuit
titled Frank McCourt, et al. vs. Opryland USA Inc, filed on August 9, 1989, in
Baltimore City Court by the developer/owner and related entities (collectively,
the "Developer") alleging, among other things, misrepresentations, breach of
fiduciary duty and breach of a management contract to operate the Baltimore
Fishmarket, an entertainment
12
<PAGE> 15
facility in Baltimore. Opryland USA Inc denied any liability to the Developer
and alleged in its defense that it terminated the management contract because
the Developer failed to provide working capital and satisfy other contractual
obligations and asserted counterclaims for breach of the same contract seeking
$300 million in damages. The plaintiffs sought damages in the same amount. On
January 7, 1997, the Baltimore City Court dismissed all claims against Opryland
USA Inc without prejudice due to the Developer's failure to prosecute.
The Company has or may have liability under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended ("CERCLA" or
"Superfund"), for response costs at two Superfund sites. The liability relates
to properties no longer owned by the Company. The Company and The Oklahoma
Publishing Company ("OPUBCO"), a former subsidiary of the Company, have entered
into a distribution agreement (the "OPUBCO Distribution Agreement"), pursuant to
which OPUBCO assumed such liabilities and agreed to indemnify the Company to the
extent of any losses, damages or other liabilities incurred by the Company in
connection with such matters. Under the OPUBCO Distribution Agreement, OPUBCO is
required to maintain adequate reserves to cover potential Superfund liabilities.
Although statutorily liable private parties cannot contractually transfer
liability so as to render themselves no longer liable, CERCLA permits private
parties to indemnify one another against CERCLA liability pursuant to a
contract, and to enforce such a contract in an appropriate court. The Company
believes that OPUBCO's indemnification will fully cover the Company's Superfund
liabilities, and that, based on the Company's current estimates of these
liabilities, OPUBCO has sufficient financial resources to fulfill its
indemnification obligations under the OPUBCO Distribution Agreement. Because
there can be no assurance that OPUBCO will be able to fulfill these obligations,
however, the Company's potential Superfund liabilities are described below.
The sites at which the Company has or may have CERCLA liability are the
Hardage Site, located in Criner, Oklahoma (the "Hardage Site") and the Double
Eagle Refining Co. Site, located in Oklahoma City, Oklahoma (the "Double Eagle
Site"). The Hardage Site is a former industrial waste landfill covering 60 acres
and estimated to contain more than 18 million gallons of waste. In 1986, the
United States Environmental Protection Agency (the "EPA") filed a Superfund
action in the Western District of Oklahoma against a number of companies that
allegedly sent waste to the site, including the Company. Ultimately more than
100 private parties, including the Company, were adjudged liable for installing
and maintaining the remedy at the site and for reimbursing the response costs
incurred by the United States.
The Company participated in a group of liable parties, known as the Hardage
Steering Committee, that assumed principal responsibility for litigation of the
matter and supervision of the cleanup of the site. The Company is also a Grantor
in the Hardage Site Remedy Trust established to fund and oversee installation,
operation, and maintenance of the remedy. The remedy has now been installed and
is currently in the second year of operation and maintenance which is projected
to last at least 30 years. The Company's full share of the costs for installing
the remedy has been paid. The Company's full share of the government's past
response costs has also been paid. The Company's share of all future liability
for the site, including the cost of operating and maintaining the remedy, has
been established under a volumetric allocation, with the Company being assigned
a 3.72% share of a total remedy expected to range between $1.0 and $2 million
per year. This share could increase if other liable parties are unable to pay
their share of the costs of the site. The OPUBCO Distribution Agreement provides
that OPUBCO will indemnify the Company for any additional environmental
liabilities in this regard. There is, of course, some uncertainty as to whether
the projected operation and maintenance costs will prove correct. After the
first five years of operation, EPA will review the effectiveness of the remedy
to determine whether additional remedial measures may be necessary. Despite the
uncertainty regarding such future costs and events, the Company does not believe
that its liability at the Hardage Site will have a material adverse effect on
the Company's financial condition or results of operations.
On August 23, 1991, the Company received from EPA a request for information
concerning the possible disposal of wastes at the Double Eagle Site -- a former
waste oil recycling operation. The former operator of the Double Eagle Site has
provided EPA customer lists indicating that there may be several thousand
companies that sent waste motor oil to the site, including the Company. A few of
the entities that Double Eagle identified as having sent wastes to the site are
believed to have sent waste industrial solvents, but the
13
<PAGE> 16
Company is not among this group. EPA has selected a groundwater remedy that
consists primarily of monitoring and natural attenuation. This remedy is
currently in the design stage and is expected to cost approximately $7.0
million. Based on the large number of potentially responsible parties, the
apparent contribution by some major companies of waste industrial solvents, as
well as a review of cleanup costs at other oil rerefining sites, the Company
does not believe that liability it may have at the site, if any, will have a
material adverse effect on the Company's financial condition or results of
operations.
The Company does not believe that the potential Superfund or other
environmental liabilities will have a material adverse effect on the Company's
liquidity or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Inapplicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information
The Company's Class A Common Stock is traded on the New York Stock Exchange
under the symbol "GET." There is no established public trading market for the
Company's Class B Common Stock.
The table below lists the high and low sales prices for the Class A Common
Stock as reported on the New York Stock Exchange for each full quarterly period
within the two most recent fiscal years. The prices set forth below have been
adjusted to reflect a 5% stock dividend paid in each of June 1995 and June 1996.
<TABLE>
<CAPTION>
QUARTER HIGH LOW
- ------- ------- -------
<S> <C> <C>
1995
1st.................................................. $25.737 $19.274
2nd.................................................. 25.833 20.408
3rd.................................................. 27.619 23.095
4th.................................................. 26.429 21.310
1996
1st.................................................. 26.310 23.452
2nd.................................................. 28.250 24.048
3rd.................................................. 28.250 22.375
4th.................................................. 23.250 18.750
</TABLE>
(b) Holders
At March 3, 1997, the approximate number of record holders of the Company's
Class A Common Stock was 4,238 and the approximate number of record holders of
the Company's Class B Common Stock was 172.
(c) Cash Dividends
In the first and second quarters of 1995, the Company paid a dividend of
$.073 per share with respect to its outstanding common stock. For the third and
fourth quarters of 1995, the Company paid a $.076 per share dividend with
respect to its outstanding common stock. The Company paid a dividend of $.086
per share of outstanding common stock in the first and second quarters of 1996,
$.09 per share for the third quarter of 1996, and $.10 per share for the fourth
quarter of 1996. The Amended and Restated Credit Agreement among the Company,
certain banks, and NationsBank of Texas N.A., as administrative lender, dated as
of August 25, 1995, restricts cash dividends and certain other payments payable
by the Company to $150 million plus the Company's cumulative net income (or
minus the Company's cumulative net loss) over the term of the Amended and
Restated Credit Agreement.
14
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Entertainment.................. $ 330,540 $ 294,241 $ 289,769 $ 261,586 $ 251,416
Cable networks................. 331,767 282,647 243,899 208,869 176,035
Broadcasting................... 84,851 130,572 154,263 152,129 137,453
---------- ---------- ---------- ---------- ----------
Total revenues.......... 747,158 707,460 687,931 622,584 564,904
Operating expenses:
Operating costs................ 443,236 442,208(2) 427,903 392,151 358,828
Selling, general and
administrative............... 125,459 115,361 108,624 92,849 87,258
Depreciation and amortization:
Entertainment................ 31,243 23,737 20,884 18,291 18,841
Cable networks............... 13,548 10,399 8,394 6,970 5,218
Broadcasting................. 4,065 3,950 3,668 3,662 3,730
---------- ---------- ---------- ---------- ----------
Total depreciation and
amortization.......... 48,856 38,086 32,946 28,923 27,789
---------- ---------- ---------- ---------- ----------
Total operating
expenses.............. 617,551 595,655 569,473 513,923 473,875
Operating income:
Entertainment.................. 37,466 34,471 29,628 36,433 37,381
Cable networks................. 76,661 67,907 57,931 46,144 42,113
Broadcasting................... 15,480 9,427(2) 30,899 26,084 11,535
---------- ---------- ---------- ---------- ----------
Total operating
income................ 129,607 111,805 118,458 108,661 91,029
Interest expense................. (19,538) (4,200) (1,292) (1,076) (654)
Interest income.................. 22,904 7,011 950 225 125
Other gains (losses)............. 71,741(1) (8,264)(3) (15,579)(3)(5) 1,116 (459)
---------- ---------- ---------- ---------- ----------
Income from continuing
operations before provision
for income taxes............. 204,714 106,352 102,537 108,926 90,041
Provision for income taxes....... 73,549 40,945 39,477 45,967 31,569
---------- ---------- ---------- ---------- ----------
Income from continuing
operations................... 131,165 65,407 63,060 62,959 58,472
Discontinued operations, net of
taxes(4)....................... -- 42,998 -- (26,905) (29,045)
Cumulative effect of accounting
change, net of taxes........... -- -- -- (8,406)(6) --
---------- ---------- ---------- ---------- ----------
Net income.............. $ 131,165 $ 108,405 $ 63,060 $ 27,648 $ 29,427
========== ========== ========== ========== ==========
Income from continuing operations
per share...................... $ 1.34 $ 0.67 $ 0.65 $ 0.67 $ 0.63
========== ========== ========== ========== ==========
Net income per share............. $ 1.34 $ 1.11 $ 0.65 $ 0.30 $ 0.32
========== ========== ========== ========== ==========
Weighted average shares
outstanding, including
equivalent shares.............. 97,797 97,624 96,713 93,615 93,064
========== ========== ========== ========== ==========
Dividends per share.............. $ 0.36 $ 0.30 $ 0.24 $ 0.19 $ 0.18
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets..................... $1,182,248 $1,095,812 $1,015,806 $ 915,803 $ 806,130
Net assets of discontinued
operations(4).................. -- -- 214,649 222,830 258,474
Total long-term debt, including
current portion................ 363,409 340,044 361,894 388,866 299,286
Total stockholders' equity....... 512,963 419,106 338,606 221,999 204,925
</TABLE>
- ---------------
(1) Includes a pretax gain of $73,850 on sale of Houston television station
KHTV.
(2) Includes non-recurring pretax charge of $13,302 for write-down to net
realizable value of certain television program rights.
(3) Includes pretax losses of $5,529 and $26,000 for 1995 and 1994,
respectively, to reflect the loss on the January 1996 disposal of the
Company's 14% limited partnership interest in the Fiesta Texas theme park.
(4) In November 1993 the Company formalized plans to sell its cable television
systems segment (the "Systems") and began accounting for the Systems as
discontinued operations. The Systems were sold in September 1995 which
resulted in a gain of $42,998, net of income taxes of $30,824.
(5) Includes a pretax gain of $10,689 on sale of Milwaukee television station
WVTV.
(6) Reflects the adoption of Statement of Financial Accounting Standards No.
106, "Employers' Accounting of Postretirement Benefits Other Than Pensions."
15
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The following table contains selected income statement data for each of the
three years ended December 31, 1996, 1995 and 1994 (in thousands). The table
also shows the percentage relationships to total revenues and, in the case of
segment operating income, its relationship to segment revenues.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Entertainment.............. $330,540 44.2% $294,241 41.6% $289,769 42.1%
Cable networks............. 331,767 44.4 282,647 40.0 243,899 35.5
Broadcasting............... 84,851 11.4 130,572 18.5 154,263 22.4
-------- ----- -------- ----- -------- -----
Total revenues..... 747,158 100.0 707,460 100.0 687,931 100.0
-------- ----- -------- ----- -------- -----
Operating expenses:
Operating costs............ 443,236 59.3 442,208 62.5 427,903 62.2
Selling, general and
administrative.......... 125,459 16.8 115,361 16.3 108,624 15.8
Depreciation and
amortization:
Entertainment........... 31,243 23,737 20,884
Cable networks.......... 13,548 10,399 8,394
Broadcasting............ 4,065 3,950 3,668
-------- ----- -------- ----- -------- -----
Total depreciation
and
amortization..... 48,856 6.5 38,086 5.4 32,946 4.8
-------- ----- -------- ----- -------- -----
Total operating
expenses......... 617,551 82.7 595,655 84.2 569,473 82.8
-------- ----- -------- ----- -------- -----
Operating income:
Entertainment.............. 37,466 11.3 34,471 11.7 29,628 10.2
Cable networks............. 76,661 23.1 67,907 24.0 57,931 23.8
Broadcasting............... 15,480 18.2 9,427 7.2 30,899 20.0
-------- ----- -------- ----- -------- -----
Total operating
income........... $129,607 17.3% $111,805 15.8% $118,458 17.2%
======== ===== ======== ===== ======== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues
Total Revenues -- Total revenues increased $39.7 million, or 5.6%, to
$747.2 million in 1996. The increases were primarily attributable to continued
growth in the cable networks segment and increased revenues in the entertainment
segment resulting from the expansion of the Opryland Hotel. The average number
of guest rooms at the hotel increased from 1,907 in 1995 to 2,613 in 1996. These
increases were partially offset by a decrease in revenues from the broadcasting
segment due to the sale of a television station in January 1996 and a decline in
revenues at the Company's two other television stations.
Entertainment -- Revenues in the entertainment segment increased $36.3
million, or 12.3%, to $330.5 million in 1996. Opryland Hotel revenues increased
$43.2 million, or 28.2%, to $196.2 million in 1996, principally because of the
hotel expansion. The hotel's occupancy rate decreased to 84.7% in 1996 compared
to 87.5% in 1995 because of the additional rooms which became available in 1996.
The hotel sold 780,300 rooms in 1996 compared to 587,200 rooms sold in 1995
reflecting a 32.9% increase. The hotel's average guest room rate declined to
$131.21 in 1996 from $132.99 in 1995. At December 31, 1996, the hotel's advanced
bookings were in excess of $1 billion of future revenues at current rates with a
significant portion of these advanced bookings relating to the next three years.
Opryland theme park revenues decreased $5.4 million in 1996 due primarily to a
5.7% decrease in theme park attendance and a 3.4% decrease in per guest spending
as compared with 1995.
16
<PAGE> 19
Cable Networks -- Revenues increased $49.1 million, or 17.4%, to $331.8
million in 1996. Advertising revenues increased 19.6% during 1996 at TNN.
Subscriber revenues at TNN increased 12.2% in 1996 due to an increase in the
number of U.S. subscribers to 68.3 million in December 1996 from 64.4 million in
December 1995 and increased revenues from satellite customers. Revenues related
to the United States operations of CMT increased 19.3% in 1996 due to growth in
both advertising and subscriber revenues. CMT subscribers increased to 37.3
million in December 1996 from 31.7 million in December 1995. CMT International
revenues increased to $10.1 million in 1996 from $8.9 million in 1995.
Broadcasting -- Revenues decreased $45.7 million, or 35.0%, to $84.9
million in 1996. Broadcasting revenues were impacted by the Company's sale of
KHTV, a Houston, Texas, television station in January 1996. Excluding the
operations of KHTV from the 1995 results, broadcasting revenues decreased 12.6%
in 1996. The decline in broadcasting revenues reflects a decrease in advertising
inventory available for sale at the Company's Dallas and Seattle-area television
stations resulting from their affiliation with the CBS television network
("CBS"). The affiliation with CBS was effective on March 13, 1995 in
Tacoma-Seattle and on July 2, 1995 in Ft. Worth-Dallas. Advertising revenues at
KSTW, the Company's Tacoma-Seattle television station, also decreased in 1996
due to a decline in ratings. In January 1997, the Company entered into a
definitive agreement to sell KSTW for $160.0 million in cash to Cox
Broadcasting, Inc., which assigned its rights under the agreement to Paramount
Stations Group, Inc. The transaction requires the approval of the Federal
Communications Commission and will result in the recognition of a gain.
Management expects the transaction to be completed during 1997.
Operating Expenses
Total Operating Expenses -- Total operating expenses increased $21.9
million, or 3.7%, to $617.6 million in 1996. Operating costs, as a percentage of
revenues, decreased to 59.3% during 1996 as compared to 62.5% during 1995.
Selling, general and administrative expenses, as a percentage of revenues,
increased to 16.8% in 1996 from 16.3% in 1995. Total operating expenses for 1995
include operating expenses of KHTV of $30.1 million.
Operating Costs -- Operating costs increased $1.0 million, or 0.2%, to
$443.2 million in 1996. During 1995, the Company recorded a nonrecurring pretax
charge of $13.3 million for the write-down of certain program rights at the
Company's Dallas and Seattle-area television stations. This write-down was
primarily related to excess program rights resulting from the affiliations of
these stations with CBS. Excluding the effect of the 1995 program rights
write-down and the operating costs of KHTV, operating costs increased by $37.8
million, or 9.3%, in 1996. The increase was attributable to operating costs
increases of $23.6 million during 1996 at the Opryland Hotel, primarily as a
result of the hotel's expansion. In addition, increased operating costs are
attributable to the continued growth in the cable networks segment, including an
$11.6 million increase in Group W commissions at TNN; a $9.3 million increase in
programming costs at TNN; a $4.5 million increase in operating costs related to
the expansion of CMT International; and a $1.1 million operating cost increase
relating to the opening of a chain of racing themed retail stores. These
increases were partially offset by a $10.4 million decrease in operating costs
during 1996 at the Company's two remaining television stations due to lower
programming costs resulting from their affiliation with CBS; a $3.5 million
decrease in operating costs at the Opryland theme park; and a $2.4 million
decrease in operating costs of the Nashville On Stage concert series. Because of
the Company's agreements with Group W, a Westinghouse subsidiary, certain
operating costs in the cable networks segment increase or decrease
proportionately with revenues.
Selling, General and Administrative -- Selling, general and administrative
expenses increased $10.1 million, or 8.8%, to $125.5 million in 1996. Excluding
the selling, general and administrative expenses of KHTV from the 1995 results,
selling, general and administrative expenses increased $16.0 million, or 14.7%,
in 1996. The increases for the year are primarily attributable to administrative
cost increases of $4.8 million at the Opryland Hotel, $3.7 million at TNN and
$1.2 million at the Opryland theme park. Selling and promotion costs at CMT's
domestic and international operations increased $1.5 million and $1.8 million,
respectively. The Company's two remaining television stations also reflected
increased selling and promotion costs, which were $1.1 million greater than the
corresponding 1995 amounts. In addition, the Company had nonrecurring
17
<PAGE> 20
expenses of $1.1 million during 1996 related to its obligations under an
employment agreement with its departing chief operating officer which is
included in the increases discussed above. Management expects to significantly
increase marketing expenses related to CMT's United States operations in 1997 in
an attempt to benefit from recent increases in its distribution.
Depreciation and Amortization -- Depreciation and amortization increased
$10.8 million, or 28.3%, to $48.9 million in 1996. The increase was primarily
attributable to the expansion of the Opryland Hotel and continued growth in the
cable networks segment.
Operating Income
Total operating income increased $17.8 million, or 15.9%, to $129.6 million
during 1996. This increase reflects higher operating income in all segments. The
entertainment segment increase is primarily related to greater operating income
generated by the Opryland Hotel expansion. The cable networks increase is a
result of the continued growth of TNN and CMT offset, in part, by increased
operating losses associated with CMT International's expansion. Operating losses
of CMT International increased to $13.0 million in 1996 from $7.1 million in
1995. The broadcasting segment increase resulted from the 1995 write-down of
television program rights. Excluding the impact of this write-down, broadcasting
segment operating income decreased primarily due to the sale of KHTV and the
decline in revenues at the Company's Tacoma-Seattle television station as
discussed above.
The following table reflects operating income before depreciation and
amortization expenses ("Operating Cash Flow"). Operating Cash Flow represents an
alternative method of measuring cash flows and is not intended to represent cash
available for dividends, reinvestment, or other discretionary uses. Operating
Cash Flow is not adjusted for noncash expenses or changes in working capital,
and is not derived pursuant to generally accepted accounting principles.
Operating Cash Flow for the years ended December 31, 1996 and 1995 (in
thousands) is as follows:
<TABLE>
<CAPTION>
CHANGE
----------------
1996 1995 $ %
-------- -------- ------- -----
<S> <C> <C> <C> <C>
Entertainment............................... $ 68,709 $ 58,208 $10,501 18.0%
Cable networks.............................. 90,209 78,306 11,903 15.2
Broadcasting................................ 19,545 26,679 (7,134) (26.7)
Broadcasting program write-down............. -- (13,302) 13,302 --
-------- -------- ------- -----
Total Operating Cash Flow......... $178,463 $149,891 $28,572 19.1%
======== ======== ======= =====
</TABLE>
Interest Expense
Interest expense increased $15.3 million to $19.5 million in 1996. A
significant portion of the Company's interest expense for 1995 was attributable
to the Company's cable television systems segment (the "Systems") prior to their
sale in September 1995. In accordance with generally accepted accounting
principles, such interest was allocated to the Systems and was therefore not
included in income from continuing operations. The Company's weighted average
interest rate on its bank debt and senior notes combined was 6.9% in 1996
compared to 7.3% in 1995.
Interest Income
Interest income increased $15.9 million to $22.9 million in 1996. This
increase primarily results from an additional $15.5 million of noncash interest
income in 1996 recorded on the long-term note receivable from the sale of the
Systems.
18
<PAGE> 21
Other Gains (Losses)
In January 1996, the Company sold its Houston, Texas, television station,
KHTV, for $97.8 million, including certain working capital and other adjustments
of approximately $4.3 million. The sale resulted in a pretax gain of $73.9
million which is included in other gains (losses) in 1996.
In 1995, the Company recorded a pretax charge of $5.5 million to reflect
losses related to the January 1996 disposal of its 14% limited partnership
interest in the Fiesta Texas theme park. The charge was based on the permanent
impairment in the value of the investment and the Company's guarantee on certain
indebtedness related to the original construction of Fiesta Texas. The Company
paid $13.0 million to transfer its partnership interest and related obligations
to a subsidiary of USAA, the majority investor, in January 1996. In connection
with the Company's termination of its interest in Fiesta Texas, the Company was
released from the loan guarantee.
Income Taxes
The Company's provision for income taxes on income from continuing
operations was $73.5 million for 1996 compared to $40.9 million for 1995. The
Company's effective tax rate on its income from continuing operations before
provision for income taxes was 35.9% for 1996 compared to 38.5% for 1995.
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues
Total Revenues -- Total revenues increased $19.5 million, or 2.8%, to
$707.5 million in 1995. The increase was primarily attributable to growth in the
cable networks segment offset in part by a decrease in broadcasting segment
revenues.
Entertainment -- Revenues in the entertainment segment increased $4.5
million, or 1.5%, to $294.2 million in 1995. Opryland Hotel revenues increased
$6.0 million, or 4.1%, to $153.1 million in 1995 due primarily to an additional
385 guest rooms completed in the fourth quarter of 1995 and an increase in the
average guest room rate to $132.99 in 1995 from $130.15 in 1994. The hotel's
occupancy rates were 87.5% in 1995 and 87.9% in 1994. Entertainment segment
revenues also increased during 1995 due to a full year of operations of the
Wildhorse Saloon and the renovated Ryman Auditorium, each of which opened in
June 1994, and increased revenues from the Company's program production and
syndication activities. These increases were offset by lower revenues from the
Nashville On Stage concert series, which had fewer concerts in 1995 than in
1994; lower revenues related to the nonrecurring 1994 production of the World
Cup opening ceremonies; and a decrease in Opryland theme park attendance to 2.1
million visitors in 1995 from 2.3 million visitors in 1994.
Cable Networks -- Revenues increased $38.7 million, or 15.9%, to $282.6
million in 1995. Advertising revenues increased 12.5% at TNN in 1995 due to
higher advertising rates. TNN subscriber revenues increased 8.5% due to an
increase in the number of subscribers to 64.4 million at the end of 1995 from
58.7 million at the end of 1994, an increase in subscriber rates, and an
increase in revenue from satellite customers. Revenues at CMT increased 25.1% in
1995 due to increased advertising and subscriber revenues. The number of CMT
subscribers increased by 27.4% to 31.7 million at the end of 1995 from 24.9
million at the end of 1994.
Broadcasting -- Revenues decreased $23.7 million, or 15.4%, to $130.6
million in 1995. Broadcasting revenues were impacted by the Company's sale of
substantially all of the assets of WVTV, a Milwaukee, Wisconsin, television
station, in May 1994. Excluding the revenues related to WVTV's operations,
broadcasting revenues decreased 10.9% in 1995 as compared to 1994. Revenues from
the Company's remaining television stations reflected decreased advertising
demand at those stations, partially due to decreased fan and advertiser support
for major league baseball. The decline in revenues also reflected a decrease in
advertising inventory available for sale at the Company's Dallas and
Seattle-area television stations due to their affiliation with CBS.
19
<PAGE> 22
Operating Expenses
Total Operating Expenses -- Total operating expenses increased $26.2
million, or 4.6%, to $595.7 million in 1995. As a percentage of revenues,
operating costs increased slightly to 62.5% in 1995 compared to 62.2% in 1994.
As a percentage of revenues, selling, general and administrative expenses
increased to 16.3% in 1995 from 15.8% in 1994.
Operating Costs -- Operating costs increased $14.3 million, or 3.3%, to
$442.2 million in 1995. During 1995, the Company recorded a nonrecurring pretax
charge of $13.3 million for the write-down of certain program rights at the
Company's Dallas and Seattle-area television stations. Excluding the impact of
the television program write-down, operating costs increased $1.0 million, or
0.2%, to $428.9 million in 1995. Additional increases in operating costs during
1995 were attributable to the Wildhorse Saloon and the Ryman Auditorium being
operational for all of 1995, compared with seven months of operations in 1994,
representing an increase of $4.5 million; growth in the cable networks,
including increased Group W commissions and higher programming costs at TNN
which resulted in an increase of $12.9 million; and increased labor costs at the
Opryland Hotel. These increases were partially offset by lower operating costs
of $9.4 million resulting from fewer Nashville On Stage concerts; the
nonrecurring 1994 production of the World Cup opening ceremonies which reduced
operating costs by $3.1 million; and the 1994 inclusion of WVTV's operating
costs of $6.0 million prior to its sale.
Selling, General and Administrative -- Selling, general and administrative
expenses increased $6.7 million, or 6.2%, to $115.4 million in 1995. The
increase was primarily due to increased selling and promotional costs of $3.8
million associated with CMT's international expansion; higher administrative
costs at the Opryland Hotel and Opryland theme park of $3.2 million; and the
continued growth of TNN and CMT which resulted in an increase of $2.4 million.
These increases were partially offset by decreases at the Company's television
stations of $2.3 million, primarily attributable to the impact of the sale of
WVTV in 1994, and reduced promotional costs associated with the Nashville On
Stage concert series.
Depreciation and Amortization -- Depreciation and amortization increased
15.6% to $38.1 million in 1995 due to the capital improvements at the Opryland
Hotel, growth in the cable networks segment, and a full year of operations for
the Wildhorse Saloon and the Ryman Auditorium.
Operating Income
Total operating income decreased $6.7 million, or 5.6%, to $111.8 million
in 1995. Excluding the nonrecurring charge for the write-down of television
program rights, total operating income increased $6.6 million, or 5.6%, to
$125.1 million in 1995. The entertainment segment had a $4.8 million increase in
operating income during 1995, due primarily to the reduction of operating losses
of the Nashville On Stage concert series by $6.3 million. The cable networks
segment had a $10.0 million increase in operating income in 1995, reflecting
improvements at both TNN and CMT, which were offset by a $1.6 million increase
in losses from CMT's international operations. The broadcasting segment had an
$8.2 million decrease in operating income during 1995, excluding the effect of
the write-down of television program rights, due primarily to the decline in
revenues at the Company's television stations as discussed above and increased
news costs resulting from the affiliations with CBS.
The following table reflects Operating Cash Flow for the years ended
December 31, 1995 and 1994 (in thousands) as follows:
<TABLE>
<CAPTION>
CHANGE
-----------------
1995 1994 $ %
-------- -------- -------- -----
<S> <C> <C> <C> <C>
Entertainment.............................. $ 58,208 $ 50,512 $ 7,696 15.2%
Cable networks............................. 78,306 66,325 11,981 18.1
Broadcasting............................... 26,679 34,567 (7,888) (22.8)
Broadcasting program write-down............ (13,302) -- (13,302) --
-------- -------- -------- -----
Total Operating Cash Flow........ $149,891 $151,404 $ (1,513) (1.0)%
======== ======== ======== =====
</TABLE>
20
<PAGE> 23
Interest Expense
Interest expense increased $2.9 million to $4.2 million in 1995. The
increase in interest expense was attributable to higher interest rates and
increased average debt levels resulting from the financing of the Company's
continued growth. The Company's weighted average interest rate on its bank debt
and senior notes combined was 7.3% and 6.3% in 1995 and 1994, respectively.
Additional interest expense for 1995 and 1994, $17.1 million and $19.7 million,
respectively, was attributable to the Systems prior to their sale. In accordance
with generally accepted accounting principles, such interest has been allocated
to the Systems and is therefore not included in income from continuing
operations.
Interest Income
Interest income increased $6.1 million to $7.0 million in 1995. This
increase primarily resulted from $5.0 million of noncash interest income
recorded on the long-term note receivable from the sale of the Systems.
Other Gains (Losses)
In 1995, the Company recorded a pretax charge of $5.5 million (in addition
to the pretax charge of $26.0 million recorded in December 1994) to reflect
losses related to the January 1996 disposal of its 14% limited partnership
interest in the Fiesta Texas theme park. The charges were based on the permanent
impairment in the value of the investment and the Company's guarantee on certain
indebtedness related to the original construction of Fiesta Texas.
Sinclair Broadcast Group, Inc. purchased the non-license assets of WVTV
from the Company in May 1994 for $18.2 million, resulting in a pretax gain of
$10.7 million, and assigned its purchase option for the license assets of WVTV
to Glencairn, Ltd., which exercised the option and purchased the license assets
in July 1995.
Income Taxes
The Company's provision for income taxes was $40.9 million for 1995
compared to $39.5 million for 1994. The Company's effective tax rate on income
from continuing operations was 38.5% in 1995 and 1994.
During 1995, the Company reached settlements with the Internal Revenue
Service of routine audits of the Company's 1987-1990 tax returns. These
settlements had no material impact on the Company's financial position or
results of operations, as amounts previously reserved were adequate.
Discontinued Operations
On September 29, 1995, the Company sold the Systems to CCT Holdings Corp.
("CCTH"), an entity jointly owned by investment partnerships affiliated with
Kelso & Company, Inc. and by Charter Communications, Inc. ("Charter"), an owner
and manager of cable systems. Proceeds from the sale, after a working capital
adjustment, consisted of $198.8 million in cash and a 10-year, $165.7 million
note (the "Note") with an interest rate of 12% per year which increases to 15%
in year six and increases 2% per year thereafter, with principal and interest
payable at maturity. The Note was recorded at $150.7 million, net of a $15.0
million discount, to reflect the Note at fair value at the date of the sale
based upon financial instruments of comparable credit risk and interest rates.
In addition, the Company received the contractual right to 15% of the net
distributable proceeds, as defined, from certain future sales by Charter
Communications Entertainment, L.P., a newly formed joint venture created to
operate cable television systems, to which CCTH contributed certain of the
Systems' assets which were purchased from the Company. Immediately prior to the
closing of the sale, the Company paid Charter $10.6 million to acquire the
remaining 2.9% interest in the Systems.
The Company recorded a gain of $43.0 million, net of tax of $30.8 million,
on the sale of the Systems during 1995. The Systems have been accounted for as
discontinued operations and, accordingly, the Systems' losses including interest
expense (based upon debt that can be specifically attributed to the Systems)
subsequent to the November 1993 measurement date were deferred and reflected as
a reduction in the gain on
21
<PAGE> 24
the sale of the Systems. The 1995 net loss from discontinued operations prior to
the sale of the Systems was $19.5 million, including interest expense of $17.1
million, which was deferred and reflected as a reduction in the gain on the sale
of the Systems.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently projects capital expenditures of approximately $65
million for 1997. During 1996, net cash flows generated from the Company's
operations exceeded the amount required to fund its net investing and financing
activities. The Company believes that net cash flows from operations will
continue to exceed its net investing and financing requirements. The Company has
an unsecured revolving loan (the "Revolver") which provides for borrowings of up
to $400 million until its maturity on December 31, 2000. At February 28, 1997,
the Company had approximately $15.7 million in available borrowing capacity
under the Revolver. The Company's purchase of Word Records and Music in January
1997 for approximately $120 million was financed through borrowings under the
Revolver. The proceeds from the sale of KSTW in 1997 will be used to reduce
indebtedness under the Revolver.
In addition to the Revolver, the Company has senior notes ("Senior Notes")
outstanding with a fixed rate of 7.19% and a variable-rate term loan ("Term
Loan"). The Senior Notes and the Term Loan require annual principal payments of
$30 million and $7 million, respectively. At February 28, 1997, the outstanding
principal balances of the Senior Notes and the Term Loan were $90 million and
$21 million, respectively.
In March 1997 the Company negotiated an additional $50 million short term
line of credit which the Company expects to utilize until the sale of KSTW is
completed in 1997. This short term line of credit has the same interest rate
options as the Revolver and incorporates the same covenants, restrictions, and
conditions to borrowing as the Revolver. The Company expects the short term line
of credit, together with its net cash flows from operations, will fund its
anticipated cash requirements. The Company is negotiating with its lenders under
its various credit facilities regarding a debt restructuring necessitated by the
Westinghouse Merger and Spin-off.
In October 1996, the Company's Board of Directors authorized the repurchase
of up to $100 million of the Company's outstanding Class A Common Stock over the
next three years. The authorization includes both open market purchases and
private transactions and the amount, timing, and pricing of any repurchases is
at management's discretion. As of December 31, 1996, the Company had purchased
300,300 shares of its Class A Common Stock at an aggregate cost of $5.9 million,
which shares were held in treasury at December 31, 1996.
SEASONALITY
Certain of the Company's businesses are subject to seasonal fluctuation. In
general, lower revenues and operating income are generated in the first quarter,
which is the off-peak season for the Company's entertainment and tourism
properties. The Opryland theme park produces most of its revenues in the summer
months. Revenues from the Company's broadcasting segment have also been weakest
in the first quarter and strongest in the second and fourth quarters.
WORD RECORDS AND MUSIC ACQUISITION
In January 1997, the Company purchased all of the assets of Word Records
and Music for approximately $120 million in cash. The purchase price included
approximately $40 million of working capital, which is subject to certain
adjustments. With annual sales of $90 to $100 million, Word is one of the
largest contemporary Christian music companies in the world. The acquisition was
financed through borrowings under the Revolver and will be accounted for using
the purchase method of accounting.
NEWLY ISSUED ACCOUNTING STANDARD
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which
establishes standards for computing and presenting
22
<PAGE> 25
earnings per share and disclosing information about an entity's capital
structure. The Company is required to adopt the provisions of SFAS 128 in 1997
and does not expect the adoption thereof to have a material effect on the
Company's financial statements.
FORWARD-LOOKING STATEMENTS/RISK FACTORS
This Form 10-K contains certain forward-looking statements regarding, among
other things, the anticipated financial and operating results of the Company.
Investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release any modifications or revisions to these
forward-looking statements to reflect events or circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events.
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions investors that future
financial and operating results may differ materially from those projected in
forward-looking statements made by, or on behalf of, the Company. The Company's
future operating results depend on a number of factors that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements. These factors, many of which are beyond the
Company's control, include the continued growth in the popularity of country
music and country lifestyles; continued growth in the popularity of Christian
music; diversion of management's attention from the Company's operations to
matters attendant to the Westinghouse Merger and related Spin-off; costs
associated with the Merger and Spin-off; the ability to integrate the operations
of Word into the Company's business; the advertising market in the United States
in general and in the Company's local television markets in particular; the
perceived attractiveness of Nashville, Tennessee as a convention and tourist
destination; consumer tastes and preferences for the Company's programming and
other entertainment offerings; competition; and consolidation in the
broadcasting and cable distribution industries.
23
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... 25
Consolidated Statements of Income for the years ended
December 31, 1996, 1995, and 1994......................... 26
Consolidated Balance Sheets as of December 31, 1996 and
1995...................................................... 27
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994......................... 28
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1995, and 1994............. 29
Notes to Consolidated Financial Statements.................. 30
</TABLE>
SCHEDULES
The schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
24
<PAGE> 27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Gaylord Entertainment Company:
We have audited the accompanying consolidated balance sheets of Gaylord
Entertainment Company (a Delaware corporation) and its subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Gaylord Entertainment
Company and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
February 7, 1997
(Except for certain matters discussed
in Note 2 as to which the dates are
February 9, 1997 and March 24, 1997)
25
<PAGE> 28
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues................................................... $747,158 $707,460 $687,931
Operating expenses:
Operating costs.......................................... 443,236 442,208 427,903
Selling, general and administrative...................... 125,459 115,361 108,624
Depreciation and amortization............................ 48,856 38,086 32,946
-------- -------- --------
Operating income................................. 129,607 111,805 118,458
Interest expense........................................... (19,538) (4,200) (1,292)
Interest income............................................ 22,904 7,011 950
Other gains (losses)....................................... 71,741 (8,264) (15,579)
-------- -------- --------
Income from continuing operations before provision for
income taxes.......................................... 204,714 106,352 102,537
Provision for income taxes................................. 73,549 40,945 39,477
-------- -------- --------
Income from continuing operations........................ 131,165 65,407 63,060
Discontinued operations, net of taxes...................... -- 42,998 --
-------- -------- --------
Net income....................................... $131,165 $108,405 $ 63,060
======== ======== ========
Income per share:
Income from continuing operations.......................... $ 1.34 $ 0.67 $ 0.65
Discontinued operations, net of taxes...................... -- 0.44 --
-------- -------- --------
Net income....................................... $ 1.34 $ 1.11 $ 0.65
======== ======== ========
Weighted average shares outstanding, including equivalent
shares................................................... 97,797 97,624 96,713
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE> 29
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 13,720 $ 12,062
Trade receivables, less allowance of $3,276 and $3,297,
respectively........................................... 108,702 105,898
Program rights............................................ 14,072 26,583
Other assets.............................................. 50,778 53,639
---------- ----------
Total current assets.............................. 187,272 198,182
---------- ----------
Program rights.............................................. 26,472 37,641
Property and equipment, net of accumulated depreciation..... 640,319 571,551
Intangible assets, net of accumulated amortization.......... 39,363 36,935
Investments................................................. 66,037 64,985
Long-term notes and interest receivable..................... 203,514 176,356
Other assets................................................ 19,271 10,162
---------- ----------
Total assets...................................... $1,182,248 $1,095,812
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 37,350 $ 37,400
Accounts payable and accrued liabilities.................. 111,673 129,795
Program contracts payable................................. 14,943 23,574
---------- ----------
Total current liabilities......................... 163,966 190,769
---------- ----------
Long-term debt.............................................. 326,059 302,644
Program contracts payable................................... 24,661 34,058
Deferred income taxes....................................... 117,947 117,361
Other liabilities........................................... 21,805 18,866
Minority interest........................................... 14,847 13,008
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 100,000 shares
authorized, no shares issued or outstanding............ -- --
Class A common stock, $.01 par value, 300,000 and 150,000
shares authorized, 44,987 and 41,301 shares issued,
44,687 and 41,301 shares outstanding, respectively..... 450 413
Class B common stock, $.01 par value, 150,000 and 65,000
shares authorized, 51,684 and 53,608 shares issued,
51,684 and 50,498 shares outstanding, respectively..... 517 536
Additional paid-in capital................................ 483,287 414,458
Retained earnings......................................... 39,494 68,353
Unearned restricted stock compensation.................... (4,847) (2,798)
Treasury stock............................................ (5,938) (61,856)
---------- ----------
Total stockholders' equity........................ 512,963 419,106
---------- ----------
Total liabilities and stockholders' equity........ $1,182,248 $1,095,812
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
27
<PAGE> 30
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income................................................ $ 131,165 $ 108,405 $ 63,060
Amounts to reconcile net income to net cash flows provided
by operating activities:
Depreciation and amortization.......................... 48,856 38,086 32,946
Provision (benefit) for deferred income taxes.......... 2,119 (684) 1,512
Write-down of television program rights................ -- 13,302 --
Noncash interest income................................ (20,479) (4,970) --
Discontinued operations, net of taxes.................. -- (42,998) --
Provision for losses on disposal of Fiesta Texas
partnership interest................................. -- 5,529 26,000
Gain on sale of television stations.................... (73,850) -- (10,689)
Changes in:
Trade receivables.................................... (8,914) (6,720) (19,270)
Program rights and program contracts payable......... (3,667) 12,042 (100)
Income taxes payable................................. (10,462) (69,464) (870)
Accounts payable and accrued liabilities............. 2,181 5,674 21,242
Other, net........................................... (1,606) (3,421) (16,721)
--------- --------- ---------
Net cash flows provided by operating activities... 65,343 54,781 97,110
--------- --------- ---------
Cash Flows from Investing Activities:
Proceeds from sale of discontinued operations, net of
direct selling costs................................... -- 190,838 --
Purchase of minority interest in discontinued
operations............................................. -- (10,585) --
Proceeds from sale of television stations, net of direct
selling costs paid..................................... 96,840 -- 13,231
Investments in, advances to and distributions from
affiliates, net........................................ (7,893) (6,143) (5,017)
Payment upon disposal of Fiesta Texas partnership
interest............................................... (12,976) -- --
Purchases of property and equipment, net.................. (115,542) (175,225) (140,014)
Other, net................................................ (7,954) (4,401) 3,537
--------- --------- ---------
Net cash flows used in investing activities....... (47,525) (5,516) (128,263)
--------- --------- ---------
Cash Flows from Financing Activities:
Proceeds from sale of common stock, net................... -- -- 74,738
Proceeds from issuance of long-term debt.................. -- 400 17
Repayment of long-term debt............................... (38,081) (453) --
Net borrowings (payments) under revolving credit
agreement.............................................. 61,446 (21,797) (26,989)
Purchase of treasury stock................................ (5,938) -- --
Proceeds from exercise of stock options................... 1,359 128 256
Dividends paid............................................ (34,946) (28,685) (22,508)
--------- --------- ---------
Net cash flows provided by (used in) financing
activities...................................... (16,160) (50,407) 25,514
--------- --------- ---------
Cash Flows from Discontinued Operations:
Operating activities...................................... -- 16,758 30,995
Investing activities...................................... -- (12,985) (21,474)
Increase in cash balance.................................. -- 2,856 (1,340)
--------- --------- ---------
Net cash flows provided by discontinued
operations...................................... -- 6,629 8,181
--------- --------- ---------
Net change in cash.......................................... 1,658 5,487 2,542
Cash, beginning of year..................................... 12,062 6,575 4,033
--------- --------- ---------
Cash, end of year........................................... $ 13,720 $ 12,062 $ 6,575
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
28
<PAGE> 31
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UNEARNED
CLASS A CLASS B ADDITIONAL RESTRICTED TOTAL
COMMON COMMON PAID-IN RETAINED STOCK TREASURY STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS COMPENSATION STOCK EQUITY
------- ------- ---------- -------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993...................... $286 $585 $264,716 $ 18,268 $ -- $(61,856) $221,999
Net income................ -- -- -- 63,060 -- -- 63,060
Cash dividends ($.24 per
share).................. -- -- -- (22,508) -- -- (22,508)
Sale of common stock...... 30 -- 74,708 -- -- -- 74,738
Conversion of common
stock................... 51 (51) -- -- -- -- --
Exercise of stock
options................. 1 -- 255 -- -- -- 256
Issuance of restricted
stock................... 1 -- 1,060 -- -- -- 1,061
---- ---- -------- -------- ------- -------- --------
Balance, December 31,
1994...................... 369 534 340,739 58,820 -- (61,856) 338,606
Net income................ -- -- -- 108,405 -- -- 108,405
Cash dividends ($.30 per
share).................. -- -- -- (28,685) -- -- (28,685)
Conversion of common
stock................... 24 (24) -- -- -- -- --
Issuance of restricted
stock................... 1 -- 3,564 -- (3,565) -- --
Compensation expense...... -- -- -- -- 767 -- 767
5% stock dividend......... 19 26 70,142 (70,187) -- -- --
Other..................... -- -- 13 -- -- -- 13
---- ---- -------- -------- ------- -------- --------
Balance, December 31,
1995...................... 413 536 414,458 68,353 (2,798) (61,856) 419,106
Net income................ -- -- -- 131,165 -- -- 131,165
Cash dividends ($.36 per
share).................. -- -- -- (34,946) -- -- (34,946)
Conversion of common
stock................... 13 (13) -- -- -- -- --
Exercise of stock
options................. 1 -- 1,358 -- -- -- 1,359
Issuance of restricted
stock................... 2 -- 4,318 -- (4,320) -- --
Compensation expense...... -- -- -- -- 2,271 -- 2,271
5% stock dividend......... 21 26 125,031 (125,078) -- -- --
Retirement of treasury
stock................... -- (32) (61,824) -- -- 61,856 --
Purchase of treasury
stock................... -- -- -- -- -- (5,938) (5,938)
Other..................... -- -- (54) -- -- -- (54)
---- ---- -------- -------- ------- -------- --------
Balance, December 31,
1996...................... $450 $517 $483,287 $ 39,494 $(4,847) $ (5,938) $512,963
==== ==== ======== ======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
29
<PAGE> 32
GAYLORD ENTERTAINMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Gaylord Entertainment Company (the "Company") is a diversified
entertainment and communications company operating, through its subsidiaries,
principally in three business segments: entertainment, cable networks and
broadcasting. Subsequent to December 31, 1996, the Company entered into a
definitive agreement with Westinghouse Electric Corporation ("Westinghouse")
whereby substantially all of the assets and liabilities of the Company's cable
networks segment will be acquired by Westinghouse as further described in Note
2. The Company sold its cable television systems segment (the "Systems") on
September 29, 1995. Prior to the sale, the Systems were accounted for as
discontinued operations in the accompanying consolidated financial statements as
further described in Note 4.
ENTERTAINMENT
The Company owns and operates the Opryland entertainment complex in
Nashville, Tennessee. The complex primarily includes the Opryland Hotel, the
Opryland theme park, the Grand Ole Opry, and various other Nashville-based
tourist attractions. The Company also owns a minority limited partnership
interest in Bass Pro, L.P. ("Bass Pro"), which is a leading retailer of premium
outdoor sporting goods and fishing products, and a music publishing company.
CABLE NETWORKS
The Company owns The Nashville Network ("TNN") which is a national basic
cable television network carried by substantially all United States cable
operators, as well as by many Canadian cable services. In addition, the Company
operates and owns 67% of the outstanding stock of Country Music Television, Inc.
("CMT"), a country music video cable network. CMT Europe, a country music video
cable network established to provide service to Europe, was launched in October
1992. CMT expanded into the Asia-Pacific region in October 1994 and into Latin
America in April 1995.
BROADCASTING
At December 31, 1996, the Company owned and operated two broadcast
television stations: KTVT (Fort Worth-Dallas, Texas) and KSTW (Tacoma-Seattle,
Washington). In January 1997, the Company announced it had entered into a
definitive agreement to sell KSTW as further described in Note 2. The Company
sold its television station KHTV (Houston, Texas) in January 1996 as further
described in Note 3. The Company affiliated KTVT and KSTW with the CBS
television network during 1995. In addition, the Company owns and operates three
radio stations in Tennessee.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all of its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
PROGRAM RIGHTS
The Company acquires exhibition rights for certain theatrical and
television programs. The program rights are recorded at the gross contract
amount when certain conditions are met, including availability of the program
for broadcast, and are amortized over the shorter of the estimated number of
program showings or the contract periods. The current portion of program rights
represents those rights currently available for telecast which will be amortized
in the succeeding year. The Company had commitments for program rights and
related program contract payables of $8,850 and $32,507 at December 31, 1996 and
1995, respectively,
30
<PAGE> 33
which were not available for telecast until a future date. These amounts are not
included in the accompanying consolidated balance sheets.
During 1995, the Company recorded a pre-tax charge to operations of $13,302
for the write-down to net realizable value of certain television program rights.
The write-down is primarily related to excess program rights resulting from the
affiliation of KTVT and KSTW with CBS.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, including interest on funds
borrowed to finance the construction of major capital additions, and are
depreciated or amortized using straight-line and accelerated methods over the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings................................................... 20-40 years
Leasehold and land improvements............................. 20 years
Theme park rides and attractions............................ 15-20 years
Furniture, equipment and vehicles........................... 3-10 years
</TABLE>
Effective January 1, 1994, the Company changed to the straight-line method
of depreciation for substantially all newly acquired property. Maintenance and
repairs are charged to expense as incurred.
INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill which is amortized using
the straight-line method over a period not to exceed 40 years. The Company
continually evaluates whether later events and circumstances have occurred that
indicate the remaining balance of goodwill may not be recoverable. In evaluating
possible impairment, the Company uses the most appropriate method of evaluation
given the circumstances surrounding the particular acquisition, which has
generally been an estimate of the related business unit's undiscounted operating
income before interest and taxes over the remaining life of the goodwill.
Amortization expense related to intangible assets for 1996, 1995 and 1994
was $3,212, $2,445 and $2,118, respectively. At December 31, 1996 and 1995,
accumulated amortization of intangible assets was $14,817 and $15,304,
respectively.
INVESTMENTS
Investments consist primarily of a minority interest in Bass Pro, L.P.
("Bass Pro"), a supplier of premium outdoor sporting goods and fishing tackle
which distributes its products through retail centers and an extensive mail
order catalog operation. Bass Pro also owns and operates a resort hotel and
development in Southern Missouri. The Company accounts for the Bass Pro
investment using the equity method of accounting. The Company's original
investment exceeded its share of the underlying equity in the net assets of Bass
Pro by approximately $36,000, which is being amortized on a straight-line basis
over 40 years. The Company's recorded investment in Bass Pro was $62,852 and
$62,537 at December 31, 1996 and 1995, respectively.
OTHER ASSETS
Other current and long-term assets consist primarily of program
inventories, merchandise inventories, deferred preopening expenses and prepaid
expenses. Program inventories, $20,175 and $22,484 in 1996 and 1995,
respectively, are amortized at a rate based upon the broadcast periods of the
programs and the revenues estimated to be earned over these periods. Inventories
of $15,436 and $15,111 in 1996 and 1995, respectively, consist primarily of
merchandise held for resale and are priced at the lower of average cost or
market. To provide for a better matching of revenues and expenses, the Company
defers expenses prior to a new venture becoming operational. These deferred
preopening expenses, $12,335 and $7,387 in 1996 and 1995, respectively, are
amortized on a straight-line basis. Prepaid expenses were $11,784 and $10,295 in
1996 and 1995, respectively.
31
<PAGE> 34
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Trade accounts payable...................................... $ 20,128 $ 25,049
Commissions payable......................................... 16,877 15,954
Income taxes payable........................................ 3,669 14,131
Accrued royalties........................................... 10,153 10,617
Deferred revenues........................................... 15,174 11,472
Accrued salaries and benefits............................... 7,431 5,076
Accrued interest payable.................................... 4,500 5,526
Property and other taxes payable............................ 11,293 9,746
Other accrued liabilities................................... 22,448 32,224
-------- --------
Total accounts payable and accrued liabilities.... $111,673 $129,795
======== ========
</TABLE>
Other accrued liabilities included approximately $15,000 in 1995 for the
liabilities related to the disposal of the Company's 14% limited partnership
interest in the Fiesta Texas theme park, as further described in Note 3. Accrued
royalties consist primarily of music royalties and licensing fees at the
Company's television stations, cable networks and music publishing business.
Deferred revenues consist primarily of deposits on advance room bookings at the
Opryland Hotel and advance ticket sales at the Opryland theme park and the Grand
Ole Opry.
INCOME TAXES
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes", the Company establishes deferred tax
liabilities and assets based on the difference between the financial statement
and income tax carrying amounts of assets and liabilities using existing tax
rates.
STOCK-BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but
does not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method as prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB Opinion No. 25"), and related Interpretations, under which no
compensation cost related to stock options has been recognized as further
discussed in Note 9.
INCOME PER SHARE
The computations of income per share are based on the weighted average
number of common and common equivalent (stock options) shares assumed to be
outstanding during the years. The number of shares used in the computations of
income per share for the years ended December 31, 1996, 1995 and 1994 was
97,797,000, 97,624,000 and 96,713,000, respectively. The Company paid 5% stock
dividends in both 1996 and 1995 as further discussed in Note 8. All per share
amounts in the accompanying consolidated financial statements have been restated
to reflect the retroactive application of the stock dividends.
32
<PAGE> 35
FINANCIAL INSTRUMENTS
Estimated fair values and carrying amounts of the Company's financial
instruments at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Long-term notes and interest receivable....... $206,655 $203,514 $177,990 $176,356
-------- -------- -------- --------
Debt.......................................... $369,907 $363,409 $350,534 $340,044
-------- -------- -------- --------
</TABLE>
The fair value estimates were determined using discounted cash flow
analyses. For long-term notes receivable, the discount rate was determined based
upon similar instruments. The discount rate for fixed-rate debt was based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements. The Company's carrying value of its variable-rate debt
approximates fair value. The carrying amount of short-term financial instruments
(cash, trade receivables, accounts payable and accrued liabilities) approximates
fair value due to the short maturity of those instruments. Credit risk on trade
receivables is minimized by the large and diverse nature of the Company's
customer base.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
NEWLY ISSUED ACCOUNTING STANDARD
The Financial Accounting Standards Board issued SFAS No. 128, "Earnings per
Share," which establishes standards for computing and presenting earnings per
share and disclosing information about an entity's capital structure. The
Company is required to adopt the provisions of SFAS 128 in 1997 and does not
expect the adoption thereof to have a material effect on the Company's financial
statements.
RECLASSIFICATIONS
Certain reclassifications of 1995 and 1994 amounts have been made to
conform with the 1996 presentation.
2. SUBSEQUENT EVENTS:
In January 1997, the Company purchased all of the assets of Word Records
and Music ("Word") for approximately $120,000 in cash. The purchase price
included approximately $40,000 of working capital, which is subject to certain
adjustments. With annual sales of $90,000 to $100,000, Word is one of the
largest contemporary Christian music companies in the world. The acquisition was
financed through borrowings under the Company's revolving credit agreement and
will be accounted for using the purchase method of accounting.
In addition, during January 1997, the Company entered into a definitive
agreement to sell its Tacoma-Seattle, Washington, television station, KSTW, for
$160,000 in cash to Cox Broadcasting, Inc., which subsequently assigned its
rights under the agreement to Paramount Stations Group, Inc. The transaction
requires the approval of the Federal Communications Commission and will result
in the recognition of a gain.
In February 1997, the Company entered into an agreement with Westinghouse
that provides for the acquisition by Westinghouse of substantially all of the
assets and liabilities of the Company's cable networks segment (the
"Westinghouse Merger"). The Company will be restructured immediately prior to
the Westinghouse Merger so that all of the assets and liabilities relating to
the Company's broadcasting and entertainment businesses, including all of the
Company's long-term debt, will be held, directly or indirectly, by a separate
wholly-owned subsidiary of the Company ("New GET"). New GET will then be spun
off (the
33
<PAGE> 36
"Spin-off") to the Company's stockholders, each of whom will receive one share
of New GET common stock (the "Distribution") for every three shares of Class A
or Class B Common Stock of the Company. Immediately prior to the Distribution,
Westinghouse will transfer its 33% interest in CMT International to New GET.
Immediately following the Distribution, the Westinghouse Merger will be
consummated, which will result in the acquisition by Westinghouse of all of the
Company's cable networks business (other than CMT International and Z Music). In
the Westinghouse Merger the Company's stockholders will receive Westinghouse
common stock with an aggregate value of $1,550,000 based upon a per share
exchange ratio determined by reference to the market price of Westinghouse
common stock at the time of the merger, subject to certain limits on the total
number of shares to be issued. The Spin-off, Distribution, and Westinghouse
Merger are expected to occur during 1997, subject to a number of conditions,
including Company stockholder approval of the Westinghouse Merger and certain
regulatory approvals, including an Internal Revenue Service ruling that the
Distribution, Westinghouse Merger, and certain of the transactions comprising
the restructuring will be tax-free transactions.
The assets of New GET will include the Grand Ole Opry, the Opryland Hotel,
the Opryland theme park, broadcasting operations comprised of Dallas
CBS-affiliate television station KTVT, and three Nashville-based radio stations,
as well as interests in country and Christian music publishing and recording
with the Opryland Music Group and Word Records and Music. New GET's remaining
cable networks operations will consist of CMT International and the management
of Z Music. New GET is expected to be a publicly traded, NYSE-listed company.
In March 1997, the Company entered into an agreement for a $50,000 line of
credit with the agent bank in the Company's revolving credit agreement. The
Company's interest rate options under the line of credit are the same as in the
Company's revolving credit agreement, which is further described in note 7, and
the line of credit matures in September 1997.
3. ACQUISITIONS AND DIVESTITURES:
In January 1996, the Company sold its Houston, Texas, television station,
KHTV, to Tribune Broadcasting Company for $97,800, including certain working
capital and other adjustments of approximately $4,300. The sale resulted in a
pretax gain of $73,850, which is included in other gains (losses) in the
consolidated statements of income. The sale of the television station included
program rights of $32,235 and related program contracts payable of $23,766.
In December 1995 and December 1994, the Company recorded pretax losses of
$5,529 and $26,000, respectively, included in other gains (losses) in the
consolidated statements of income, to reflect losses related to the January 1996
disposal of its 14% limited partnership interest in the Fiesta Texas theme park.
The charges were based on the permanent impairment in the value of the
investment and the Company's guarantee on certain indebtedness related to the
original construction of Fiesta Texas. The Company paid $12,976 to transfer its
partnership interest and related obligations to a subsidiary of USAA, the
majority investor, in January 1996. In connection with the Company's termination
of its interest in Fiesta Texas, the Company was released from the loan
guarantee.
Sinclair Broadcast Group, Inc. ("Sinclair") purchased the non-license
assets of the Company's WVTV television station in Milwaukee, Wisconsin, in May
1994. Total proceeds from the sale of the non-license assets were $18,231,
resulting in a pretax gain of $10,689, which is included in other gains (losses)
in the 1994 consolidated statement of income. Sinclair retained an option to
purchase the license assets of WVTV which it subsequently assigned to Glencairn,
Ltd., which exercised the option and purchased the license assets in July 1995.
4. DISCONTINUED OPERATIONS:
On September 29, 1995, the Company completed the sale of the Systems to CCT
Holdings Corp. ("CCTH"). Net proceeds, after a working capital adjustment of
$5,512, consisted of $198,800 in cash and a 10-year note receivable with a face
amount of $165,688. The note receivable and related accrued interest are
34
<PAGE> 37
included in long-term notes and interest receivable in the accompanying
consolidated balance sheets in the amount of $176,138 and $155,658, for 1996 and
1995, respectively, net of a $15,000 discount in both years to reflect the note
at fair value based upon financial instruments of comparable credit risk and
interest rates. The note is currently classified as held to maturity and bears
interest at an initial rate of 12% which increases to 15% in September 2000 and
2% each year thereafter with principal and interest payable at maturity in 2005.
The Company recorded $20,479 and $4,970 of interest income related to the note
receivable during 1996 and 1995, respectively. Immediately prior to the sale,
the Company purchased the remaining 2.9% minority interest in the Systems for
$10,585. In addition, the Company received the contractual right to 15% of the
net distributable proceeds, as defined, from certain future asset sales by the
buyer of the Systems. A significant stockholder and certain directors of the
Company own, indirectly, less than a 5% interest in CCTH.
The Company recorded a gain in 1995 on the sale of the Systems of $42,998,
net of applicable income taxes of $30,824. The Systems have been accounted for
as discontinued operations and, accordingly, the Systems' losses subsequent to
the November 1993 measurement date, including interest expense on debt that can
be specifically attributed to the Systems, were deferred and are reflected as a
reduction in the gain on the sale of the Systems.
Selected results of operations related to the Systems prior to their sale
are summarized below for the period ended September 29, 1995 and the year ended
December 31, 1994:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Revenues.................................................... $ 67,157 $ 85,200
======== ========
Depreciation and amortization............................... $ 39,178 $ 57,383
======== ========
Interest expense............................................ $ 17,051 $ 19,728
======== ========
Loss before income taxes.................................... $(29,344) $(40,975)
Benefit for income taxes.................................... 9,831 13,953
Loss deferred subsequent to measurement date................ 19,513 27,022
-------- --------
Net loss.......................................... $ -- $ --
======== ========
</TABLE>
Net cash flows related to the Systems for the period ended September 29,
1995 and the year ended December 31, 1994 were:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net losses from discontinued operations................... $(19,513) $(27,022)
Depreciation and amortization............................. 39,178 57,383
Other, net................................................ (2,907) 634
-------- --------
Net cash flows provided by operating activities... 16,758 30,995
-------- --------
Cash flows from investing activities:
Purchases of property and equipment, net.................. (12,924) (21,625)
Other, net................................................ (61) 151
-------- --------
Net cash flows used in investing activities....... (12,985) (21,474)
-------- --------
Increase (decrease) in cash balance......................... 2,856 (1,340)
-------- --------
Net cash flows.................................... $ 6,629 $ 8,181
======== ========
</TABLE>
35
<PAGE> 38
5. PROPERTY AND EQUIPMENT:
Property and equipment at December 31 is recorded at cost and summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Land and improvements....................................... $105,669 $100,715
Buildings................................................... 478,955 318,105
Furniture, fixtures, and equipment.......................... 379,822 327,811
Construction in progress.................................... 9,742 128,449
-------- --------
974,188 875,080
Accumulated depreciation.................................... 333,869 303,529
-------- --------
Property and equipment, net................................. $640,319 $571,551
======== ========
</TABLE>
Depreciation expense for 1996, 1995, and 1994 was $42,101, $33,416, and
$28,954, respectively. Capitalized interest for 1996, 1995, and 1994 was $3,383,
$5,308, and $2,227, respectively.
6. INCOME TAXES:
The provision for income taxes for the years ended December 31 consisted
of:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current:
Federal provision....................................... $69,585 $37,768 $36,244
State provision......................................... 1,845 3,861 1,721
------- ------- -------
Total current provision......................... 71,430 41,629 37,965
------- ------- -------
Deferred:
Federal provision (benefit)............................. 1,771 (1,712) 442
State provision......................................... 348 1,028 1,070
------- ------- -------
Total deferred provision (benefit).............. 2,119 (684) 1,512
------- ------- -------
Total provision for income taxes................ $73,549 $40,945 $39,477
======= ======= =======
</TABLE>
The effective tax rate as applied to income from continuing operations for
the years ended December 31 differed from the statutory federal rate due to the
following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory federal rate...................................... 35% 35% 35%
State taxes................................................. 2 3 1
Other items, net............................................ (1) 1 3
--- --- ---
36% 39% 39%
=== === ===
</TABLE>
36
<PAGE> 39
The components of the net deferred tax liability as of December 31 were:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Amortization.............................................. $ 11,861 $ 10,850
Accounting reserves and accruals.......................... 16,827 26,537
Other, net................................................ 3,810 10,740
-------- --------
Total deferred tax assets......................... 32,498 48,127
-------- --------
Deferred tax liabilities:
Depreciation.............................................. 43,916 36,658
Accounting reserves and accruals.......................... 106,529 128,830
-------- --------
Total deferred tax liabilities.................... 150,445 165,488
-------- --------
Net deferred tax liability.................................. $117,947 $117,361
======== ========
</TABLE>
Provision is made for deferred federal and state income taxes in
recognition of certain temporary differences in reporting items of income and
expense for financial statement purposes and income tax purposes. During 1995,
the Company reached settlements of routine Internal Revenue Service audits of
the Company's 1987-1990 tax returns. These settlements had no material impact on
the Company's financial position or results of operations.
Cash payments for income taxes were approximately $83,400, $95,700
(including payments related to the sale of the Systems of approximately
$84,400), and $26,300 in 1996, 1995 and 1994, respectively.
7. LONG-TERM DEBT:
Long-term debt at December 31 consisted of:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Revolving credit agreement.................................. $209,042 $147,596
Senior Notes................................................ 120,000 150,000
Term Loan................................................... 28,000 35,000
Other....................................................... 6,367 7,448
-------- --------
363,409 340,044
Less amounts due in one year................................ 37,350 37,400
-------- --------
$326,059 $302,644
======== ========
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 37,350
1998........................................................ 37,000
1999........................................................ 37,000
2000........................................................ 246,042
2001........................................................ --
Years thereafter............................................ 6,017
--------
$363,409
========
</TABLE>
The Company's unsecured revolving credit agreement ("Revolver") was amended
in 1995 to provide for an unsecured revolving loan of up to $400,000 until its
expiration on December 31, 2000. According to the Revolver's terms, at the time
borrowings are made, the Company may elect an interest rate of the prime rate or
LIBOR plus 0.5% to 1.0%, depending on certain of the Company's financial ratios.
At December 31, 1996, the Company's borrowing rate under the Revolver was LIBOR
plus 0.5%. Additionally, the Company is required to pay annual commitment fees
based on 0.25% or 0.1875% of the average daily unused portion of the total
commitment available as determined by certain of the Company's financial ratios.
The weighted average
37
<PAGE> 40
interest rates for borrowings under the Revolver for 1996, 1995 and 1994 were
6.4%, 7.3% and 5.6%, respectively.
On February 5, 1993, the Company entered into an agreement for a $35,000
term loan ("Term Loan") with the agent bank in the Revolver. The proceeds from
the Term Loan were used to reduce the Company's indebtedness under the Revolver.
The Company's interest rate options are the same as under the Revolver. At
December 31, 1996, the Company's effective borrowing rate under the Term Loan
was LIBOR plus 0.5%. The Term Loan requires annual principal payments of $7,000.
The weighted average interest rates for the borrowings under the Term Loan for
1996, 1995 and 1994 were 6.1%, 6.8% and 5.2%, respectively.
The terms and conditions of the Revolver and Term Loan include, among other
restrictions, mandatory commitment reductions in the event of the sale of
certain Company assets that results in proceeds in excess of specified amounts,
limitations on the amount of dividends paid and treasury stock purchases, and
maintenance of certain financial ratios.
On February 1, 1993, the Company issued $150,000 of 7.19% fixed-rate senior
notes ("Senior Notes") to a group of institutional investors. The proceeds from
the Senior Notes were used to reduce the Company's indebtedness under the
Revolver. The Senior Notes require annual principal payments of $30,000.
The terms and conditions of the Senior Notes include, among other
restrictions, certain restrictions on sales of Company assets, limitations
relating to the payment of dividends and treasury stock purchases, and
maintenance of certain financial ratios.
At December 31, 1996, the Company was in compliance with all financial
covenants under the Revolver, the Term Loan and the Senior Notes.
Accrued interest payable for 1996 and 1995 was $4,500 and $5,526,
respectively, and is included in accounts payable and accrued liabilities in the
accompanying consolidated balance sheets. Cash paid for interest for 1996, 1995
and 1994, excluding amounts capitalized, was $20,564, $21,110 and $20,785,
respectively.
8. COMMON STOCK:
Holders of Class A common stock and Class B common stock are entitled to
one vote per share and five votes per share, respectively. Each share of Class B
common stock is convertible into one share of Class A common stock, and such
converted shares of Class B common stock may not be reissued.
A 5% stock dividend was paid by the Company in both 1996 and 1995, subject
to which retained earnings were reduced by $125,078 and $70,187, respectively.
Approximately 4,742,000 and 4,519,000 additional shares of the Company's common
stock were issued in 1996 and 1995, respectively, as a result of the stock
dividends. Income per share and dividends per share in the consolidated
financial statements have been restated to reflect the retroactive applications
of the stock dividends.
At December 31, 1995, treasury stock consisted of 3,110,000 shares of Class
B common stock. In August 1996, the Company's Board of Directors retired the
Class B common shares held in treasury. The cost of the treasury stock in excess
of par value was charged to additional paid-in capital. In October 1996, the
Company's Board of Directors authorized the repurchase of up to $100,000 of the
Company's outstanding Class A common stock over the next three years. The
authorization includes both open market purchases and private transactions and
the amount, timing, and pricing of any repurchases is at management's
discretion. Subsequent to October 1996, the Company purchased 300,300 shares of
its Class A common stock which is held in treasury at December 31, 1996.
On March 17, 1994, the Company consummated the sale of 3,021,083 shares of
its Class A common stock. As part of this transaction, 4,425,167 shares of Class
B common stock were sold by existing stockholders. The shares of Class B common
stock were converted to Class A common stock upon their sale. The Company's net
proceeds as a result of the sale of its stock were $74,738 which were utilized
to reduce the Company's indebtedness.
38
<PAGE> 41
9. STOCK PLANS:
At December 31, 1996 and 1995, 2,864,184 and 2,779,265 shares,
respectively, of Class A common stock were reserved for future issuance pursuant
to the exercise of stock options under existing stock option and incentive plans
for directors and key employees. Under the terms of these plans, stock options
are generally granted with an exercise price equal to the fair market value at
the date of grant and generally expire ten years after the date of grant. Stock
options granted to non-employee directors are exercisable one year from the date
of grant, while options granted to employees generally are not exercisable for
two to three years from the date of grant. The Company accounts for these plans
under APB Opinion No. 25 under which no compensation expense for employee stock
options has been recognized. In addition, based on the number of options
outstanding and the historical and expected future trends of factors affecting
valuation of those options, management believes that any compensation cost under
SFAS 123 attributable to options granted is immaterial. During 1996 and 1995,
the number and exercise prices of all options outstanding were adjusted to
recognize the effect of the stock dividends discussed in Note 8. The stock
dividend adjustments resulted in an increase in the number of stock options and
a reduction of the exercise prices.
The plans also provide for the award of restricted stock, 332,523 and
183,497 shares of which were outstanding at December 31, 1996 and 1995,
respectively. The restricted shares issued in 1996 and 1995 have certain
variable terms concerning the number of shares that will vest at the end of a
three-year period based upon defined performance measures. The market value at
date of grant of these restricted shares is reflected as unearned compensation
as a separate component of stockholders' equity. Unearned compensation is
amortized over the three-year vesting period.
Stock option awards available for future grant under the stock plans at
December 31, 1996 and 1995 were 1,799,873 and 2,204,647 shares of Class A common
stock, respectively. Stock option transactions under the plans are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year............................ 2,779,265 $12.98 2,513,131 $11.77 2,487,489 $11.51
Granted........................... 286,612 25.09 321,047 22.72 84,867 22.66
Exercised......................... (128,614) 10.57 (13,781) 9.30 (27,563) 9.30
Canceled.......................... (73,079) 23.38 (41,132) 16.60 (31,662) 22.82
--------- ------ --------- ------ --------- ------
Outstanding at end of year........ 2,864,184 $14.03 2,779,265 $12.98 2,513,131 $11.77
========= ====== ========= ====== ========= ======
Exercisable at end of year........ 2,329,297 $11.96 1,535,703 $10.25 1,047,372 $ 9.86
========= ====== ========= ====== ========= ======
</TABLE>
A summary of stock options outstanding as of December 31, 1996 is as
follows:
<TABLE>
<CAPTION>
WEIGHTED
OPTION WEIGHTED AVERAGE
EXERCISE AVERAGE REMAINING
NUMBER PRICE EXERCISE CONTRACTUAL
OF SHARES EXERCISABLE RANGE PRICE LIFE
--------- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
1,686,825 1,686,825 $ 9.30 $ 9.30 4.8 years
918,047 616,222 16.21-23.81 19.60 6.9 years
259,312 26,250 24.63-25.75 25.10 9.2 years
--------- --------- ------------ ------ ---------
Outstanding at end of year.............. 2,864,184 2,329,297 $ 9.30-25.75 $14.03 5.9 years
========= ========= ============ ====== =========
</TABLE>
10. SIGNIFICANT BUSINESS RELATIONSHIP:
Group W Satellite Communications, Inc. ("Group W"), a subsidiary of
Westinghouse, is primarily responsible for promoting, marketing and selling
advertising time on TNN and CMT, marketing TNN and CMT to cable operators, and
providing a satellite transponder to deliver TNN programming to cable systems.
39
<PAGE> 42
In addition, an affiliate of Group W owns 33% of CMT. Group W receives a
commission of 33% of TNN's gross receipts, net of agency commissions, and a
commission of 10% of CMT's gross receipts, net of agency commissions, up to a
current maximum of $3,800 annually with regard to CMT, for its services. Group W
commissions under these agreements were approximately $86,600, $73,700 and
$65,900 in 1996, 1995 and 1994, respectively. Commissions payable to Group W at
December 31, 1996 and 1995, were approximately $15,300 and $15,100,
respectively, and are included in accounts payable and accrued liabilities in
the accompanying consolidated balance sheets.
11. COMMITMENTS AND CONTINGENCIES:
Rental expense was $11,771, $8,965 and $9,067 for 1996, 1995 and 1994,
respectively. Future minimum lease commitments under all noncancelable operating
leases in effect as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 15,418
1998........................................................ 16,944
1999........................................................ 16,740
2000........................................................ 17,065
2001........................................................ 6,973
Years thereafter............................................ 60,193
--------
Total............................................. $133,333
========
</TABLE>
The Company is involved in certain legal actions and claims on a variety of
matters. It is the opinion of management that such legal actions will not have a
material effect on the results of operations, financial condition or liquidity
of the Company.
12. RETIREMENT PLANS:
The Company has a noncontributory defined benefit pension plan in which
substantially all of its employees are eligible to participate upon meeting the
pension plan's participation requirements. The benefits are based on years of
service and compensation levels. The funding policy of the Company is to
contribute annually an amount which equals or exceeds the minimum required by
applicable law.
The following table sets forth the funded status at December 31:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation,
including vested benefits of $30,936 and $29,954,
respectively.............................................. $31,708 $30,875
======= =======
Projected benefit obligation................................ $36,601 $35,347
Plan assets at fair value................................... 34,084 31,647
------- -------
Projected benefit obligation in excess of plan
assets......................................... (2,517) (3,700)
Unrecognized net loss....................................... 3,730 6,947
Prior service cost not yet recognized....................... 79 111
------- -------
Prepaid pension cost.............................. $ 1,292 $ 3,358
======= =======
</TABLE>
Net pension expense included the following components for the years ended
December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost............................................ $ 1,827 $ 1,479 $ 1,252
Interest cost........................................... 2,550 2,381 2,055
Actual return on plan assets............................ (4,377) (6,431) (19)
Net deferral and amortization........................... 2,523 4,934 (1,591)
------- ------- -------
Total net pension expense..................... $ 2,523 $ 2,363 $ 1,697
======= ======= =======
</TABLE>
40
<PAGE> 43
The weighted-average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.5% and 4%, respectively, in both 1996 and
1995. The expected long-term rate of return on plan assets was 8% in both 1996
and 1995.
The Company also has contributory retirement savings plans in which
substantially all employees are eligible to participate. The Company contributed
an amount equal to the lesser of one-half of the amount of the employee's
contribution or 3% of the employee's salary. Company contributions under the
retirement savings plans were $2,055, $1,929 and $1,811 for 1996, 1995 and 1994,
respectively.
13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Company sponsors unfunded defined benefit postretirement health care
and life insurance plans for certain employees. The Company contributes toward
the cost of health insurance benefits and contributes the full cost of providing
life insurance benefits. In order to be eligible for these postretirement
benefits, an employee must retire after attainment of age 55 and completion of
15 years of service, or attainment of age 65 and completion of 10 years of
service.
Generally, for employees who retired prior to January 1, 1993 and who met
the other age and service requirements, the Company contributes 100% of the
employee and spouse's health care premium, and provides a life insurance benefit
of 100% of pay up to $50. For employees retiring on or after January 1, 1993 and
who meet the other age and service requirements, the Company contributes from
50% to 90% of the health care premium based on years of service, 50% of the
health care premium for the spouses of eligible retirees regardless of service,
and provides a life insurance benefit of $12.
The following table reconciles the funded status of the plans to the
accrued postretirement liability as reflected in other liabilities in the
accompanying consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Retirees.................................................... $ 5,271 $ 5,215
Other fully eligible participants........................... 2,266 1,997
Other active participants................................... 10,621 9,078
Unrecognized actuarial gain................................. 1,618 1,573
------- -------
Accrued postretirement cost....................... $19,776 $17,863
======= =======
</TABLE>
Net postretirement benefit expense for the years ended December 31 included
the following components:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Service cost................................................ $1,174 $1,045
Interest cost............................................... 1,185 1,142
------ ------
Net postretirement benefit expense................ $2,359 $2,187
====== ======
</TABLE>
For measurement purposes, a 9% annual rate of increase in the per capita
cost of covered health care claims was assumed for 1996. The health care cost
trend is projected to decline by 1% in 1997 and every two years thereafter to an
ultimate level trend rate of 6% per year in 2001. The health care cost trend
rates are not applicable to the life insurance benefit plan. The health care
cost trend rate assumption has a significant effect on the amounts reported. To
illustrate, a 1% increase in the assumed health care cost trend rate each year
would increase the accumulated postretirement benefit obligation as of December
31, 1996 by approximately 14% and the aggregate of the service and interest cost
components of net postretirement insurance plans would increase approximately
16%. The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% in both 1996 and 1995.
41
<PAGE> 44
14. FINANCIAL REPORTING BY BUSINESS SEGMENTS:
The following reflects the Company's revenues, operating income,
depreciation and amortization, capital expenditures and identifiable assets by
business segment for the years ended or as of December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Entertainment................................ $ 330,540 $ 294,241 $ 289,769
Cable networks............................... 331,767 282,647 243,899
Broadcasting................................. 84,851 130,572 154,263
---------- ---------- ----------
Total................................ $ 747,158 $ 707,460 $ 687,931
========== ========== ==========
Operating income:
Entertainment................................ $ 37,466 $ 34,471 $ 29,628
Cable networks............................... 76,661 67,907 57,931
Broadcasting................................. 15,480 9,427 30,899
---------- ---------- ----------
Total................................ $ 129,607 $ 111,805 $ 118,458
========== ========== ==========
Depreciation and amortization:
Entertainment................................ $ 31,243 $ 23,737 $ 20,884
Cable networks............................... 13,548 10,399 8,394
Broadcasting................................. 4,065 3,950 3,668
---------- ---------- ----------
Total................................ $ 48,856 $ 38,086 $ 32,946
========== ========== ==========
Capital expenditures:
Entertainment................................ $ 89,584 $ 149,689 $ 126,839
Cable networks............................... 21,522 17,229 9,526
Broadcasting................................. 4,436 8,307 3,649
---------- ---------- ----------
Total................................ $ 115,542 $ 175,225 $ 140,014
========== ========== ==========
Identifiable assets:
Entertainment................................ $ 658,092 $ 576,900 $ 452,034
Cable networks............................... 208,482 174,931 147,948
Broadcasting................................. 73,000 120,301 146,490
Corporate and other.......................... 242,674 223,680 54,685
Net assets of discontinued operations........ -- -- 214,649
---------- ---------- ----------
Total................................ $1,182,248 $1,095,812 $1,015,806
========== ========== ==========
</TABLE>
42
<PAGE> 45
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1996
Revenues........................................ $138,857 $209,280 $205,011 $194,010
======== ======== ======== ========
Depreciation and amortization................... $ 8,635 $ 12,651 $ 13,942 $ 13,628
======== ======== ======== ========
Operating income................................ $ 13,729 $ 42,923 $ 31,452 $ 41,503
======== ======== ======== ========
Net income...................................... $ 54,378 $ 28,908 $ 20,433 $ 27,446
======== ======== ======== ========
Net income per share............................ $ 0.56 $ 0.30 $ 0.21 $ 0.28
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1995
Revenues........................................ $140,548 $197,064 $195,170 $174,678
======== ======== ======== ========
Depreciation and amortization................... $ 7,423 $ 9,932 $ 10,662 $ 10,069
======== ======== ======== ========
Operating income................................ $ 16,853 $ 37,215 $ 18,840 $ 38,897
======== ======== ======== ========
Income from continuing operations............... $ 9,602 $ 22,036 $ 11,389 $ 22,380
Discontinued operations, net of taxes........... -- -- 42,998 --
-------- -------- -------- --------
Net income............................ $ 9,602 $ 22,036 $ 54,387 $ 22,380
======== ======== ======== ========
Income from continuing operations per share..... $ 0.10 $ 0.23 $ 0.12 $ 0.23
Discontinued operations per share............... -- -- 0.44 --
-------- -------- -------- --------
Net income per share.................. $ 0.10 $ 0.23 $ 0.56 $ 0.23
======== ======== ======== ========
</TABLE>
Certain of the Company's businesses are subject to seasonal fluctuations.
In general, lower revenues and operating income are generated in the first
quarter, which is the off-peak season for the Company's entertainment and
tourism properties. The Opryland theme park produces most of its revenues in the
summer months. Revenues from the Company's broadcasting segment have also been
weakest in the first quarter and strongest in the second and fourth quarters.
In the first quarter of 1996, the Company recorded a pretax gain of $73,850
due to the sale of KHTV television station. In the fourth quarter of 1995, the
Company recorded a pretax loss of $5,529 resulting from the disposal of its
Fiesta Texas limited partnership interest. During the third quarter of 1995, the
Company recorded an after-tax gain of $42,998 related to the disposal of the
Systems, which had been accounted for as discontinued operations, as well as a
write-down of television program rights of $13,302.
43
<PAGE> 46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Inapplicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding executive
officers and directors of the Company as of date hereof. All officers serve at
the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Edward L. Gaylord......................... 77 Chairman of the Board
E. K. Gaylord II.......................... 39 Vice-Chairman of the Board
Earl W. Wendell........................... 69 Director, President and Chief Executive Officer
Terry E. London........................... 47 Executive Vice President, Chief Operating Officer,
and Chief Financial and Administrative Officer
Michael J. Dimond......................... 56 Senior Vice President (Marketing)
Alan E. Hall.............................. 45 Vice President (Corporate Communications)
David Hall................................ 47 Vice President (Cable Networks
and Broadcasting)
Jack J. Vaughn............................ 59 Vice President (Hospitality and Attractions)
F. M. Wentworth, Jr....................... 52 Senior Vice President, Secretary and
General Counsel
Martin C. Dickinson....................... 61 Director
Christine Gaylord Everest................. 45 Director
Joe M. Rodgers............................ 63 Director
Glenn M. Stinchcomb....................... 69 Director
</TABLE>
The following is additional information with respect to the above-named
executive officers and directors.
Mr. Edward L. Gaylord, the son of one of the founders of the Company,
served as President and Chief Executive Officer of the Company from 1974 until
October 1991, and has served as Chairman of the Board of the Company since
October 1991. Mr. Gaylord has been a director of the Company since 1946. Mr.
Gaylord is currently the chairman, chief executive officer, and a director of
OPUBCO. Mr. Gaylord is active in numerous civic and charitable organizations,
and is (among others) chairman of the Oklahoma Industries Authority, director
and past president (ten years) of the State Fair of Oklahoma, chairman and
director of The Oklahoma Medical Research Foundation and chairman and director
of the National Cowboy Hall of Fame & Western Heritage Center. Mr. Gaylord is
the father of Mr. E. K. Gaylord II and Mrs. Christine Gaylord Everest, both of
whom are directors of the Company.
Mr. E. K. Gaylord II has served as Vice-Chairman of the Board of the
Company since May 1996 and as a director since 1977. From 1989 until October
1991, Mr. Gaylord served as Vice President of the Company. Mr. Gaylord has been
the president of OPUBCO since June 1994 and is a director of OPUBCO. He served
as executive vice president and assistant secretary of OPUBCO from June 1993
until June 1994 and as vice president and assistant secretary from 1991 until
1993. He also owns and operates the Lazy E Ranch in Guthrie, Oklahoma. Mr.
Gaylord is a director of the National Cowboy Hall of Fame & Western Heritage
Center and is also a director of Bass GEC Management Company. Mr. Gaylord is the
son of Mr. Edward L. Gaylord and the brother of Mrs. Christine Gaylord Everest,
both of whom are directors of the Company.
Mr. Wendell has served as President and Chief Executive Officer of the
Company since October 1991, as President and Chief Executive Officer of Opryland
USA Inc since its formation in 1983, and has been employed by the Opryland USA
businesses since 1950. Mr. Wendell has been a director of the Company since
1985. Mr. Wendell also serves as a director of SunTrust Bank, Nashville, N.A.,
and as vice president and director of the Country Music Association.
44
<PAGE> 47
Mr. London has served as Executive Vice President and Chief Operating
Officer since March 1997 and as Senior Vice President and Chief Financial and
Administrative Officer since September 1993. He served as Vice President and
Chief Financial Officer of the Company from October 1991 until September 1993,
as Assistant Treasurer and Assistant Secretary of the Company from 1981 to
October 1991, and has been employed by the Company since 1978. Mr. London is a
certified public accountant.
Mr. Dimond is the Company's executive officer responsible for marketing the
Opryland Hotel, the Opryland theme park and certain other properties included in
the Company's entertainment segment. He has served as Senior Vice President of
the Company since September 1993. He served as Vice President of the Company
from August 1992 until September 1993. From 1988 to August 1992, Mr. Dimond
served as vice president of marketing at the Broadmoor Hotel in Colorado
Springs, Colorado.
Mr. Alan Hall is the Company's executive officer responsible for corporate
communications. He has served as Vice President of the Company since October
1993. From June 1989 to October 1993, he served as vice president of public
relations for Ericson Marketing Communications.
Mr. David Hall is the Company's executive officer responsible for its cable
networks and broadcasting operations. He has served as Vice President of the
Company since December 1996. From July 1993 through December 1996, he served as
Senior Vice President of the Company's cable networks, and from 1983 through
1993 as General Manager for TNN. He has been employed by the Opryland USA
businesses since 1971.
Mr. Vaughn is the Company's executive officer in charge of the Opryland
Hotel, the Opryland theme park and certain other properties included in the
Company's entertainment segment. He has served as Vice President of the Company
since October 1991, and was the General Manager of the Opryland Hotel from 1975
to 1993. He has been a member and served on committees of the American Hotel and
Motel Association since 1972. Mr. Vaughn was elected World Hotelier of the Year
by Hotels International Magazine in 1990.
Mr. Wentworth has served as Senior Vice President, Secretary and General
Counsel of the Company since September 1993. He served as Secretary and General
Counsel of the Company from October 1991 until September 1993, as General
Counsel and Secretary of Opryland USA Inc since 1983, and has been employed by
the Opryland USA businesses since 1966.
Mr. Dickinson has been a director of the Company since 1974. He is a
retired officer of Scripps Bank in La Jolla, California and has been a director
of the bank since 1990. Mr. Dickinson is also a director of OPUBCO.
Mrs. Everest has been a director of the Company since 1976. She has served
as vice president of OPUBCO since June 1996, as secretary of OPUBCO since June
1994, and as senior assistant secretary of OPUBCO from October 1991 until June
1994. Mrs. Everest is also a director of OPUBCO. From 1989 to October 1991, Mrs.
Everest was Senior Assistant Secretary of the Company. Mrs. Everest is the
daughter of Mr. Edward L. Gaylord and the sister of Mr. E. K. Gaylord II, both
of whom are directors of the Company.
Mr. Rodgers has been a director of the Company since 1991. He is chairman
of The JMR Group, a private investment company specializing in merchant and
investment banking. Mr. Rodgers served as chairman of the board and chief
executive officer of Berlitz International, Inc., a foreign language services
company, from December 1991 to February 1993. From 1985 to 1989, Mr. Rodgers
served as United States Ambassador to France. Mr. Rodgers is also a director of
AMR Corporation/American Airlines, Inc.; American Constructors, Inc.; Gryphon
Holdings, Inc.; Lafarge Corporation; SunTrust Bank, Nashville, N.A.; Thomas
Nelson, Inc.; Tractor Supply Company; and Willis Corroon Group, plc.
Mr. Stinchcomb has been a director of the Company since 1977. He was vice
president and treasurer of OPUBCO from October 1991 to July 1995. Mr. Stinchcomb
was Chief Financial Officer and Treasurer of the Company from 1974 to 1991, and
Vice President of the Company from 1986 to 1991. Mr. Stinchcomb is also a
director of Western Pacific Airlines, Inc. and Charter Communications, Inc.
45
<PAGE> 48
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC and the NYSE. Officers,
directors, and greater than ten percent stockholders are required by federal
securities regulations to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on the Company's review of the copies of such forms, or
written representations from certain reporting persons furnished to the Company,
the Company believes that its officers, directors and greater than ten percent
beneficial owners were in compliance with all applicable filing requirements.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the cash compensation
and certain other components of the compensation of Earl W. Wendell, the
President and Chief Executive Officer of the Company, the other four most highly
compensated executive officers of the Company who were serving as executive
officers at December 31, 1996, and Tom Griscom, who retired in December 1996
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND ------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(1) OPTIONS COMPENSATION(2)
------------------ ---- -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Earl W. Wendell.............. 1996 $654,000 $ 292,730 $338,625 52,500 $38,103
President and CEO 1995 654,000 286,256 306,000 55,125 33,032
1994 627,123(3) 260,400 -0- -0- 25,752
Edward L. Gaylord............ 1996 510,000 -0- -0- -0- -0-
Chairman of the Board 1995 510,000 -0- -0- -0- -0-
1994 510,000(3) -0- -0- -0- -0-
Jack J. Vaughn............... 1996 364,000 195,723 148,120 21,000 24,280
Vice President 1995 364,000 203,767 133,863 22,050 19,973
1994 336,939 105,000 -0- -0- 11,942
Terry E. London(4)........... 1996 312,000 194,683 84,643 14,175 15,892
Executive Vice President, 1995 312,000 117,312 76,488 14,883 14,058
Chief Operating Officer, 1994 295,810 83,610 -0- -0- 8,800
and Chief Financial and
Administrative Officer
David Hall(5)................ 1996 305,000 182,040 105,785 18,375 22,601
Vice President 1995 300,000 218,610 95,593 19,293 21,215
1994 242,729 238,430 -0- -0- 9,804
Tom Griscom(6)............... 1996 333,667 222,156 148,120 21,000 19,937
Former Vice President 1995 364,000 134,862 133,863 22,050 22,541
1994 335,652 350,033 -0- -0- 10,127
</TABLE>
- ---------------
(1) Awards of shares of restricted Class A Common Stock (the "Performance
Shares") were made in 1996 and 1995 to the Named Executive Officers other
than Mr. Gaylord. Provided that the Named Executive Officer remains employed
by the Company, restrictions on the Performance Shares lapse on the third
anniversary of the date of grant based on the extent to which the Company
attains certain pre-determined cumulative earnings per share targets.
Persons holding Performance Shares are entitled to dividends and voting
rights from the date of grant. The numbers of Performance Shares awarded to
Messrs. Wendell,
46
<PAGE> 49
Vaughn, London, Hall, and Griscom in each of 1996 and 1995 were 13,230,
5,787, 3,307, 4,133, and 5,787, respectively. The values of these awards as
shown in the table are based on per share prices of $25.60 and $23.13, the
closing market prices of the Class A Common Stock as reported on the New
York Stock Exchange ("NYSE") on the respective dates of the awards. Based on
the closing market price of the Class A Common Stock of $22.875 as reported
on the NYSE on December 31, 1996, the aggregate values of the 1996 and 1995
awards to Messrs. Wendell, Vaughn, London, Hall and Griscom were $605,273,
$264,755, $151,295, $189,085, and $0 (forfeited upon retirement),
respectively.
(2) Includes contributions by the Company to the supplemental deferred
compensation plan (the "SUDCOMP Plan"), and to the Company's 401(k) Savings
Plan ("401(k) Plan"), and premiums paid by the Company for term life
insurance provided for the benefit of the Named Executive Officer. Mr.
Gaylord is not a participant in the SUDCOMP Plan or 401(k) Plan nor does he
receive life insurance benefits from the Company. The Company's
contributions to the SUDCOMP Plan, the 401(k) Plan, and payments on behalf
of the Named Executive Officers for group term life insurance are reflected
below.
<TABLE>
<CAPTION>
GROUP
TERM LIFE TOTAL
INSURANCE ALL OTHER
NAME YEAR SUDCOMP 401(K) PREMIUMS COMPENSATION
---- ---- ------- ------ --------- ------------
<S> <C> <C> <C> <C> <C>
Earl W. Wendell............................ 1996 $24,748 $4,455 $8,900 $38,103
1995 21,701 4,304 7,027 33,032
1994 21,026 4,620 106 25,752
Jack J. Vaughn............................. 1996 11,721 4,500 8,059 24,280
1995 9,443 4,152 6,378 19,973
1994 7,166 4,620 156 11,942
Terry E. London............................ 1996 4,484 4,500 6,908 15,892
1995 4,086 4,500 5,472 14,058
1994 4,042 4,620 138 8,800
David Hall................................. 1996 11,459 4,500 6,642 22,601
1995 11,451 4,500 5,264 21,215
1994 5,028 4,620 156 9,804
Tom Griscom................................ 1996 10,035 4,500 5,402 19,937
1995 13,765 4,500 4,276 22,541
1994 5,401 4,620 106 10,127
</TABLE>
- ---------------
(3) Includes fees for services as a director of $30,000.
(4) Mr. London became Executive Vice President and Chief Operating Officer of
the Company on March 3, 1997.
(5) Mr. Hall became a Vice President of the Company on December 1, 1996.
(6) Mr. Griscom retired on December 1, 1996. Performance Shares and stock
options awarded to Mr. Griscom in 1996 and 1995 were forfeited upon his
retirement.
47
<PAGE> 50
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes the terms of stock options granted to each
of the Named Executive Officers during 1996. All of the options referred to in
the table below are nonqualified stock options granted pursuant to the Company's
1993 Stock Option and Incentive Plan (the "1993 Stock Plan") at the fair market
value on the date of grant (determined as the closing sale price on the NYSE of
the Company's Class A Common Stock on the trading day preceding the grant) and
are for the purchase of the Company's Class A Common Stock. No stock
appreciation rights have ever been granted by the Company.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL OPTIONS AT ASSUMED RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN FOR OPTION TERM
OPTIONS FISCAL EXERCISE PRICE EXPIRATION --------------------------
NAME GRANTED(#) YEAR(%) ($) DATE 5%($) 10%($)
- ---- ---------- ------------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Earl W. Wendell.......... 52,500(1) 20.53 25.00 2/23/06 825,424 2,091,787
Edward L. Gaylord........ -0- -- -- -- -- --
Jack J. Vaughn........... 21,000(1) 8.21 25.00 2/23/06 330,170 836,715
Terry E. London.......... 14,175(1) 5.54 25.00 2/23/06 222,865 564,782
David Hall............... 18,375(1) 7.18 25.00 2/23/06 288,898 732,125
Tom Griscom.............. 21,000(2) 8.21 25.00 (2) (2) (2)
</TABLE>
- ---------------
(1) None of the options granted to Messrs. Wendell, Vaughn, London, and Hall
vest and become exercisable until the second anniversary of the date of
grant, or February 23, 1998. The options then vest and become exercisable in
25% increments on each of February 23, 1998, 1999, 2000, and 2001.
(2) Options granted to Mr. Griscom in 1996 were forfeited upon his retirement on
December 1, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FIVE YEAR END OPTION VALUES
The following table summarizes, for each of the Named Executive Officers,
the shares acquired upon the exercise of stock options during 1996, the value
realized on exercise, and the total number of unexercised stock options and the
aggregate dollar value of in-the-money unexercised stock options held at
December 31, 1996. All of the stock options referenced below are for Class A
Common Stock and were awarded pursuant to either the 1993 Stock Plan or the
Company's 1991 Stock Option and Incentive Plan (collectively, the "Stock
Plans"). The values of the unexercised stock options reflected in the table
below may not be realized in the event that the underlying options are not, for
whatever reason, ever exercisable or exercised. Furthermore, actual gains, if
any, upon exercise of such stock options will depend on the value of the Class A
Common Stock as of the date of exercise, which value may be different than those
reflected in the following table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END(#) OPTIONS AT FY-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Earl W. Wendell............ -- -- 882,000 107,625 11,975,750 -0-
Edward L. Gaylord.......... -- -- 132,300 -0- 1,796,363 -0-
Jack J. Vaughn............. -- -- 132,300 43,050 1,796,363 -0-
Terry E. London............ -- -- 132,300 29,058 1,796,363 -0-
David Hall................. -- -- 55,125 37,668 748,484 -0-
Tom Griscom................ 13,781 144,052 -0- -0- -0- -0-
</TABLE>
- ---------------
(1) The aggregate dollar value of the options held at fiscal year-end are
calculated as the difference between the fair market value of the Class A
Common Stock ($22.875 as reported on the NYSE on December 31, 1996) and the
exercise price of the stock options.
48
<PAGE> 51
RETIREMENT PLAN
The following table shows the estimated annual pension payable pursuant to
the Company's defined benefit pension plan (the "Retirement Plan") upon
retirement to employees in specified remuneration and years-of-service
classifications. The amounts shown in the table do not include benefits payable
from Social Security. The amount of estimated annual pension is based upon a
pension formula which applies to all participants in the Retirement Plan. The
estimated amounts are based on the assumption that (i) payments under the
Retirement Plan will commence upon retirement at age 65 in 1996 in the form of a
single life only annuity, (ii) covered compensation is $27,576, and (iii) the
Retirement Plan will continue in force in its present form.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
- ----------------------------------------------------------------------------------------
ESTIMATED FIVE- ESTIMATED ANNUAL PENSION PLAN BENEFIT
PAY AT YEAR FINAL EXCLUDING SOCIAL SECURITY
AGE AVERAGE ------------------------------------------------------------
65(1) COMPENSATION(2) YEARS OF SERVICE
- ------- --------------- ------------------------------------------------------------
10 15 20 25 30 35 40
------ ------ ------ ------ ------ ------ ------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
50,000 45,000 4,845 7,268 9,690 12,113 14,536 16,958 20,333
75,000 67,500 8,220 12,330 16,440 20,551 24,661 28,771 33,833
100,000 90,000 11,595 17,393 23,190 28,988 34,786 40,583 47,333
125,000 112,500 14,970 22,455 29,940 37,426 44,911 52,396 60,833
150,000 135,000 18,345 27,518 36,690 45,863 55,036 64,208 74,333
</TABLE>
- ---------------
(1) The maximum annual compensation that can be recognized in a qualified
retirement plan is $150,000 in 1996 (Code Section 401(a)(17)).
(2) Estimated five-year final average compensation is based on 90% of pay at age
65.
Employees of the Company and certain of its subsidiaries who have attained
age 21 and completed one year of service with more than 1,000 hours of service
are eligible to participate in the Retirement Plan. The normal retirement
benefit payable to a vested participant upon retirement at age 65 is equal to
the sum of:
(i) 0.85% of the participant's Average Annual Compensation multiplied
by his or her number of years of Benefit Accrual Service, as defined in the
Retirement Plan, not in excess of 35 years;
(ii) 0.65% of the excess, if any, of the participant's Average Annual
Compensation over Covered Compensation multiplied by his or her years of
Benefit Accrual Service not in excess of 35 years; and
(iii) 1.5% of the participant's Average Annual Compensation multiplied
by his or her number of years of Benefit Accrual Service in excess of 35
years.
The normal form of benefit is calculated in the form of a life only annuity
payable monthly. The participant may elect alternative forms of payment pursuant
to the provisions of the Retirement Plan.
Average Annual Compensation is defined as the average of "includable
compensation" for the five consecutive years in which earnings were the highest
within the last ten years of benefit service. Includable compensation is defined
to include only base pay through December 31, 1988; thereafter it is defined as
all "wages" within the meaning of Code Section 3121(a) (without such base pay
limit), plus employee contributions to the Company's 401(k) Plan and Code
Section 125 deferrals, subject to additional limitations imposed by the Code.
Accrued benefits are 100% vested after five years of service.
Messrs. Wendell, Gaylord, Vaughn, London, Hall, and Griscom had 44, 49, 20,
18, 30, and 44 years of credited service, respectively, on December 31, 1996. As
a result of the Code Section 401(a)(17) limitation on eligible compensation, the
1996 includable compensation in determining Average Annual Compensation was
limited to $150,000 for the Named Executive Officers in 1996.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
The Company maintains two non-qualified retirement plans to provide
benefits to certain employees of the Company: (i) the NLT Supplemental Executive
Retirement Plan (the "NLT SERP") and (ii) the
49
<PAGE> 52
Benefit Restoration Plan (the "Restoration Plan"). These plans are not prefunded
and the beneficiaries' rights to receive distributions thereunder constitute
unsecured claims to be paid from the general assets of the Company.
The NLT SERP provides a benefit to certain executives in an amount equal to
the actuarial difference between benefits provided by the Retirement Plan and
benefits that would have been available to such persons under the defined
benefit pension plan of the predecessor to Opryland USA Inc had service
continued thereunder from the date such predecessor was acquired by the Company,
August 31, 1983, until the date of retirement, service termination, or death of
the covered employee. The benefits payable under the NLT SERP are determined as
of the effective date of termination of employment and are restricted to the
maximum benefit limitation imposed by Section 415 of the Code. Mr. Vaughn is the
only Named Executive Officer currently covered by the NLT SERP and the estimated
benefit payable to Mr. Vaughn upon retirement at normal retirement age is
$18,537.
The Restoration Plan provides a benefit to certain employees to "replace"
benefits lost due to Code limitations applied to qualified defined benefit
pension plans. The benefit is determined by calculating the Retirement Plan
benefit without respect to limitations of the Code and subtracting the benefit
payable from the Retirement Plan. The total annual benefit is limited to 45% of
Average Annual Compensation (without respect to Code limitations) and consists
of benefits payable pursuant to the Restoration Plan, the Retirement Plan, the
NLT SERP, employer matching contributions to the Company's 401(k) Plan and
SUDCOMP Plan (assuming the maximum match), and one-half of any annual Social
Security benefit payable to the employee. To determine the maximum benefit, all
benefits are converted to a life only benefit payable at age 65. The Restoration
Plan benefit is reduced (not below zero) if the total annual benefit exceeds the
45% maximum limitations.
EMPLOYMENT, SEVERANCE, AND CHANGE IN CONTROL ARRANGEMENTS
Stock Plans
Awards granted under the Stock Plans become immediately exercisable or
otherwise nonforfeitable in full in the event of a Change in Control of the
Company (as defined therein), notwithstanding specific terms of the awards
providing otherwise. Furthermore, with respect to stock options granted under
the Stock Plans, following a Change in Control the Compensation Committee may,
in its discretion, permit the cancellation of such options in exchange for a
cash payment in an amount per share equal, generally, to the difference between
the highest closing sales price during the sixty-day period preceding the Change
in Control and the exercise price. A Change in Control is defined identically in
the Stock Plans to include, among other things, the acquisition of securities
representing more than 50% of the combined voting power of all classes of the
Company's capital stock by any person (other than the Company and other related
entities); the approval by the stockholders of the Company of a merger or
consolidation of the Company into or with another entity (with certain
exceptions), or of a sale or other disposition of all or substantially all of
the Company's assets, or of a plan of liquidation; or a change in the
composition of the Board of Directors in any two year period such that
individuals who were Board members at the beginning of such period cease to
constitute a majority thereof (with certain exceptions).
In connection with the proposed Westinghouse Merger and Spin-off, the
Compensation Committee has determined that a Change in Control (for purposes of
the Stock Plans) will have occurred upon consummation thereof. Accordingly, upon
consummation of such transactions, (i) all options outstanding under the Stock
Plans will immediately vest and become exercisable and (ii) Performance Shares
(at the 100% performance target) will vest and become otherwise nonforfeitable.
Severance Agreements
The Company has entered into Severance Agreements with each of its Named
Executive Officers. These Severance Agreements become effective following a
"Change of Control" (as defined therein) and provide for a two year employment
agreement thereafter. In the event a Named Executive Officer is terminated or
his
50
<PAGE> 53
compensation is reduced during such two year period, he would be entitled to a
lump sum payment equal to 250% of the sum of his base salary and cash incentive
bonus. A Change of Control is defined in the Severance Agreements to include,
among other things, the acquisition of securities by a person of 33 1/3% or more
of the combined voting power of the Company's securities; mergers,
consolidations, and sales of assets in which existing Company stockholders own
less than a majority of the resulting voting power; and changes in the
composition of a majority of the Board of Directors over a two year period. In
connection with the Westinghouse Merger and Spin-off, the Compensation Committee
has deemed that, upon consummation of such transaction, a Change of Control will
have occurred for purposes of the Severance Agreements. Accordingly, all persons
party thereto will have two year employment agreements with Westinghouse or New
GET, as applicable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Martin C. Dickinson, Joe M. Rodgers and, until May 1, 1996, E.
K. Gaylord II served as members of the Compensation Committee of the Board of
Directors of the Company.
From 1989 until October 1991, E. K. Gaylord II, a member of the
Compensation Committee until May 1, 1996, served as Vice President of the
Company and is currently the president and a director of OPUBCO. Edward L.
Gaylord, Chairman of the Board of the Company, is currently the chairman, chief
executive officer and a director of OPUBCO, and in such capacities is in a
position to influence the compensation of E. K. Gaylord II.
In September 1996, the Company entered into an agreement with OPUBCO
pursuant to which OPUBCO will exchange certain commercial real estate located in
Dallas, Texas (the "OPUBCO Real Estate") for the Company's interests in the
Oklahoma City '89ers, a minor league baseball franchise. The Voting Trust, which
controls approximately 62.7% of the Company's voting power, beneficially owns a
majority of the voting stock of OPUBCO. See Item 12, "Security Ownership of
Certain Beneficial Owners and Management." Edward L. Gaylord, E.K. Gaylord II,
Christine Gaylord Everest, and Martin C. Dickinson, directors of the Company,
are also directors and officers of OPUBCO. The OPUBCO Real Estate was appraised
at $950,000, which the directors of the Company (other than Edward L. Gaylord,
E.K. Gaylord II, Christine Gaylord Everest, Martin C. Dickinson and Glenn M.
Stinchcomb) determined was equal to or greater than the value of the Company's
interests in the Oklahoma City '89ers being exchanged. The consummation of this
transaction is subject to the approval of Major League Baseball.
DIRECTORS' COMPENSATION
Arrangements regarding directors' compensation for services as directors
are determined by the Compensation Committee. During 1996, the Company's
non-employee directors received (a) an annual Board retainer of $30,000, and (b)
an annual committee retainer of $5,000 per committee on which such director
served ($6,000 for committee chairmen). In addition, non-employee directors are
entitled to a per-meeting fee of $1,500 for special meetings of the Board of
Directors or its committees. During 1995, the Company established a deferred
compensation plan whereby non-employee directors may defer their cash
compensation until their retirement or resignation from the Board of Directors.
Employee directors are not compensated for service as directors in addition to
their salaries. All directors are reimbursed for their expenses incurred in
attending meetings. The 1993 Stock Plan provides for the automatic grant to each
non-employee director of a nonqualified stock option to purchase 7,717 shares of
Class A Common Stock (adjusted to reflect stock dividends and stock splits) as
of the date of each annual meeting of stockholders at an exercise price equal to
the fair market value on the date of grant as determined pursuant to the 1993
Stock Plan.
51
<PAGE> 54
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 3, 1997 or such other date as
indicated in the footnotes to the table, the beneficial ownership of each
current director, each of the Named Executive Officers, the executive officers
and directors as a group, and each stockholder known to management of the
Company to beneficially own more than five percent of the outstanding Class A
Common Stock or Class B Common Stock. Each share of Class B Common Stock is
convertible into one share of Class A Common Stock. Accordingly, under federal
securities laws governing beneficial ownership, holders of Class B Common Stock
are deemed to beneficially own the same number of shares of Class A Common Stock
as shares of Class B Common Stock beneficially owned. The beneficial ownership
of Class A Common Stock shown in the table does not include shares of Class B
Common Stock beneficially owned by such holder. In accordance with the
provisions of Rule 13d-3 of the Exchange Act, the beneficial ownership of Class
A Common Stock in the table below includes shares issuable upon the exercise of
stock options granted under the Stock Plans if such options are currently
exercisable or exercisable within 60 days of the date hereof. Unless otherwise
indicated, the Company believes that the beneficial owner set forth in the table
has sole voting and investment power.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF CLASS A COMMON BENEFICIAL OWNERSHIP OF
STOCK AND PERCENTAGE CLASS B COMMON STOCK AND PERCENTAGE
OF CLASS PERCENTAGE OF CLASS OF TOTAL
-------------------- ------------------------- VOTING
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT POWER
------------------------ --------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Edward L. Gaylord(1)*+......................... 529,200(2) 1.17 18,850,286(3)(4) 36.84 31.44
Edith Gaylord Harper Revokable Trust(1)........ -- -- 6,400,114(3)(5) 12.51 10.63
Christine Gaylord Everest(1)*.................. 81,584(6) ** 3,017,110(3)(7) 5.90 5.01
E. K. Gaylord II(1)*........................... 29,767(6) ** 1,593,375(3)(8) 3.11 2.65
Louise Gaylord Bennett(1)...................... 7,717(9) ** 2,834,730(3)(10) 5.54 4.71
Martin C. Dickinson*
17461 Avenida De Acacias
Rancho Sante Fe, CA 92067.................... 38,534(11) ** 3,880,181(3)(12) 7.58 6.44
Dickinson Trust
P.O. Box 808
Rancho Santa Fe, CA 92067.................... -- -- 3,596,615(13) 7.03 5.97
Edward L. Gaylord, Edith Gaylord Harper,
Christine Gaylord Everest, E. K. Gaylord II,
and Martin C. Dickinson, as Voting
Trustees(1).................................. -- -- 37,767,956(3) 73.82 62.72
Glenn M. Stinchcomb*........................... 82,466(14) ** 330,595 ** **
Joe M. Rodgers*................................ 59,534(6) ** -- -- --
Earl W. Wendell*+.............................. 944,291(15) 2.05 -- -- **
Terry E. London+............................... 145,220(16) ** 2,409 ** **
David Hall+.................................... 74,523(17) ** 1,543 ** **
Jack Vaughn+................................... 166,878(18) ** 3,997 ** **
Tom Griscom+................................... 27,431 ** 3,997 ** **
The Capital Group Companies, Inc.
333 South Hope Street
Los Angeles, CA 90071........................ 5,430,880(19) 12.00 -- -- 1.80
Goldman Sachs Asset Management, Inc.
(Successor to Liberty Investment
Management, Inc.)
2502 Rocky Point Drive, Suite 500
Tampa, FL 33607.............................. 4,655,880(20) 10.29 -- -- 1.55
Wellington Management Company
75 State Street
Boston, MA 02109............................. 4,323,475(21) 9.55 -- -- 1.44
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202.......................... 2,708,702(22) 5.99 -- -- **
All executive officers and directors as a group
(14 persons)................................. 2,301,513(23) 4.89 39,517,658 77.24 65.81
</TABLE>
- ---------------
* Director
+ Named Executive Officer
** Less than one percent
(1) Mailing address: 9000 N. Broadway, Oklahoma City, Oklahoma 73114.
52
<PAGE> 55
(2) Includes (a) 44,100 shares beneficially owned as trustee of the Edward L.
Gaylord Revocable Trust; (b) 22,050 shares beneficially owned by Mr.
Gaylord's wife, Thelma Gaylord, as to which Mr. Gaylord disclaims
beneficial ownership; (c)330,750 shares owned by the Edward L. Gaylord and
Thelma Gaylord Foundation, Edward L. Gaylord and Thelma Gaylord, Trustees;
and (d) 132,300 shares issuable upon the exercise of options.
(3) Edward L. Gaylord, Edith Gaylord Harper, and certain other stockholders of
the Company have entered into a Voting Trust Agreement, dated as of October
3, 1990 (the "Voting Trust"), which terminates on October 3, 2000. Edward
L. Gaylord, Edith Gaylord Harper, Christine Gaylord Everest, E. K. Gaylord
II, and Martin C. Dickinson, as the voting trustees (the "Voting Trustees")
under the Voting Trust, have the shared right to vote the 37,767,956 shares
of Class B Common Stock beneficially owned by the Voting Trust, which
represents 62.72% of the combined voting power of the Common Stock of the
Company. Although the Voting Trustees do not have the right to make any
investment decisions with respect to the shares beneficially owned by the
Voting Trust, a stockholder party to the Voting Trust needs the written
consent of at least 60% of the Voting Trustees (the "Trustees' Consent") to
withdraw such holder's shares from the Voting Trust (the "Trust Withdrawal
Restriction").
(4) Includes (a) 13,907,995 shares beneficially owned as trustee for the Edward
L. Gaylord Revocable Trust; (b) 2,585,940 shares beneficially owned as
trustee for the Mary I. Gaylord Revocable Living Trust of 1985; (c)
1,035,709 shares beneficially owned by Thelma Gaylord; (d) 147,582
additional shares beneficially owned as trustee for the Edward L. Gaylord
Revocable Trust; (e) 787,185 shares beneficially owned by Gayno, Inc., a
corporation controlled by Edward L. Gaylord; and (f) 385,875 shares
beneficially owned by The Oklahoman Foundation (the "Charitable Trust"), a
charitable trust of which Edward L. Gaylord is a trustee. Edward L. Gaylord
has shared voting power and sole investment power (subject to the Trust
Withdrawal Restriction) with respect to the shares listed in (a) and (b)
above, which together with the shares listed in (c) above are deposited
with the Voting Trust (to which Edward L. Gaylord is party as a stockholder
and as a Voting Trustee), such 17,529,644 shares being referred to herein
as the "ELG Voting Trust Shares;" sole voting power and investment power
with respect to the shares listed in (d) and (e) above, and shared voting
power and shared investment power with respect to the shares in the
Charitable Trust. Does not include the shares owned by Edward L. Gaylord's
son and daughters, E. K. Gaylord II, Christine Gaylord Everest and Louise
Gaylord Bennett, respectively. Does not include 20,238,312 shares of Class
B Common Stock beneficially owned by the Voting Trust (excluding the ELG
Voting Trust Shares), as to which Edward L. Gaylord has shared voting power
and shared investment power (limited solely to the Trustees' Consent). See
Note 3.
(5) Includes (a) 1,190,802 shares owned by the Edith Gaylord Harper 1995
Revokable Trust, Edith Gaylord Harper, W.I. Ross and David Hogan Trustees
(the "EGH Revokable Trust") and (b) 5,209,312 shares owned by the EGH
Revokable Trust which are deposited with the Voting Trust (to which Mrs.
Harper is party as a stockholder and as a Voting Trustee), such shares
being referred to herein as the "EGH Voting Trust Shares." Mrs. Harper,
Edward L. Gaylord's sister, has sole voting power and investment power with
respect to the shares in (a) above and shared voting power and sole
investment power (subject to the Trust Withdrawal Restriction) with respect
to the EGH Voting Trust Shares. Does not include 32,558,644 shares of Class
B Common Stock beneficially owned by the Voting Trust (excluding the EGH
Voting Trust Shares), as to which Mrs. Harper has shared voting power and
shared investment power (limited solely to the Trustees' Consent). See Note
3.
(6) Shares issuable upon the exercise of options.
(7) Includes (a) 2,595,489 shares owned directly; (b) 11,239 shares owned or
beneficially owned by Mrs. Everest's husband, James H. Everest; (c) 11,278
shares owned by Mrs. Everest's daughter, Mary C. Everest; (d) 11,278 shares
owned by Mrs. Everest's daughter, Tricia L. Everest; (e) 1,951 additional
shares owned by James H. Everest; and (f) 385,875 shares beneficially owned
by the Charitable Trust of which Mrs. Everest is a trustee. Does not
include the shares owned by Mrs. Everest's father, mother, brother, and
sisters, Edward L. Gaylord, Thelma Gaylord, E. K. Gaylord II, and Louise
Gaylord Bennett and Mary I. Gaylord, respectively. Mrs. Everest has shared
voting power and sole investment power (subject to the Trust Withdrawal
Restriction) with respect to the shares listed in (a) above, which together
with the shares listed in (b), (c), and (d) above are deposited with the
Voting Trust (to which Mrs. Everest is party as a stockholder and as a
Voting Trustee), such 2,629,284 shares being
53
<PAGE> 56
referred to herein as the "CGE Voting Trust Shares," and shared voting
power and shared investment power with respect to the shares in the
Charitable Trust. Does not include 35,138,672 shares of Class B Common
Stock beneficially owned by the Voting Trust (excluding the CGE Voting
Trust Shares), as to which Mrs. Everest has shared voting power and shared
investment power (limited solely to the Trustees' Consent). See Note 3.
(8) Includes (a) 1,207,500 shares owned directly which are deposited with the
Voting Trust (to which E. K. Gaylord II is party as a stockholder and as a
Voting Trustee), such shares being referred to herein as the "EKG Voting
Trust Shares," and (b) 385,875 shares beneficially owned by the Charitable
Trust of which E. K. Gaylord II is a trustee. E. K. Gaylord II has shared
voting power and sole investment power (subject to the Trust Withdrawal
Restriction) with respect to the EKG Voting Trust Shares, and shared voting
power and shared investment power with respect to the shares in the
Charitable Trust. Does not include the shares owned by E. K. Gaylord II's
father, mother, and sisters, Edward L. Gaylord, Thelma Gaylord, and
Christine Gaylord Everest, Louise Gaylord Bennett, and Mary I. Gaylord,
respectively. Does not include 36,560,456 shares of Class B Common Stock
beneficially owned by the Voting Trust (excluding the EKG Voting Trust
Shares), as to which E. K. Gaylord II has shared voting power and shared
investment power (limited solely to the Trustees' Consent). See Note 3.
(9) Includes (a) 5,512 shares owned directly, and (b) 2,205 shares owned by
Mrs. Bennett's husband, Clayton I. Bennett, as to which Mrs. Bennett
disclaims beneficial ownership.
(10) Deposited with the Voting Trust (to which Louise Gaylord Bennett is party
as a stockholder), such shares being referred to herein as the "LGB Voting
Trust Shares." Louise Gaylord Bennett has no voting power and sole
investment power (subject to the Trust Withdrawal Restriction) with respect
to the LGB Voting Trust Shares. See Note 3. Does not include the shares
owned by Louise Gaylord Bennett's father, mother, brother, and sisters,
Edward L. Gaylord, Thelma Gaylord, E. K. Gaylord II, and Christine Gaylord
Everest and Mary I. Gaylord, respectively, as to which Louise Gaylord
Bennett disclaims beneficial ownership.
(11) Includes (a) 1,050 shares beneficially owned by Mr. Dickinson's wife, Carol
D. Dickinson, as to which Mr. Dickinson disclaims beneficial ownership, and
(b) 37,484 shares issuable upon the exercise of options.
(12) Includes (a) 198,998 shares beneficially owned as trustee for the Martin C.
Dickinson Revocable Trust (the "MCD Revokable Trust") which are deposited
with the Voting Trust; (b) 82,479 additional shares in the MCD Revokable
Trust; (c) 771 shares beneficially owned by Mr. Dickinson's wife, Carol D.
Dickinson, which are deposited with the Voting Trust; (d) 1,318 additional
shares beneficially owned by Carol D. Dickinson; and (e) 3,596,615 shares
beneficially owned by the Dickinson Trust. See Note 13. Mr. Dickinson
disclaims beneficial ownership with respect to the shares in (c) and (d)
above. The shares listed in (a), (c), and (e) above are deposited with the
Voting Trust (to which Mr. Dickinson is party as a stockholder and as a
Voting Trustee), such 3,796,384 shares being referred to herein as the "MCD
Voting Trust Shares." Mr. Dickinson has shared voting power and sole
investment power (subject to the Trust Withdrawal Restriction) with respect
to the shares in (a) above, sole voting power and investment power with
respect to the shares in (b) above, and shared voting power and shared
investment power with respect to the shares in the Dickinson Trust. Does
not include 33,971,572 shares of Class B Common Stock beneficially owned by
the Voting Trust (excluding the MCD Voting Trust Shares), as to which Mr.
Dickinson has shared voting power and shared investment power (limited
solely to the Trustees' Consent). See Note 3.
(13) Deposited with the Voting Trust. Elizabeth M. Dickinson, Martin C.
Dickinson, and Elizabeth D. Smoyer, as trustees of the Dickinson Trust,
have no voting power and sole investment power (subject to the Trust
Withdrawal Restriction) as to these shares. However, Mr. Dickinson has
shared voting power as to these shares as a trustee of the Voting Trust.
See Note 3.
(14) Includes (a) 882 shares owned by Mr. Stinchcomb's wife Hilda H. Stinchcomb
and (b) 81,584 shares issuable upon the exercise of options.
(15) Includes (a) 22,050 shares beneficially owned by Mr. Wendell's wife, Janice
Wendell, as to which Mr. Wendell disclaims beneficial ownership; (b)
895,781 shares issuable upon the exercise of options; and (c) 26,460 shares
of restricted stock issued pursuant to the 1993 Stock Plan.
54
<PAGE> 57
(16) Includes (a) 2,586 shares owned directly; (b) 6,614 shares of restricted
stock issued pursuant to the 1993 Stock Plan; and (c) 136,020 shares
issuable upon the exercise of options.
(17) Includes (a) 6,045 shares owned directly; (b) 264 shares owned by Mr.
Hall's minor daughter; (c) 8,266 shares of restricted stock issued pursuant
to the 1993 Stock Plan; and (d) 59,948 shares issuable upon the exercise of
options.
(18) Includes (a) 17,492 shares owned directly; (b) 11,574 shares of restricted
stock issued pursuant to the 1993 Stock Plan; and (c) 137,812 shares
issuable upon the exercise of options.
(19) Based on information set forth in Amendment No. 6 to Schedule 13G, dated
February 12, 1997, filed with the Securities and Exchange Commission (the
"SEC") jointly by The Capital Group Companies, Inc., a parent holding
company ("CGC"), Capital Guardian Trust Company ("CGTC"), a bank and
wholly-owned subsidiary of CGC, Capital Research and Management Company
("CRMC"), an investment advisor and wholly-owned subsidiary of CGC, and
Capital International Limited ("CIL"). CGC reported that it has sole voting
power with respect to 1,373,980 shares and sole dispositive power with
respect to 5,430,880 shares of Class A Common Stock. CRMC reported that it
exercised investment discretion over 3,882,900 shares of Class A Common
Stock.
(20) Effective January 2, 1997, Goldman Sachs Investment Management, Inc., a
subsidiary of Goldman Sachs & Co., purchased substantially all of the
accounts of Liberty Investment Management, Inc. ("Liberty"), including
those holding the Class A Common Stock as previously reported in a Schedule
13G filed with the SEC by Liberty.
(21) Based on information set forth in Amendment No. 6 to Schedule 13G, dated
January 24, 1997, filed with the SEC by Wellington Management Company, an
investment advisor ("WMC"). WMC reported that it has shared voting power
with respect to 3,399,260 shares of Class A Common Stock and shared
dispositive power with respect to 4,323,475 shares of Class A Common Stock.
(22) Based on information set forth in Schedule 13G dated February 14, 1997
filed with the SEC by T. Rowe Price Associates, Inc., an investment advisor
("TRPAI"). TRPAI reported that it has shared voting power with respect to
250,181 shares of Class A Common Stock and sole dispositive power with
respect to 2,708,702 shares of Class A Common Stock.
(23) Includes 1,761,628 shares issuable upon the exercise of options.
In connection with the proposed Westinghouse Merger, the Voting Trustees
and certain related stockholders (collectively, the "Principal Stockholders") of
the Company entered into a Stockholder Agreement with Westinghouse with respect
to shares of Class A Common Stock and Class B Common Stock owned of record by
the Principal Stockholders, including the 37,767,956 shares of Class B Common
Stock owned of record by the Voting Trust, as well as any shares of capital
stock of the Company acquired by the Principal Stockholders and Voting Trust
after February 9, 1997 (the "Trust Shares"). Under the terms of the Stockholder
Agreement, the Principal Stockholders have agreed (i) to vote the Trust Shares,
representing approximately 65% of the aggregate voting power of the Common
Stock, in favor of the Westinghouse Merger and each transaction contemplated
thereby and (ii) not to consent to the withdrawal of the Trust Shares from the
Voting Trust, convert any of the Trust Shares into Class A Common Stock, or
transfer (subject to certain exceptions) any shares of Class A Common Stock or
Class B Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 11 "Executive Compensation -- Compensation Committee Interlocks
and Insider Participation."
55
<PAGE> 58
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. See Item 8.
(a)(2) Financial Statement Schedules. Inapplicable.
(a)(3) Exhibits. See Index to Exhibits, pages 58 through 61.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company
during the quarter ended December 31, 1996.
[THIS SPACE INTENTIONALLY LEFT BLANK]
56
<PAGE> 59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GAYLORD ENTERTAINMENT COMPANY
March 26, 1997 By: /s/ EDWARD L. GAYLORD
------------------------------------
Edward L. Gaylord
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EDWARD L. GAYLORD Chairman of the Board March 26, 1997
- -----------------------------------------------------
Edward L. Gaylord
/s/ EARL W. WENDELL President, Chief Executive March 26, 1997
- ----------------------------------------------------- Officer and Director
Earl W. Wendell (Principal Executive
Officer)
/s/ TERRY E. LONDON Chief Financial Officer March 26, 1997
- ----------------------------------------------------- (Principal Financial and
Terry E. London Accounting Officer)
/s/ MARTIN C. DICKINSON Director March 26, 1997
- -----------------------------------------------------
Martin C. Dickinson
/s/ CHRISTINE GAYLORD EVEREST Director March 26, 1997
- -----------------------------------------------------
Christine Gaylord Everest
/s/ E. K. GAYLORD II Vice-Chairman of the Board March 26, 1997
- -----------------------------------------------------
E. K. Gaylord II
/s/ JOE M. RODGERS Director March 26, 1997
- -----------------------------------------------------
Joe M. Rodgers
/s/ GLENN M. STINCHCOMB Director March 26, 1997
- -----------------------------------------------------
Glenn M. Stinchcomb
</TABLE>
57
<PAGE> 60
INDEX TO EXHIBITS
<TABLE>
<C> <C> <S>
2.1+ -- Basic Agreement, dated as of December 15, 1993, among
BASSGEC Management Company, Bass Pro Shops, Inc., Trackmar
Corporation, Finley River Properties, Inc., John L. Morris,
Trustee of the John L. Morris Revocable Living Trust, U/T/A
dated December 23, 1986, as amended, Hospitality and Leisure
Management, Inc., John L. Morris, and the Company
(incorporated by reference to Exhibit 2.1 to the
Registration Statement on Form S-3 (Registration No.
33-74552)).
2.2+ -- Asset Purchase Agreement by and among Cencom Cable
Television, Inc., Lenoir TV Cable, Inc., CCT Holdings
Corporation and CCA Holdings Corporation dated as of March
30, 1995 (incorporated by reference to Exhibit 2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995).
2.3 -- Amendment 1 to the Asset Purchase Agreement by and among
Cencom Cable Television, Inc., Lenoir TV Cable, Inc., CCT
Holdings Corporation and CCA Holdings Corporation dated as
of May 24, 1995 (incorporated by reference to Exhibit 2.2 to
the Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 13, 1995).
2.4 -- Amendment 2 to the Asset Purchase Agreement by and among
Cencom Cable Television, Inc., Lenoir TV Cable, Inc., CCT
Holdings Corporation and CCA Holdings Corporation dated as
of September 29, 1995 (incorporated by reference to Exhibit
2.3 to the Current Report on Form 8-K filed with the
Securities and Exchange Commission on October 13, 1995).
2.5+ -- Asset Purchase Agreement dated as of September 15, 1995
between Tribune Broadcasting Company and New Gaylord
Broadcasting Company, L.P.(incorporated by reference to
Exhibit 2.5 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
2.6+ -- Asset Purchase Agreement, dated as of November 21, 1996 by
and among Thomas Nelson, Inc., Word, Incorporated and Word
Direct Partners, L.P. as Sellers and Gaylord Entertainment
Company as Buyer (incorporated by reference to Exhibit 2.1
to the Current Report on Form 8-K dated January 6, 1997, of
Thomas Nelson, Inc.).
2.7+ -- Amendment No. 1 to the Asset Purchase Agreement dated as of
January 6, 1997, by and among Thomas Nelson, Inc., Word
Incorporated and Word Direct Partners, L.P. as Sellers and
Gaylord Entertainment Company as Buyer (incorporated by
reference to Exhibit 2.2 to the Current Report on Form 8-K
dated January 6, 1997, of Thomas Nelson, Inc.).
2.8+ -- Asset Purchase Agreement dated as of January 6, 1997 by and
between Nelson Word Limited and Word Entertainment Limited
(incorporated by reference to Exhibit 2.3 to the Current
Report on Form 8-K dated January 6, 1997, of Thomas Nelson,
Inc.).
2.9+ -- Subsidiary Asset Purchase Agreement executed on January 6,
1997 and dated as of November 21, 1996 between Word
Communications, Ltd. and Word Entertainment (Canada), Inc.
(incorporated by reference to Exhibit 2.4 to the Current
Report on Form 8-K dated January 6, 1997, of Thomas Nelson,
Inc.).
2.10+ -- Asset Purchase Agreement by and between Cox Broadcasting,
Inc. and Gaylord Broadcasting Company, L.P. dated January
20, 1997.
2.11+ -- Agreement and Plan of Merger dated February 9, 1997 by and
among Westinghouse Electric Corporation, G Acquisition Corp.
and Gaylord Entertainment Company and Agreement and Plan of
Distribution filed as Annex A thereto (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K dated February 9, 1997).
3.1 -- Restated Certificate of Incorporation of Gaylord
Entertainment Company (incorporated by reference to Exhibit
3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996).
3.2 -- Restated By-laws of the Company (incorporated by reference
to Exhibit 3.0 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995).
</TABLE>
58
<PAGE> 61
4.1 -- Specimen of Class A Common Stock certificate (incorporated
by reference to Exhibit 4.1 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
4.2 -- Note Purchase Agreement dated January 15, 1993 between
Gaylord Entertainment Company and the within named
purchasers for the sale of $150,000,000 of the Company's
7.19% Senior Notes due 2000 (incorporated by reference to
Exhibit 10.17 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1992).
4.3 -- Amended and Restated Credit Agreement dated as of August 25,
1995 among Gaylord Entertainment Company, the banks named
therein and NationsBank of Texas N.A., as Administrative
Lender. (Revolver) (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995).
4.4 -- Amended and Restated Credit Agreement dated as of August 25,
1995 among Gaylord Entertainment Company, the banks named
therein and NationsBank of Texas N.A., as Administrative
Lender. (Term Loan). (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995).
4.5** -- Promissory Note of Gaylord Entertainment Company, dated
March 24, 1997, payable to the order of NationsBank of
Texas, N.A. in an amount up to $50,000,000.
9.1 -- Voting Trust Agreement ("Voting Trust Agreement") dated as
of October 3, 1990 between certain stockholders of The
Oklahoma Publishing Company and Edward L. Gaylord, Edith
Gaylord Harper, Christine Gaylord Everest, E. K. Gaylord II
and Martin C. Dickinson, as Voting Trustees (incorporated by
reference to Exhibit 9.1 to the Registration Statement on
Form S-1 (Registration No. 33-42329)).
9.2 -- Amendment No. 1 to Voting Trust Agreement dated as of
October 7, 1991 between certain stockholders of The Oklahoma
Publishing Company and Edward L. Gaylord, Edith Gaylord
Harper, Christine Gaylord Everest, Edward K. Gaylord II and
Martin C. Dickinson, as Voting Trustees (incorporated by
reference to Exhibit 9.2 to the Registration Statement on
Form S-1 (Registration No. 33-42329)).
10.1 -- Distribution Agreement dated as of October 30, 1991 between
The Oklahoma Publishing Company and OPUBCO, Inc.
(incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 13, 1991).
10.2 -- Registration Rights Policy dated as of October 30, 1991 by
Gaylord Entertainment Company on behalf of each of the
holders of Class B Common Stock of Gaylord Entertainment
Company (incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on November 13, 1991).
10.3 -- The Oklahoman Foundation Agreement dated as of March 15,
1990, among The Oklahoma Publishing Company and Edward L.
Gaylord, Edward K. Gaylord II and Christine Gaylord Everest,
as trustees (incorporated by reference to Exhibit 10.7 to
the Registration Statement on Form S-1 (Registration No.
33-42329)).
10.4 -- Distribution Agreement dated as of January 1, 1989 among
Opryland USA Inc, Westinghouse Broadcasting Company, Inc.,
Group W. Television, Inc. and Group W Satellite
Communications (incorporated by reference to Exhibit 10.14
to the Registration Statement on Form S-1 (Registration No.
33-42329)).
10.5 -- Assumption Agreement dated as of October 30, 1991 between
The Oklahoma Publishing Company and OPUBCO, Inc.
(incorporated by reference to Exhibit 10.10 to the Company's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 13, 1991).
10.6 -- Senior Subordinated Note issued on September 29, 1995 by CCT
Holdings Corporation in the original principal amount of
$165,687,890 (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on October 13, 1995).
59
<PAGE> 62
<TABLE>
<C> <C> <S>
10.7 -- Senior Subordinated Loan Agreement, dated as of September
29, 1995, between CCT Holdings and Cencom Cable Television,
Inc. (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on October 13, 1995).
10.8 -- Contingent Payment Agreement, dated as of September 29,
1995, between Charter Communications Entertainment, L.P.,
CCT Holdings Corporation and Cencom Cable Television, Inc.
(incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 13, 1995).
10.9 -- Agreement for Assignment and Acceptance of Limited
Partnership Interest effective January 1, 1996 by and among
Hospitality and Leisure Management Company, Inc., Fiesta
Texas Showpark, Inc., Gaylord Entertainment Company,
Showpark Management, Inc. and La Cantera Group Limited
Partnership (incorporated by reference to Exhibit 10.12 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.10 -- Assignment and Acceptance of Limited Partnership Interest
dated January 1, 1996 by and among Hospitality & Leisure
Management Company, Inc., Fiesta Texas Showpark, Inc., and
La Cantera Group Limited Partnership (incorporated by
reference to Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.11 -- Letter Agreement dated September 14, 1994 between CBS, Inc.
and Gaylord Broadcasting Company (d/b/a KTVT, Fort
Worth-Dallas) as modified by the Affiliation Agreement dated
December 2, 1994 between the parties as amended by the
letter agreement between the parties dated December 29, 1994
(incorporated by reference to Exhibit 10.20 of the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
10.12 -- Letter Agreement dated September 14, 1994 between CBS, Inc.
and Gaylord Broadcasting Company (d/b/a KSTW,
Tacoma-Seattle) as modified by the Affiliation Agreement
dated December 2, 1994 between the parties as amended by the
letter agreement between the parties dated December 29, 1994
(incorporated by reference to Exhibit 10.21 of the Annual
Report on Form 10-K for the year ended December 31, 1994).
10.13 -- Stockholder Agreement dated February 9, 1997 among
Westinghouse Electric Corporation, individuals and other
parties listed on Schedule A attached thereto, and Edward L.
Gaylord, Edith Gaylord Harper, Christine Gaylord Everest, E.
K. Gaylord II and Martin C. Dickinson, as trustees of a
certain voting trust dated October 3, 1990, as amended
October 23, 1991 (incorporated by reference to Schedule 13D
dated February 10, 1997 of Westinghouse Electric
Corporation).
EXECUTIVE COMPENSATION PLANS AND MANAGEMENT CONTRACTS
10.14 -- Gaylord Entertainment Company Amended and Restated 1991
Stock Option and Incentive Plan (incorporated by reference
to Exhibit 10.3 to the Company's Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission for
the quarter ended September 30, 1995).
10.15 -- Gaylord Entertainment Company Amended and Restated 1993
Stock Option and Incentive Plan (incorporated by reference
to Exhibit 10.4 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995).
10.16 -- The Opryland USA Inc Supplemental Deferred Compensation Plan
(incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-1 (Registration No. 33-
42329)).
10.17 -- The Opryland USA Inc Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.22 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1992).
10.18 -- Gaylord Entertainment Company Excess Benefit Plan
(incorporated by reference to Exhibit 10.30 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
</TABLE>
60
<PAGE> 63
10.19 -- Gaylord Entertainment Company Supplemental Executive
Retirement Plan (incorporated by reference to Exhibit 10.31
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
10.20 -- Gaylord Entertainment Company Directors' Unfunded Deferred
Compensation Plan (incorporated by reference to Exhibit
10.32 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994).
10.21 -- Severance Agreement dated November 18, 1993 between Gaylord
Entertainment Company and Richard H. Evans, Executive Vice
President and Chief Operating Officer of the Company
(incorporated by reference to Exhibit 10.25 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1993).
10.22 -- Amended and Restated Limited Partnership Agreement of Bass
Pro, L.P. (incorporated by reference to Exhibit 2.3 to the
Registration Statement on Form S-3 (Registration No.
33-74552)).
10.23** -- Form of Severance Agreement between Gaylord Entertainment
Company and executive officers.
10.24** -- Form of Indemnity Agreement between Gaylord Entertainment
Company and its directors.
10.25 -- Amended and Restated Stock Option Agreement, dated June 20,
1995, between Gaylord Entertainment Company and Richard H.
Evans, (former) Executive Vice President and Chief Operating
Officer of the Company (incorporated by reference to Exhibit
10.24 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.26 -- Amended and Restated Restricted Stock Agreement, as amended
and restated dated January 28, 1994, between Gaylord
Entertainment Company and Richard H. Evans, (former)
Executive Vice President and Chief Operating Officer of the
Company (incorporated by reference to Exhibit 10.28 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993).
21** -- Subsidiaries of Gaylord Entertainment Company
23** -- Consent of Independent Auditors.
27** -- Financial Data Schedule (for SEC use only).
- ---------------
+ As directed by Item 601(b)(2) of Regulation S-K, certain schedules and
exhibits to this agreement are omitted from this filing. Registrant agrees to
furnish supplementally a copy of any omitted schedule or exhibit to the
Commission upon request.
** Filed herewith.
61
<PAGE> 1
EXHIBIT 4.5
Draft of 20 March 1997
Revised From Draft of 13 March 1997
PROMISSORY NOTE
Dallas, Texas March 24, 1997
Borrower: GAYLORD ENTERTAINMENT COMPANY, a Delaware corporation
Commitment: $50,000,000.00000
Borrower, for value received, promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. ("Lender"), at its principal office in Dallas,
Texas, or at any other place designated to Borrower in writing by Lender an
amount, in lawful money of the United States of America in immediately
available funds, up to the Commitment (or such lesser amount as provided in
Section 1.2 hereof) on the Maturity Date (except as otherwise required to be
paid earlier pursuant to this Note), together with interest on the unpaid
principal balance of each Advance evidenced by this Note at the applicable
rates herein set forth.
This Note is issued upon the following terms and conditions:
ARTICLE I
THE ADVANCES
1.1 Definitions. Defined terms used herein shall have the meaning
given to them above and in Article III hereof.
1.2 The Advances. Lender agrees, upon the terms and subject to the
conditions of this Note and provided that no Default or Event of Default has
occurred and is continuing, to make Advances to Borrower for the purposes set
forth in Section 5.8 of the Credit Agreement from time to time in an aggregate
amount not to exceed the Commitment. Subject to Section 1.9 hereof, Advances
may be repaid and then reborrowed. Any Advance shall, at the option of
Borrower as provided in Section 1.3 hereof (and, in the case of Eurodollar
Advances and Short Term Advances, subject to availability and to the provisions
of Section 1.14 hereof), be made as a Base Rate Advance, a Eurodollar Advance
or a Short Term Advance; provided that there shall not be more than five
Eurodollar Advances outstanding at any one time. On the Maturity Date unless
sooner paid as provided herein, the outstanding Advances shall be repaid in
full.
<PAGE> 2
1.3 Manner of Borrowing and Disbursement.
(a) Each Borrowing shall be made on notice, given not later than 1:00
p.m. (Dallas time) (i) in the case of such a Borrowing comprised of Base Rate
Advances and Short Term Advances, on the date of the proposed Borrowing, and
(ii) in the case of such a Borrowing comprises of Eurodollar Advances on the
second Business Day prior to the date of the proposed Borrowing, in each case
by Borrower to Lender. Each such notice of a Borrowing (a "Notice of
Borrowing") shall be by telephone (confirmed by sending a Notice of Borrowing
by one of the following means) telex, telecopier or cable, in substantially the
form of Exhibit "A" attached hereto, specifying therein the requested (A) date
of such Borrowing, (B) Type of Advances comprising such Borrowing, (C)
aggregate amount of such Borrowing, and (D) in the case of such a Borrowing
consisting of Eurodollar Advances or Short Term Advances, the Interest Period
for each such Advance. Provided no Default or Event of Default has occurred
and is continuing, Lender will make such funds available to Borrower by
depositing such funds received in the general deposit account of Borrower with
Lender.
(b) Borrower may on any Business Day, subject to the notice
provisions of Section 1.3(a) hereof and the provisions of Section 1.14 hereof,
Convert all or any portion of the Advances of one Type; provided, however, that
(i) any Conversion of any Eurodollar Advances into Base Rate Advances shall be
made on, and only on, the last day of the Interest Period for such Eurodollar
Advance, and any Conversion of one Advance into another Advance shall be in an
amount not less than the minimum amount specified in Section 1.3(d) hereof and
(ii) no Conversion into Eurodollar Advances or Short Term Advances shall be
permitted at any time that a Default or Event of Default has occurred and is
continuing. Each such notice of Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the Advance to
be Converted and (iii) if such Conversion is into Eurodollar Advances or Short
Term Advances the duration of the initial Interest Period for such Advances.
Each notice of Conversion shall be irrevocable and binding on Borrower.
(c) If prior to the end of any Interest Period for any Eurodollar
Advance or Short Term Advance Borrower shall fail to give timely notice of the
continuance or Conversion thereof, Administrative Lender will forthwith so
notify Borrower and Lenders, whereupon each such Eurodollar Advance or Short
Term Advance, as appropriate, will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance. If any
notice given by Borrower pursuant to Section 1.3(a) hereof for a Eurodollar
Advance or Short Term Advance or any notice given by Borrower pursuant to
Section 1.3(b) hereof shall fail to designate an Interest Period, such notice
shall be deemed to have designated an Interest Period of one (1) month for
Eurodollar Advances and one day for Short Term Advances.
(d) The aggregate amount of Base Rate Advances to be made by Lender
on any day shall be in a principal amount which is at least $100,000 and which
is an integral multiple of $50,000. The aggregate amount of Eurodollar
Advances having the same Interest Period and to be made by Lender on any day
shall be in a principal amount which is at least $1,000,000 any which is an
integral multiple of $100,000. The aggregate amount of Short Term Advances
-2-
<PAGE> 3
having the same Interest Period and to be made by Lender on any day shall be in
a principal amount which is at least $50,000.
(e) Each Notice of Borrowing shall be irrevocable and binding on
Borrower. In the case of any Borrowing that the related Notice of Borrowing
specifies is to be comprised of Eurodollar Advances, Borrower shall indemnify
Lender against any loss, cost or expense incurred by Lender as a result of any
failure of Borrower to borrow any Eurodollar Advances after a Notice of
Borrowing has been given in accordance with Section 1.3(a) hereof, including,
without limitation, any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or re-employment of deposits or
other funds acquired by Lender to fund the Advances to be made by Lender as
part of such Borrowing when such Advances, as a result of such failure, are not
made on such date. The obligations of Borrower under this Section 1.3(e) shall
survive termination of this Note.
1.4 Interest.
(a) Borrower shall pay interest on the outstanding principal amount
of Base Rate Advances at a rate per annum equal to the Base Rate; provided,
however, if the amount of interest payable for the account of Lender on any
interest payment date in respect of the immediately preceding interest
computation period would exceed the Maximum Amount, the amount of interest
payable on such interest payment date shall be automatically reduced to the
Maximum Amount. If the amount of interest payable for the account of Lender in
respect of any interest computation period is reduced pursuant to the
immediately preceding sentence and the amount of interest payable for its
account in respect of any subsequent interest computation period would be less
than the Maximum Amount, then the amount of interest payable for its account in
respect of such subsequent interest computation period shall be automatically
increased to such Maximum Amount; provided that at no time shall the aggregate
amount by which interest paid for the account of Lender has been increased
pursuant to this sentence exceed the aggregate amount by which interest paid
for its account has theretofore been reduced pursuant to the immediately
preceding sentence. Interest on Base Rate Advances shall be paid quarterly in
arrears on each Quarterly Date and on the Maturity Date.
(b) Borrower shall pay interest on each Eurodollar Advance at a rate
per annum equal to the Eurodollar Rate for such Eurodollar Advance. Interest
on each Eurodollar Advance shall be payable on the last day of the Interest
Period for such Eurodollar Advance and on the Maturity Date.
(c) Borrower shall pay interest on each Short Term Advance at a rate
per annum equal to the Short Term Rate for such Short Term Advance. Interest
on each Short Term Advances shall be paid on the last day of the Interest
Period for such Short Term Advance and on the Maturity Date.
(d) During the continuance of any Event of Default, Borrower shall
pay, on demand, interest on the principal amount of all Advances outstanding
and on all other Obligations due and
- 3 -
<PAGE> 4
unpaid hereunder at a rate per annum equal to the lesser of the (i) Base Rate
plus 2%; provided, however, if the amount of interest payment for the account
of Lender on any interest payment date in respect of the immediately preceding
interest computation period would exceed the Maximum Amount, the amount of
interest payable on such interest payment date shall be automatically reduced
to the Maximum Amount. If the amount of interest payable for the account of
Lender in respect of any interest computation period is reduced pursuant to the
immediately preceding sentence and the amount of interest payable for its
account in respect of any subsequent interest computation period would be less
than the Maximum Amount, then the amount of interest payable for its account in
respect of such subsequent interest computation period shall be automatically
increased to the Maximum Amount; provided that at no time shall the aggregate
amount by which interest paid for the account of Lender has been increased
pursuant to this sentence exceed the aggregate amount by which interest paid
for its account has theretofore been reduced pursuant to the immediately
preceding sentence.
1.5 Commitment Fee. Subject to Section 2.4 hereof, Borrower agrees
to pay to Lender a Commitment Fee (which shall be payable in arrears on each
Quarterly Date and on the Maturity Date), based on the daily average unused
portion of the Commitment commencing on the date of the initial Advance
hereunder at the following per annum percentages, applicable in the following
situations:
Applicability Percentage
------------- ----------
(i) If the Leverage Ratio is greater than or equal 0.2500%
to 2.0 to 1
(ii) If the Leverage Ratio is less than 2.0 to 1 0.1875%
The Commitment Fee shall be payable quarterly in arrears on each Quarterly
Date, commencing on the first Quarterly Date occurring after the date of this
Note and on the Maturity Date. Any increase or decrease in the Commitment Fee
shall be effective on the date of receipt by Lender of the Officer's
Certificate accompanying the financial statements required to be delivered
pursuant to Section 3.2(a) and 3.2(b) of the Credit Agreement indicating a
change in the Leverage Ratio which would require an adjustment in the
Commitment Fee.
1.6 Prepayment.
(a) Borrower may, from time to time, prepay the outstanding principal
amount of the Advances in whole or in part without penalty or premium,
provided, however, that (w) each partial prepayment shall be in an aggregate
principal amount not less than $100,000 or an integral multiple of $50,000 in
excess thereof, (x) no such prepayment of a Eurodollar Advance shall be made
other than on the last day of the Interest Period therefor unless Borrower,
simultaneously with such prepayment, pays the compensation required pursuant to
Section 1.9 hereof and (y) each prepayment of the principal amount of a
Eurodollar Advance or Short Term Advance shall also include accrued interest to
the date of such prepayment on the principal
- 4 -
<PAGE> 5
amount prepaid. Borrower shall notify Lender (which notice may be telephonic
promptly followed by written notice) by 1:00 p.m. (Dallas time) on the date of
the proposed payment (or two Business Days prior the date of the proposed
prepayment of a Eurodollar Advance). Any notice of prepayment shall be
irrevocable.
(b) On or before the date of any reduction of the Commitment,
Borrower shall prepay applicable outstanding Advances in an amount necessary to
reduce the sum of outstanding Advances to an amount less than or equal to the
lesser of the Commitment as so reduced. Borrower shall first prepay all Base
Rate Advances and shall thereafter prepay Eurodollar Advances and Short Term
Advances. To the extent that any prepayment requires that a Eurodollar Advance
be repaid on a date other than the last day of its Interest Period, Borrower
shall reimburse Lender in accordance with Section 1.9 hereof.
1.7 Reduction of Commitment.
(a) Borrower shall have the right, without payment of any premium or
penalty, at any time upon not less than three (3) Business Days' notice to
Lender (if telephonic, to be confirmed by telecopy or in writing on or before
the date of reduction or termination) prior to such Quarterly Date, to
terminate or reduce the Commitment, in whole or in part, provided that (i) each
partial termination shall be in an aggregate amount which is an integral
multiple of $5,000,000, and (ii) no such reduction in the Commitment shall
cause any Eurodollar Advance to be repaid prior to the last day of its Interest
Period. Once reduced or terminated, the Commitment may not be increased.
(b) On the Maturity Date, the Commitment shall automatically reduce
to zero.
1.8 Payment of Principal of Advances. Borrower agrees to pay the
principal amount of the Advances to Lender as follows:
(a) The principal amount of each Eurodollar Advance and Short Term
Advance shall be due and payable on its Payment Date, which principal payment
may be made by means of a Refinancing Advance.
(b) On the date of reduction of the Commitment pursuant to Section
1.7 hereof, including the Maturity Date, the aggregate amount of the Advances
outstanding on such date of reduction in excess of the Commitment as reduced
shall be due and payable, which principal payment may not be made by means of
Refinancing Advances.
(c) The principal amount of all Advances, all accrued interest and
fees thereon, and all other Obligations related thereto, shall be due and
payable in full, or to the extent not otherwise required to be paid earlier
herein, on the Maturity Date.
1.9 Reimbursement. If (a) any payment of principal of, or Conversion
of, any Eurodollar Advance is made by Borrower to or for the account of Lender
other than on the last
- 5 -
<PAGE> 6
day of the Interest Period for such Advance, or (b) Borrower shall fail to
Convert into or continue a Eurodollar Advance on the date specified in the
notice thereof (other than as a result of any wrongful act or omission of
Lender), Borrower shall, upon demand by Lender, pay to Lender any and all
amounts required to compensate Lender for any and all additional losses, costs
and expenses that it may reasonably incur as a result of such payment,
Conversion or failure to borrow, Convert or continue, including, without
limitation, any loss (excluding loss of anticipated profits), cost or expense
incurred by reason of the liquidation or re-employment of deposits or other
funds acquired by Lender to fund or maintain such Advance. Lender shall
deliver to Borrower a certificate setting forth calculation of the additional
amounts or amounts to be paid to it hereunder which shall be conclusive in the
absence of manifest error. In determining such amount, Lender may use any
reasonable averaging and attribution methods.
(a) The obligations of Borrower under this Section 1.9 shall survive
any termination of this Note.
1.10 Payments and Computations.
(a) Borrower shall make each payment hereunder not later than 12:00
noon (Dallas time) on the day when due in Dollars to Lender at Lender's
principal office in same day funds.
(b) Interest on Base Rate Advances and the Commitment Fee shall be
calculated on the basis of a 365 or 366 day year, as appropriate. Subject to
Section 2.4 hereof, interest on Eurodollar Advances and Short Term Advances
shall be calculated on the basis of actual days elapsed but computed as if each
year consisted of 360 days. Such computations shall be made including the
first day but excluding the last day occurring in the period for which such
interest or Commitment Fee is payable. Each determination by Lender of an
interest rate, fee or commission hereunder shall be conclusive and binding for
all purposes, absent manifest error.
(c) Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation or payment of interest, as the case may be; provided, however, if
such extension would cause payment of interest on or principal of Eurodollar
Advances to be made in the next following calendar month, such payment shall be
made on the next preceding Business Day.
(d) Borrower agrees to pay principal, interest, fees and all other
amounts due under this Note without deduction for set-off or counterclaim or
any deduction whatsoever.
(e) If some but less than all amounts due from Borrower are received
by Lender, Lender shall apply such amounts in the following order of priority:
(i) to the payment of all fees then due and payable; (ii) to the payment of
interest then due and payable on the Advances; and (iii) to the payment of
principal then due and payable on the Advances.
- 6 -
<PAGE> 7
1.11 Calculation of Rates. The provisions of this Note relating to
calculation of the Eurodollar Rate and the Short Term Rate are included only
for the purpose of determining the rate of interest or other amounts to be paid
hereunder that are based upon such rate, it being understood that Lender shall
be entitled to fund and maintain its funding of all or any part of a Eurodollar
Advance or a Short Term Advance as it sees fit.
1.12 Booking Advances. Lender shall make, carry or transfer Advances
at, to or for the account of any of its branch offices or the office of any
affiliate.
1.13 Taxes.
(a) Any and all payments by Borrower hereunder shall be made, in
accordance with Section 1.10 hereof, free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions, charges
and withholdings, and all liabilities with respect thereto, excluding, in the
case of Lender, taxes imposed on, based upon or measured by its overall net
income, net worth or capital, and franchise taxes, doing business taxes or
minimum taxes imposed on it, (i) by the jurisdiction under the laws of which
Lender is organized and in which it has its applicable lending office or any
political subdivision thereof; (ii) by any other jurisdiction, or any political
subdivision thereof, other than those imposed by reason of (A) an asserted
relation of such jurisdiction to the transactions contemplated by this Note,
(B) the activities of Borrower in such jurisdiction, or (C) the activities in
connection with the transactions contemplated by this Note of Lender; and (iii)
in the case of Lender, any Taxes in the nature of transfer, stamp, recording or
documentary taxes resulting from a transfer (other than as a result of
foreclosure) by Lender of all or any portion of its interest in this Note (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to Lender, (x) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable
to additional sums payable under this Section 1.13) Lender receives an amount
equal to the sum it would have received had no such deductions been made, (y)
Borrower shall make such deductions and (z) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
(b) In addition, Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges and
similar levies (other than Taxes described in clause (iii) of the first
sentence of Section 1.13(a) hereof) that arise from any payment made hereunder
or from the execution, delivery or registration of, or otherwise with respect
to, this Note (hereinafter referred to as "Other Taxes").
(c) Borrower will indemnify Lender for the full amount of Taxes and
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 1.13) paid by Lender and
all liabilities (including penalties, additions to tax, interest and reasonable
expenses) arising therefrom or with respect thereto whether or not such Taxes
or Other Taxes were correctly or legally asserted, other than penalties,
additions to
- 7 -
<PAGE> 8
tax, interest and expenses arising as a result of gross negligence or wilful
misconduct on the part of Lender, provided, however, that Borrower shall have
no obligation to indemnify Lender unless and until Lender shall have delivered
to Borrower a certificate setting forth in reasonable detail the basis of
Borrower's obligation to indemnify Lender pursuant to this Section 1.13. This
indemnification shall be made within 30 days from the date Lender makes written
demand therefor.
(d) Within 30 days after the date of any payment of Taxes, Borrower
will furnish to Lender the original or a certified copy of a receipt evidencing
payment thereof. If no Taxes are payable in respect of any payment hereunder,
Borrower will furnish to Lender a certificate from each appropriate taxing
authority, or an opinion of counsel acceptable to Lender, in either case
stating that such payment is exempt from or not subject to Taxes, provided,
however, that such certificate or opinion need only be given if: (i) Borrower
makes any payment from any account located outside the United States, or (ii)
the payment is made by a payor that is not a United States Person. For
purposes of this Section 1.13 the terms "United States" and "United States
Person" shall have the meanings set forth in Section 7701 of the Code.
(e) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in
this Section 1.13 shall survive the payment in full of principal and interest
hereunder.
(f) If Lender claims any additional amounts payable pursuant to this
Section 1.13, it shall use its reasonable best efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its lending office, if the making of such a change would avoid
the need for, or reduce the amount of, any such additional amounts which may
thereafter accrue and would not, in the reasonable judgment of Lender in good
faith, be materially disadvantageous to Lender.
(g) Lender agrees that (i) it will take all reasonable actions by all
usual means to maintain all exemptions, if any, available to it from United
States withholding taxes (whether available by treaty, existing administrative
waiver, by virtue of the location of Lender's lending office) and (ii)
otherwise cooperate with Borrower to minimize amounts payable by Borrower under
this Section 1.13; provided, however, Lender shall not be obligated by reason
of this Section 1.13(g) to contest the payment of any Taxes or Other Taxes or
to disclose any information regarding its tax affairs or tax computations or
reorder its tax or other affairs or tax or other planning. Subject to the
foregoing, to the extent Borrower pays sums pursuant to this Section 1.13 and
Lender receives a refund of any or all of such sums, such refund shall be
applied to reduce any amounts then due and owing under this Note or, to the
extent that no amounts are due and owing under this Note at the time such
refunds are received, Lender shall promptly pay over all such refunded sums to
Borrower, provided that no Default or Event of Default is in existence at such
time.
- 8 -
<PAGE> 9
1.14 Increased Costs, Etc.
(a) If, due to either (i) the introduction of or any change (other
than any change which is taken into account in the calculation of the
Eurodollar Rate or the Short Term Rate) in or in the interpretation or
administration of any Law or (ii) the compliance with any guideline or request
from any central bank or other governmental authority, in any case introduced,
changed, interpreted or requested after the date hereof (whether or not having
the force of Law), there shall be any increase in the cost to Lender of
agreeing to make or making, funding or maintaining Eurodollar Advances or Short
Term Advances to Borrower or there shall be any reduction in the amount
received or receivable by Lender hereunder (whether of principal, interest or
otherwise), then Borrower shall from time to time, upon demand by Lender pay to
Lender additional amounts sufficient to compensate Lender for such increased
cost. A certificate as to the amount of such increased costs or reductions,
submitted to Borrower by Lender, shall be conclusive and binding for all
purposes, absent manifest error.
(b) If Lender determines that compliance with any Law or any
guideline of request from any central bank or Tribunal (other than as set forth
in the Risked-Based Capital Guidelines issued by the Board of Governors of the
Federal Reserve System, in the form in effect on the date of this Agreement, in
Appendix A to Part 208 of the Federal Reserve Board's Regulation H, 12 CFR Part
208, and in Appendix B to Part 225 of the Federal Reserve Board's Regulation Y,
12 CFR Part 225 (collectively, "Capital Adequacy Guidelines"), but not
excluding from this Section 1.14(b) any increase in cost as a result of any
amendment, modification or change in interpretation or administration of the
Capital Adequacy Guidelines subsequent to the date of this Note) (whether or
not having the force of Law) affects or would affect the amount of capital
required or expected to be maintained by Lender or any corporation controlling
Lender or has or would have the effect of reducing the rate of return on
Lender's capital or on the capital of the corporation controlling Lender and
that the amount of such capital is increased, or the return on such capital is
decreased, by or based upon the existence of Lender's commitment to lend
hereunder and other commitments of this type, then, upon demand by Lender,
Borrower shall pay to Lender, from time to time as specified by Lender,
additional amounts sufficient to compensate Lender or such controlling
corporation in the light of such circumstances, to the extent that Lender or
such controlling corporation reasonably determines such increase in capital, or
reduction in the return on capital, to be allocable to the existence of
Lender's commitment to lend hereunder. A certificate as to such amounts
submitted to Borrower by Lender shall be conclusive and binding for all
purposes, absent manifest error.
(c) If Lender notifies Borrower that the Eurodollar Rate or Short
Term Rate for any Interest Period for any Eurodollar Advances or Short Term
Advances will not adequately reflect the cost to such Lender of making, funding
or maintaining its Eurodollar Advances or Short Term Advances for such Interest
Period, (i) each such Eurodollar Advance or Short Term Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of Lender to make or
continue, or to Convert Advances into, Eurodollar Advances or Short Term
Advances shall be suspended until Lender
- 9 -
<PAGE> 10
notifies Borrower that it has determined that the circumstances causing such
suspension no longer exist.
(d) Notwithstanding any other provision of this Note, if the
introduction of or any change in or in the interpretation or administration of
any Law shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for Lender to perform its
obligations hereunder to make Eurodollar Advances or Short Term Advances or to
continue to fund or maintain Eurodollar Advances or Short Term Advances
hereunder, then, on notice thereof and demand therefor by Lender to Borrower,
(i) each Eurodollar Advance, or Short Term Advance, as appropriate, will
automatically, upon such demand, Convert into a Base Rate Advance and (ii) the
obligation of Lender to make or continue, or to Convert Advances into,
Eurodollar Advances or Short Term Advances shall be suspended until Lender
notifies Borrower that it has determined that the circumstances causing such
suspension no longer exist.
(e) Upon the occurrence and during the continuance of any Default or
Event of Default, (i) each Eurodollar Advance or Short Term Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of Lender to make or
continue, or to Convert Advances into, Eurodollar Advances or Short Term
Advances shall be suspended.
(f) The obligations of Borrower under this Section 1.14 shall survive
any termination of this Agreement.
(g) Any certificate delivered to Borrower by Lender pursuant to this
Section 1.14 shall include in reasonable detail the basis for Lender's demand
for additional compensation. Lender shall use reasonable efforts (consistent
with legal and regulatory restrictions) to reduce or eliminate any such
additional compensation which may thereafter accrue and which efforts would
not, in the sole determination of Lender, be otherwise disadvantageous to
Lender.
ARTICLE II
MISCELLANEOUS
2.1 Waivers and Consents. Borrower and all endorsers, sureties and
guarantors of this Note hereby severally waive demand and notice of demand,
presentment for payment, protest, notice of protest, notice of acceleration of
and notice of intention to accelerate the maturity of this Note, diligence in
collecting, the bringing of any suit against any Person, and any notice of or
defense on account of any extensions, renewals, partial payments or changes in
any manner of or in this Note or in any of its terms, provisions and covenants,
or any releases or substitutions of any security, or any delay, indulgence or
other act of any holder hereof, whether before or after maturity.
- 10 -
<PAGE> 11
2.2 Expenses. If this Note is placed in the hands of an attorney for
collection after default, or if all or any part of the indebtedness evidenced
hereby is proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally agree
to pay reasonable attorneys' fees and collection costs to the holder hereof in
addition to the principal and interest payable hereunder. In addition,
Borrower agrees to pay Lender all reasonable costs and expenses, including
reasonable attorneys' fees, incurred by Lender in connection with the
preparation of this Note, making the Advances hereunder, and in connection with
all amendments, consents and waivers related to the Advances and requests
therefor by Borrower.
2.3 Governing Law. This Note is payable and performable in Dallas
County, Texas, and shall be construed and enforced in accordance with and
governed by the laws of the State of Texas and the federal laws of the United
States of America. Without excluding any other jurisdiction, Borrower agrees
that the courts of the State of Texas sitting in Dallas, Texas and the federal
courts sitting in Dallas, Texas will have jurisdiction over proceedings in
connection herewith.
2.4 Interest and Charges. Interest paid or agreed to in this Note or
in any other documents executed in connection herewith shall not exceed the
Maximum Amount, and, in any contingency whatsoever, if Lender shall receive
anything of value deemed interest under Applicable Law which would exceed the
Maximum Amount, the excessive interest shall be applied to the reduction of
unpaid principal or refunded to Borrower, if it exceeds unpaid principal.
2.5 Binding Effect. This Note shall be binding upon and inure to the
benefit of Borrower and Lender and their respective successors and assigns,
except that Borrower shall not have the right to assign its rights or
obligations hereunder or any interest herein without the prior written consent
of Lender. Lender may assign to one or more banks, all or any part of, or may
grant participations to one or more banks in or to all or part of, any Advance
or Advances and this Note, and to the extent of any such assignment or
participation (unless where otherwise stated) the assignee or participant of
such assignment or participation shall have the rights and benefits with
respect to each Advance or Advances and this Note, as it would have if it was
Lender hereunder.
2.6 Titles. The titles to Sections in this Note are inserted for
convenience only and do not constitute a part of the text hereof.
- 11 -
<PAGE> 12
ARTICLE III
DEFINITIONS
3.1 As used in and for all purposes of this Note, the terms defined
in this Article III shall have the following meanings, and the singular shall
include the plural, and vice versa, unless otherwise specifically required by
the context:
"Advance" means any amount advanced by Lender to Borrower pursuant to
Section 1.2 hereof on the occasion of any borrowing, including without
limitation any Refinancing Advance.
"Applicable Law" means (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies
or regulatory agencies applicable to such Person and its properties, including,
without limiting the foregoing, all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, "Applicable Law" shall mean
the laws of the United States of America, including without limitation 12 USC
Sections 85 and 86, as amended from time to time, and any other statute of the
United States of America now or at any time hereafter prescribing the maximum
rates of interest on loans and extensions of credit, and the laws of the State
of Texas, including, without limitation, Article 5069-1.04, Title 79, Revised
Civil Statutes of Texas, 1925, as amended ("Art. 1.04"), and any other statute
of the State of Texas now or at any time hereafter prescribing maximum rates of
interest on loans and extensions of credit; provided that the parties hereto
agree that the provisions of Chapter 15, Title 79, Revised Civil Statutes of
Texas, 1925, as amended, shall not apply to the Advances of this Note.
"Art. 1.04" has the meaning ascribed thereto in the definition of
"Applicable Law".
"Base Rate" means an interest rate per annum for each day equal to the
higher of (a) the Prime Rate in effect on such day or (b) the Federal Funds
Rate in effect on such day plus 1/2%, each without notice to Borrower.
"Base Rate Advance" means any Advance bearing interest at the Base Rate.
"Borrowing" means any borrowing hereunder of a Base Rate Advance, a
Eurodollar Advance or a Short Term Advance.
"Business Day" means a day on which banks are open for the transaction
of business in Dallas, Texas and, with respect to any Eurodollar Advance or
Short Term Advance, also a day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London,
England.
"Commitment" means $50,000,000, as reduced from time to time pursuant to
Section 1.7 hereof.
- 12 -
<PAGE> 13
"Commitment Fee" means the fee described in Section 1.5 hereof.
"Conversion", "Convert" and "Converted" each refers to a conversion of
Advances of one Type into Advances of another Type pursuant to Section 1.3(b)
hereof.
"Credit Agreement" means that certain Amended and Restated Credit
Agreement, dated as of August 25, 1995, among Borrower, the lenders party
thereto and NationsBank of Texas, N.A., as Administrative Lender, as amended,
modified, supplemented or restated from time to time.
"Debtor Relief Laws" has the meaning given to such term in the Credit
Agreement.
"Default" has the meaning given to such term in the Credit Agreement.
"Eurodollar Advances" means Advances which bear interest at the
Eurodollar Rate.
"Eurodollar Rate" means an interest rate per annum equal to the sum of
(i)(a) 1.00%, if the Leverage Ratio is greater than or equal to 3.0 to 1, (b)
0.75%, if the Leverage Ratio is less than 3.0 to 1 but greater than or equal to
2.0 to 1, or (c) 0.50%, if the Leverage Ratio is less than 2.0 to 1 plus (ii) a
rate per annum determined pursuant to the following formula:
London Interbank Rate
-------------------------------------
100% - Eurodollar Reserve Percentage;
provided, that each adjustment in the Eurodollar Rate shall be effective with
respect to adjustments as a result of a change in the Leverage Ratio, (a) with
respect to Eurodollar Advances made following receipt by Lender of the
Officer's Certificate accompanying the financial statements required to be
delivered pursuant to Sections 3.2(a) and 3.2(b) of the Credit Agreement
indicating a change in the Leverage Ratio which would require an adjustment in
the Eurodollar Rate, on the date of making of such Eurodollar Advance and (b)
with respect to Eurodollar Advances outstanding on the date of receipt by
Lender of the Officer's Certificate referred to in clause (a) immediately
preceding and which are continued as Eurodollar Advances beyond the then
effective Interest Period therefor, on the first day of the immediately
succeeding Interest Period.
"Eurodollar Reserve Percentage" means the reserve requirement including
any supplemental and emergency reserves (expressed as a percentage) applicable
to member banks of the Federal Reserve System in respect of "Eurocurrency
liabilities" under Regulation D of the Board of Governors of the Federal
Reserve System, or such substituted or amended reserve requirement as may be
hereafter applicable to member banks of the Federal Reserve System.
"Event of Default" means (i) the occurrence of an "Event of Default" as
defined in the Credit Agreement (whether or not the Credit Agreement is still
in effect), (ii) the failure of Borrower to pay any interest under this Note or
any fees payable hereunder or any other costs,
- 13 -
<PAGE> 14
expenses or other amounts payable hereunder when due, and such failure is not
cured within one Business Day from the date such payment is due, (iii) the
failure of Borrower to pay any principal under this Note when due, (iv) the
failure or refusal of Borrower or any Guarantor to comply with any of the
covenants contained in this Note or any Guaranty, or (v) any representation or
warranty made under this Note or any Guaranty shall prove to have been
incorrect or misleading in any material respect when made.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of Dallas on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate quoted to
Lender on such day on such transactions as determined by Lender.
"Guarantor" has the meaning set forth in the Credit Agreement.
"Highest Lawful Rate" means at the particular time in question the
maximum rate of interest which, under Applicable Law, Lender is then permitted
to charge on the Obligations. If the maximum rate of interest which, under
Applicable Law, Lender is permitted to charge on the Obligations shall change
after the date hereof, the Highest Lawful Rate shall be automatically increased
or decreased, as the case may be, from time to time as of the effective time of
each change in the Highest Lawful Rate without notice to Borrower. For
purposes of determining the Highest Lawful Rate under the Applicable Law of the
State of Texas, the applicable rate ceiling shall be (a) the indicated rate
ceiling described in and computed in accordance with the provisions of Section
(a)(1) of Art. 1.04, or (b) if the parties subsequently contract as allowed by
Applicable Law, the quarterly ceiling or the annualized ceiling computed
pursuant to Section (d) of Art. 1.04; provided, however, that at any time the
indicated rate ceiling, the quarterly ceiling or the annualized ceiling shall
be less than 18% per annum or more than 24% per annum, the provisions of
Sections (b)(1) and (2) of said Art. 1.04 shall control for purposes of such
determination, as applicable.
"Interest Period" means, with respect to any (a) Eurodollar Advance, the
period beginning on the date an Advance is made or continued as or Converted
into a Eurodollar Advance and ending one, two or three months thereafter (as
Borrower shall select), and (b) Short Term Advance, the period beginning on the
date an Advance is made or continued as or Converted into a Short Term Advance
and ending less than one month thereafter (as Borrower shall select); provided,
however, that with respect to Eurodollar Advances:
(a) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that if such extension
- 14 -
<PAGE> 15
would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day; and
(b) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months in
such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"Leverage Ratio" has the meaning set forth in the Credit Agreement.
"London Interbank Rate" means, for any (a) Eurodollar Advance for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period and (b)
Short Term Advance for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) on the first
day of such Interest Period for a term of one month, notwithstanding the actual
Interest Period of such Short Term Advance. If for any reason such rate is not
available, the term "London Interbank Rate" shall mean, for any Eurodollar
Advance or Short Term Advance for any Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period (or on the first day of such Interest
Period with respect to Short Term Advances) for a term comparable to such
Interest Period (or for one month with respect to Short Term Advances);
provided, however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates.
"Maturity Date" means September 30, 1997, or the earlier date of
termination in whole of the Commitment hereunder.
"Maximum Amount" means the maximum amount of interest which, under
Applicable Law, Lender is permitted to charge on the Obligations.
"Obligations" means all obligations of any nature (whether matured or
unmatured, fixed or contingent) of Borrower to Lender under this Note.
"Payment Date" means the last day of any Interest Period for any
Eurodollar Advance or Short Term Advance.
- 15 -
<PAGE> 16
"Person" means an individual, corporation, partnership, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Prime Rate" means, at any time, the prime interest rate announced or
published by Lender from time to time as its reference rate for the
determination of interest rates for loans of varying maturities in United
States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by Lender as its "prime rate;"
it being understood that such rate may not be the lowest rate of interest
charged by Lender.
"Quarterly Date" means the first Business Day of each January, April,
July and October, commencing with the first such day after the date of this
Note.
"Refinancing Advance" means any Advance which is used to pay the
principal amount (or any portion thereof) of an Advance at the end of its
Interest Period and which, after giving effect to such application, does not
result in an increase in the aggregate amount of outstanding Advances.
"Short Term Advances" mean Advances which bear interest at the Short
Term Rate.
"Short Term Rate" means an interest rate per annum equal to the sum of
(i)(a) 1.00%, if the Leverage Ratio is greater than or equal to 3.0 to 1, (b)
0.75%, if the Leverage Ratio is less than 3.0 to 1 but greater than or equal to
2.0 to 1, or (c) 0.50%, if the Leverage Ratio is less than 2.0 to 1, plus (ii)
a rate per annum determined pursuant to the following formula:
London Interbank Rate
-------------------------------------
100% - Eurodollar Reserve Percentage;
provided, that each adjustment in the Short Term Rate shall be effective with
respect to adjustments as a result of a change in the Leverage Ratio, (a) with
respect to Short Term Advances made following receipt by Lender of the
Officer's Certificate accompanying the financial statements required to be
delivered pursuant to Sections 3.2(a) and 3.2(b) of the Credit Agreement
indicating a change in the Leverage Ratio which would require an adjustment in
the Short Term Rate, on the date of making of such Short Term Advance and (b)
with respect to Short Term Advances outstanding on the date of receipt by
Lender of the Officer's Certificate referred to in clause (a) immediately
preceding and which are continued as Short Term Advances beyond the then
effective Interest Period therefor, on the first day of the immediately
succeeding Interest Period.
- 16 -
<PAGE> 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants as follows:
4.1 Corporate Authority and No Violation. The execution, delivery
and performance by Borrower of this Note (a) is within its corporate powers,
(b) has been duly authorized by all necessary corporate action, and (c) does
not and will not (i) contravene its certificate of incorporation or bylaws,
(ii) violate any other applicable requirement of law, or any order or decree of
any governmental authority or arbitrator, (iii) conflict with or result in the
breach of, or constitute a default under, or result in or permit the
termination or acceleration of, any of its agreements, (iv) result in the
creation or imposition of any Lien upon any of its property or (v) require the
consent of, authorization by, approval of, notice to, or filing or registration
with, any Person not already obtained.
4.2 Binding Obligation. This Note has been duly executed and
delivered by Borrower and is the legal, binding and valid obligation of
Borrower enforceable against it in accordance with its terms, subject to the
following qualifications: (i) equitable principles generally (whether
considered in a proceeding at law or in equity), and (ii) Debtor Relief Laws
(insofar as any such law relates to the bankruptcy, insolvency or similar event
of Borrower).
4.3 Credit Agreement Representations and Warranties. For purposes
hereof, all of the representations and warranties of Borrower set forth in
Article V of the Credit Agreement (the "Credit Agreement Representations and
Warranties") are hereby reaffirmed by Borrower and are incorporated herein as
written, mutatis mutandis. The Borrower hereby represents and warrants that
the Credit Agreement Representations and Warranties are true and correct in all
material respects as though made on and as of the date of this Note.
ARTICLE V
COVENANTS
Until the termination of the Commitment and payment of all outstanding
Obligations in full, Borrower will comply with all of the covenants and
agreements set forth in Articles III and IV of the Credit Agreement as in
effect on the date of this Note. For purposes of this Note, all of the
covenants and agreements of Borrower set forth in Articles III and IV of the
Credit Agreement and all definitions relating thereto are hereby reaffirmed and
adopted by Borrower and are incorporated herein as written and agreed upon as
of the date of this Note, mutatis mutandis, which phrase for purposes hereof
means (a) the phrase "From the Agreement Date, and so long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding, any Lender shall have
any Commitment hereunder or any part of the Obligation shall remain unpaid"
appearing in the first paragraph of each of said Articles shall be deemed to
read "Until the
- 17 -
<PAGE> 18
termination of the Commitment and payment of all outstanding Obligations in
full", and (b) each reference in such Article to "Lenders", "each Lender" and
"Administrative Lender" shall be deemed to be a reference to Lender. In the
event of termination of the Credit Agreement prior to the payment in full of
all Obligations under this Note and termination of the Commitment, Borrower
covenants and agrees that the covenants and agreements of Borrower contained in
Articles III and IV of the Credit Agreement shall nevertheless remain in full
force and effect and be binding upon Borrower, and Borrower shall continue to
perform, observe and comply with all of the covenants and agreements of
Borrower set forth in Articles III and IV of the Credit Agreement. No
amendment, modification or waiver with respect to Articles III or IV of the
Credit Agreement shall be effective with respect to such Articles as they are
incorporated herein without the written consent of Lender.
ARTICLE VI
FINAL AGREEMENT
THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
GAYLORD ENTERTAINMENT COMPANY
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
- 18 -
<PAGE> 19
EXHIBIT "A"
NOTICE OF BORROWING
NationsBank of Texas, N.A. [Date]
901 Main Street, 67th Floor
Dallas, Texas 75202
Attention: Jeffrey H. Susman, Southwest
Corporate Finance Department
Ladies and Gentlemen:
The undersigned refers to the Promissory Note in the maximum principal
amount of $50,000,000, dated as of March 24, 1997 (said Note, as it may be
amended or otherwise modified from time to time, being the "Note"; the terms
defined therein being used herein as therein defined), payable by Gaylord
Entertainment Company to the order of NationsBank of Texas, N.A. and hereby
gives you notice pursuant to Section 1.3 of the Note that the undersigned
hereby requests _____ Borrowing[s] under the Note, and in that connection sets
forth below the information relating to [each] such Borrowing (a "Proposed
Borrowing") as required by Section 1.3 of the Note:
Proposed Borrowing:
(i) The Business Day of such Proposed Borrowing is __________, 19___.
(ii) The Type of Advances comprising such Proposed Borrowing is [Base
Rate Advances [to the extent of an aggregate amount of
$___________]] [Eurodollar Advances [to the extent of an
aggregate amount of $___________]] [Short Term Advances [to the
extent of an aggregate amount of $___________]].
(iii) The aggregate amount of such Proposed Borrowing is
$____________.
[(iv) The initial Interest Period for each [Eurodollar Advance] [Short
Term Advance] made as part of such Proposed Borrowing is _____
[months] [days]].
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Borrowing,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(A) the representations and warranties specified in Article IV
of the Note are true and correct in all material respects as though made
on and as of such date; and
<PAGE> 20
(B) no event has occurred and is continuing or would result
from such Proposed Borrowing, which constitutes a Default or Event of
Default.
Very truly yours,
GAYLORD ENTERTAINMENT COMPANY
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
- 2 -
<PAGE> 1
EXHIBIT 10.23
SEVERANCE AGREEMENT
AGREEMENT between Gaylord Entertainment Company, a Delaware corporation
("GEC"), and ______________________________ (the "Key Employee").
W I T N E S E T H
WHEREAS, the Board of Directors of GEC (the "Board") believes that, in the
event of a threat or occurrence of a bid to acquire or to achieve a "Change of
Control" (as defined hereafter) of GEC, it is in the best interest of GEC and
its present and future shareholders that the business of GEC be continued with a
minimum of disruption, and that such objective will be achieved if GEC key
management employees are given assurances of employment security so they will
not be distracted by personal uncertainties and risks created during such
period; and
WHEREAS, GEC believes the giving of such assurances by GEC will enable it
(a) to secure the continued services of both its key operational and management
employees in the performance of both their regular duties and such extra duties
as may be required of them during such period of uncertainty, (b) to be able to
rely on such employees to manage the affairs of GEC during any such period with
less concern for their personal risks, and (c) to have the ability to attract
new key employees as needed; and
WHEREAS, the Board has approved entering into severance agreements with
certain key management employees of GEC in order to achieve the foregoing
objectives; and
WHEREAS, Key Employee is a key management employee of GEC or one of its
subsidiaries;
NOW, THEREFORE, GEC and Key Employee agree as follows:
1. Change of Control. For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if: (i) any person or entity,
including a "group" as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, other than GEC or a wholly-owned subsidiary thereof or any employee
benefit plan of GEC or any of its subsidiaries, becomes the beneficial owner of
GEC securities having 331/3% or more of the combined voting power of the then
outstanding securities of GEC that may be cast for the election of directors of
GEC (other than as a result of an issuance of securities initiated by GEC in the
ordinary course of business); or (ii) as the result of, or in connection with,
any cash tender or exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing transactions
less than a majority of the combined voting power of the then-outstanding
securities of GEC or any successor corporation or entity entitled to vote
generally in the election of the directors of GEC or such other corporation or
entity after such transaction are held in the aggregate by the holders of GEC
securities entitled to vote generally in the election of directors of GEC
immediately prior to such transaction; or (iii) during any period of two
consecutive years, individuals who at the beginning of any such
<PAGE> 2
period constitute the Board of Directors of GEC cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by GEC's shareholders, of each director of GEC first elected during
such period was approved by a vote of at least two-thirds of the directors of
GEC then still in office who were directors of GEC at the beginning of any such
period. Upon a Change of Control of GEC while the Key Employee is still an
employee of GEC, this Agreement and all of its provisions shall become operative
immediately.
2. Employment. GEC and Key Employee hereby agree that, if Key Employee is
in the employ of GEC on the date on which a Change of Control occurs (the
"Change of Control Date"), GEC will continue to employ Key Employee and Key
Employee will remain in the employ of GEC, for the period commencing on the
Change of Control Date and ending on the Second anniversary of such date (the
"Employment Period"), to exercise such authority and perform such duties as are
commensurate with the authority being exercised and duties being performed by
the Key Employee immediately prior to the Change of Control Date, which services
shall be performed at the location where the Key Employee was employed
immediately prior to the Change of Control Date.
3. Compensation and Benefits. During the Employment Period, GEC will (a)
continue to pay the Key Employee a salary at not less than the level applicable
to Key Employee on the Change of Control Date, (b) pay the Key Employee bonuses
in amounts not less in amount than the average paid during the two 12-month
periods preceding the Change of Control Date, (c) continue employee benefits
programs to Key Employee at levels in effect on the Change of Control Date as
more particularly described in Section 7 and (d) pay to Key Employee any
Additional Amount determined pursuant to Section 4.
4. Tax Reimbursement Payment.
(a) Notwithstanding anything to the contrary contained in this Agreement,
in any plan of GEC or its affiliates, or in any other agreement or
understanding, GEC will pay to Key Employee, at the times hereinafter specified,
an amount (the "Additional Amount") equal to the excise tax under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), if any, incurred
or to be incurred by Key Employee by reason of the payments under this
Agreement, payments under the supplemental executive retirement plan,
acceleration of vesting of stock options or restricted stock granted under the
GEC 1991 Stock Option and Incentive Plan or the GEC 1993 Stock Option and
Incentive Plan, or payments under any other plan, agreement or understanding
between Key Employee and GEC or its affiliates, constituting Excess Parachute
Payments (as defined below), plus all excise taxes and federal, state and local
income taxes incurred or to be incurred by the Key Employee with respect to
receipt of the Additional Amount. For purposes of this Agreement, the term
"Excess Parachute Payment" shall mean any payment or any portion thereof which
would be an "excess parachute payment" within the meaning of Section 280G(b) of
the Code, and which would result in the imposition of an excise tax on the Key
Employee under Section 4999 of the code. Attached hereto as Exhibit A is an
example illustrating the computation of the Additional Amount.
(b) All determinations required to be made regarding the Additional Amount,
including whether payment of any Additional Amount is required and the amount of
any Additional Amount,
-2-
<PAGE> 3
shall be made by the independent accounting firm which is advising GEC (the
"Accounting Firm"), which shall provide detailed support calculations to GEC and
Key Employee on or before the last day of the calendar year during which occurs
the Change of Control Date (the "Change of Control Year"). In computing taxes,
the Accounting Firm shall use the highest marginal federal, state and local
income tax rates applicable to the Key Employee for the year in which the
Additional Amount is to be paid (or if those tax rates are unknown, for the year
in which the calculation is made) and shall assume the full deductibility of
state and local income taxes for purposes of computing federal income tax
liability. The portion of the Additional Amount based on the excise tax as
determined by the Accounting Firm to be due for the Change of Control Year shall
be paid to Key Employee no later than March 1 immediately following the Change
of Control Year. The portion of the Additional Amount based on the excise tax as
determined by the Accounting Firm to be due for each calendar year following the
Change of Control Year during the Employment Period shall be paid to the Key
Employee on or before March 1 immediately following the end of each such
calendar year. If GEC determines that the excise tax for any year will be
different from the amount originally calculated in the report of the Accounting
Firm delivered at the end of the Change of Control Year, then GEC shall provide
to Key Employee detailed support calculations by the Accounting Firm specifying
the basis for the change in the Additional Amount.
5. Termination of Employment.
(a) If during the Employment Period, Key Employee's employment is
terminated by GEC (or a subsidiary of GEC) or a successor thereto for other than
gross misconduct (defined as an intentional act of fraud or embezzlement,
intentional wrongful damage to property of GEC, or intentional wrongful
disclosure of material confidential information of GEC; for the purposes of this
Agreement no act or failure to act on the part of the Key Employee shall be
deemed intentional unless determined by a final judicial decision to be done, or
omitted to be done, by Key Employee not in good faith and without reasonable
belief that his action or omission was in the best interest of GEC), or
(i) if there is a reduction in Key Employee's compensation (other than
normal bonus fluctuations) or benefits, or a change in Key Employee's
status, working conditions or management responsibilities, or
(ii) if Key Employee is required to change his city of employment,
and Key Employee voluntarily terminates his or her employment within 60
days of any such event, or the last in a series of events,
then Key Employee shall be entitled to continue to receive those benefits
described in Section 5(d) and to receive a lump sum payment ("Severance
Compensation") equal to the sum of
(x) ___% of Key Employee's "Base Amount" as determined under
paragraph (b) below, and
-3-
<PAGE> 4
(y) any portion of the Additional Amount not theretofore paid, as
described in paragraph (c) below.
The lump sum payment shall be subject to and reduced by all applicable federal
and state withholding taxes and shall be paid to the Key Employee within 30
business days after his termination of employment.
(b) The Base Amount for purposes of this section 5 shall be Key Employee's
base salary and bonuses paid to him during the 12-month period preceding his
termination of employment pursuant to paragraph (a). If Key Employee has not
been employed for a 12-month period, his Base Amount shall be his annualized
base salary at the rate then in effect and bonuses paid to Key Employee prior to
the date of his termination of employment.
(c) The Additional Amount shall be determined in the same manner described
in section 4, as illustrated in Exhibit A, and any portion of such Additional
Amount not already paid to Key Employee, including any portion estimated to
arise by reason of excise tax due in future years, shall be paid within 30
business days after his termination of employment. At or prior to the time of
payment of the Additional Amount (or the remainder thereof), GEC shall provide
to Key Employee a report of the Accounting Firm, including detailed support
calculations, describing its determination of the Additional Amount (or an
updated report of the Accounting Firm to its report for the Change of Control
Year, if that report has already been provided to Key Employee). If GEC
determines that no Additional Amount is due under this paragraph (c), it shall
provide to Key Employee an opinion of the Accounting Firm that Key Employee will
not incur an excise tax on any or all of the Severance Compensation, vesting of
stock options, or payments under any other plan, agreement or understanding
between Key Employee and GEC. Any such opinion shall be based upon the proposed
regulations under Code Sections 280G and 4999 or substantial authority within
the meaning of Code Section 6661.
(d) After termination of employment for which Key Employee is entitled to
Severance Compensation, and continuing until the end of the Employment Period
(i.e., the second anniversary of the Change of Control Date, or if later, during
the extended term of this Agreement pursuant to Section 16), GEC shall maintain
at its expense for the continued benefit of Key Employee and his dependents all
medical, dental, life insurance and accident insurance plans of GEC in which Key
Employee or his dependents are entitled to participate pursuant to Section 7,
provided that such continued participation is possible under the terms and
provisions of such plans. In the event that the participation by Key Employee or
his dependents in any such plan is barred, or if the benefits in any of the
plans are reduced to a level below what they were on the Change of Control Date,
GEC shall arrange to provide Key Employee and his dependents with benefits
equivalent to those which they were receiving under such plans immediately prior
to the Change of Control Date, such benefits to be provided at GEC's expense by
means of individual insurance policies, or if such policies cannot be obtained,
from GEC's assets. If Key Employee should accept employment with another
employer and if Key Employee or his dependents should become covered under that
employer's medical, dental, life insurance and accident insurance plans, or any
of them, then effective on the date that such coverage commences, the obligation
of GEC to provide any benefits under this Section 5(d)
-4-
<PAGE> 5
to Key Employee or his dependents shall terminate to the extent that equivalent
coverage is provided under the plans of the subsequent employer.
The medical and dental benefits required to be provided pursuant to this
Section 5(d) are not intended to be a substitute for any extended coverage
benefits ("COBRA rights") described in Section 4980B of the Code, and such COBRA
rights shall not commence until after the period of coverage specified in the
first sentence of this Section 5(d) comes to an end.
(e) In the event of a dispute concerning the amount of Severance
Compensation, including a dispute as to the calculation of the Additional
Amount, which is not resolved within 60 days after the date of termination of
employment, Key Employee may submit the resolution of the dispute to
arbitration. Any arbitration pursuant to this Agreement shall be determined in
accordance with the rules of the American Arbitration Association then in
effect, by a single arbitrator if the parties shall agree upon one, or otherwise
by three arbitrators, one appointed by each party, and a third arbitrator
appointed by the two arbitrators selected by the parties, all arbitrators to
come from a panel proposed by the American Arbitration Association. If any party
shall fail to appoint an arbitrator within 30 days after it is notified to do
so, then the arbitration shall be accomplished by a single arbitrator. Unless
otherwise agreed by the parties hereto, all arbitration proceedings shall be
held in Nashville, Tennessee. Each party agrees to comply with any award made in
any such proceeding, which shall be final, and to the entry of judgment in
accordance with applicable law in any jurisdiction upon any such award. The
decision of the arbitrators shall be tendered within 60 days of final submission
of the parties in writing or any hearing before the arbitrators and shall
include their individual votes. If the Key Employee is entitled to any award
pursuant to the determination reached in the arbitration proceeding that is
greater than that proposed by GEC, he shall be entitled to payment by GEC of all
attorneys' fees, costs (including expenses of arbitration), and other
out-of-pocket expenses incurred in connection with the arbitration.
6. Indemnification.
(a) If Key Employee shall have to institute litigation brought in good
faith to enforce any of his rights under the Agreement, GEC shall indemnify Key
Employee for his reasonable attorney's fees and disbursements incurred in any
such litigation.
(b) In the event that an excise tax is ever assessed by the Internal
Revenue Service against Key Employee (or if GEC and Key Employee mutually agree
that an excise tax is payable) by reason of the payments under this Agreement,
payments under the supplemental executive retirement plan, acceleration of
vesting of stock options or restricted stock granted under the GEC 1991 Stock
Option and Incentive Plan or the GEC 1993 Stock Option and Incentive Plan, or
payments under any other plan, agreement or understanding between Key Employee
and GEC or its affiliates, constituting Excess Parachute Payments, and if such
excise tax was not included in the determination by the Accounting Firm of the
Additional Amount that has been actually paid to Key Employee, GEC agrees to
indemnify Key Employee by paying to Key Employee the amount of such excise tax,
together with any interest and penalties, including reasonable legal and
accounting fees and other out-of-pocket expenses incurred by Key Employee,
attributable to the failure to pay such excise tax
-5-
<PAGE> 6
by the date it was originally due, plus all federal, state and local income
taxes incurred with respect to payment of the excise tax, calculated in a manner
analogous to Exhibit A. This indemnification obligation shall survive the
termination of the Employment Period and shall apply to all such excise taxes on
Excess Parachute Payments, whether due before or after termination of
employment, except that no such right of indemnification shall exist after
termination of employment for gross misconduct (as defined in paragraph (a)(i)
of Section 5).
(c) If the excise tax for any year which is actually imposed on Key
Employee is finally determined to be less than the amount taken into account in
the calculation of the Additional Amount that was paid to Key Employee pursuant
to Section 4 or Section 5, then Key Employee shall repay to GEC, at the time
that the amount of such reduction in excise tax is finally determined, the
portion of the Additional Amount attributable to such reduction (including the
portion of the Additional Amount attributable to the excise tax and federal and
state income taxes imposed on the Additional Amount being repaid by Key
Employee, to the extent that such repayment results in a reduction in such
excise tax, federal or state income tax), plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of the Code.
7. Normal Employee Benefits. During the Employment Period, Key Employee and
his dependents shall be entitled to participate in any and all employee benefit
plans maintained by GEC (or a subsidiary of GEC), or a successor thereto, which
provide benefits for its executives and for its salaried employees generally,
including, without limitation, its tax-qualified retirement plans, supplemental
executive retirement plan, stock option and other stock award plans, and welfare
benefit plans providing medical and dental benefits, group life insurance,
disability benefits and accidental death and dismemberment insurance. Any future
increases in benefits in any of such plans available to executives or salaried
employees of GEC generally shall also be provided to Key Employee.
Nothing in this Agreement shall preclude GEC from amending or terminating
any employee benefit plan, but it is the intent of the parties that Key Employee
and his dependents shall be entitled during the Employment Period to the same
level of benefits in all employee benefit plans as the level in effect in the
respective plans of GEC on the Change of Control Date. In the case of the stock
option and other stock award plans, the requirement that the same level of
benefits be provided shall be satisfied if Key Employee enjoys at least the same
reward opportunities as provided by GEC prior to the Change of Control Date. If
any of the employee benefit plans are amended to reduce benefits to Key Employee
or his dependents, or if Key Employee or his dependents become ineligible to
participate in any such plans, GEC shall arrange to provide Key Employee and his
dependents with benefits equivalent to those which they were receiving under
such plans immediately prior to the Change of Control Date, such benefits to be
provided at GEC's expense by means of individual insurance policies, or if such
policies cannot be obtained, from GEC's assets.
8. Confidentiality. Key Employee recognizes that he has or will have access
to and may participate in the origination of non-public confidential information
and will owe a fiduciary duty with respect to such information to GEC.
Confidential information includes, but is not limited to, trade secrets,
supplier information, pricing information, internal corporate planning, GEC
secrets,
-6-
<PAGE> 7
methods of marketing, methods of showroom selection and operation, ideas and
plans for development, historical financial data and forecasts, long range plans
and strategies, and any other data or information of or concerning GEC that is
not generally known to the public or in the industry in which GEC is engaged.
Key Employee agrees that from the date of this Agreement and throughout the
Employment Period he will, except as specifically authorized by GEC in writing,
maintain in strict confidence and will not use or disclose, other than
disclosure made in the ordinary course of business or to other employees of GEC,
any confidential information belonging to GEC. If Key Employee shall breach the
terms of Section 8, all of his rights under this Agreement shall terminate.
9. Employment Rights. Nothing expressed or implied in this Agreement shall
create any right or duty on the part of GEC or the Key Employee to have the Key
Employee remain in the employment of GEC prior to any Change in Control,
provided, however, that any termination of employment of the Key Employee or the
removal of the Key Employee from the office or position in GEC following the
commencement of any discussion with a third person that ultimately results in a
Change in Control with that or another person shall be deemed to be a
termination or removal of the Key Employee after a Change in Control for
purposes of this Agreement.
10. Withholding of Taxes. GEC may withhold from any amounts payable under
this Agreement all federal, state, city or other taxes as shall be required
pursuant to any law or government regulations or ruling.
11. Governing Law. This Agreement shall be construed according to the laws
of Tennessee, without giving effect to the principles of conflicts of laws of
such State.
12. Amendment; Modification; Waiver. This Agreement may not be amended
except by the written agreement of the parties hereto. No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing signed by Key Employee and GEC. No waiver
by either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
13. Binding Effect.
(a) This Agreement shall be binding on GEC, its successors and assigns.
Should there be a consolidation or merger of GEC with or into another
corporation, or a purchase of all or substantially all of the assets of GEC by
another entity, the surviving or acquiring corporation will succeed to the
rights and obligations of GEC under this Agreement.
(b) This Agreement shall inure to the benefit of and be enforceable by Key
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees and/or legatees.
-7-
<PAGE> 8
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
paragraphs (a) or (b) hereof. Without limiting the generality of the foregoing,
Key Employee's right to receive payments hereunder shall not be assignable,
transferable or delegable, whether by pledge, creation of a security interest or
otherwise, other than by a transfer by his will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer contrary
to this Section 11(c), GEC shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.
(d) GEC and Key Employee recognize that each party will have no adequate
remedy at law for breach by the other of any of the agreements contained herein
and, in the event of any such breach, GEC and Key Employee hereby agree and
consent that the other shall be entitled to a decree of specific performance,
mandamus or other appropriate remedy to enforce performance of this Agreement.
(e) Notwithstanding anything to the contrary contained in this Agreement,
in any plan of GEC or its affiliates, or in any other agreement or
understanding, GEC shall pay to Key Employee all amounts required to be paid
hereunder (including the Additional Amount and Severance Compensation), as well
as amounts required by the terms of any other plan, agreement or understanding
(including the accelerated vesting of stock options and restricted stock upon a
Change of Control), regardless of whether any such amounts or accelerated
vesting constitute Excess Parachute Payments.
14. Entire Contract. This Agreement constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
express or implied with respect to the subject matter of this Agreement.
15. Notice. For all purposes of this Agreement, all communications provided
for herein shall be in writing and shall be deemed to have been duly given when
delivered or after three business days after having been mailed registered or
certified mail, return receipt requested, addressed to the addresses set forth
at the end of this Agreement or to such other address as any party furnishes in
writing to the other party.
16. Term. This Agreement shall be effective from the date of its execution
by GEC and for the twenty-four (24) months next succeeding any Change of
Control, and shall continue in effect from year to year after such twenty-four
(24) month period, unless GEC shall notify Key Employee in writing 90 days in
advance of an anniversary of its execution that the Agreement shall terminate or
unless, prior to a Change of Control or the commencement of any discussion with
a third person that ultimately results in a Change of Control, the Key Employee
ceases for any reason to be an employee of GEC in which event this Agreement
shall immediately terminate and be of no further effect. Notwithstanding the
foregoing, the indemnification provisions of this Agreement contained in Section
6 shall survive until the expiration of the statute of limitations for
assessment of any excise tax with regard to an Excess Parachute Payment on
account of the Change of Control.
-8-
<PAGE> 9
IN WITNESS WHEREOF the parties hereto have executed this Severance
Agreement as of the ____ day of ____________________, 199___.
GAYLORD ENTERTAINMENT COMPANY _____________________________________
Key Employee
By:___________________________________ Address:_____________________________
One Gaylord Drive _____________________________
Nashville, TN 37214
-9-
<PAGE> 10
EXHIBIT A
1. Excess Parachute Payment Subject to Excise Tax $50,000
2. Excise Tax on Item 1 @ 20% $10,000
3. Total Additional Amount under Agreement * $27,190
4. Verification of Total Additional Amount
1) Excise Tax on additional $27,190 @ 20% - $ 5,438
2) State Income Tax on $27,190 @ 6% - $ 1,631
3) Federal Income Tax on $27,190 -
a) Additional income - $27,190
b) State Income Tax deduction - (1,631)
c) Net Additional Federal
Taxable Income - $25,558
d) Federal Income Tax @ 39.6% - $10,121
4) Total Taxes on Additional Amount $17,190
5) Net Amount Available to Key Employee to pay
Excise Tax in #2 $10,000
- ----------------------
* The formula used to compute the Additional Amount is to divide the
Excise Tax amount on the excess parachute payment by a percentage equal
to 100% less the sum of the Excise Tax percentage plus the state income
tax percentage plus the federal tax percentage less a percentage
determined by multiplying the federal tax percentage times the state
tax percentage. Thus in the example above, the following percentages
should be subtracted from 100%:
1) Excise Tax Percentage - 20.00%
2) Assumed State Tax Percentage - 6.00%
3) Federal Income Tax Percentage - 39.60%
------
Total 65.60%
Less 39.6% Times 6% = 2.38%
------
63.22%
The resulting percentage of 100% - 63.22% = 36.78% should be divided
into $10,000 = $27,190.
-i-
<PAGE> 1
EXHIBIT 10.24
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into as of the ____ day of ___________,
1996 and effective November 13, 1991 by and between GAYLORD ENTERTAINMENT
COMPANY, a Delaware corporation (the "Company"), and the undersigned (the
"Indemnitee").
RECITALS
WHEREAS, it is essential to the Company that it attract and retain as
directors and officers the most capable persons available; and
WHEREAS, both the Company and the Indemnitee recognize the increased risk
of litigation and other claims being asserted against directors and officers of
public companies in the course of exercising their duties; and
WHEREAS, the Company and the Indemnitee are also aware of conditions in the
insurance industry that have affected the Company's ability to obtain adequate
directors' and officers' liability insurance coverage on an economically
acceptable basis;
WHEREAS, Section 145 of the Delaware General Corporation Law, Article X of
the Company's Certificate of Incorporation (the "Certificate of Incorporation")
and Article 52 of the Company's By-laws provide for the indemnification of the
Company's directors and officers under certain circumstances;
WHEREAS, the Company and the Indemnitee recognize the potential inadequacy
of the protection available to directors and officers under the Delaware General
Corporation Law, the Company's Certificate of Incorporation, the Company's
By-laws, and directors' and officers' liability insurance; and
WHEREAS, Section 145(f) of the Delaware General Corporation Law, the
Company's Certificate of Incorporation and the Company's By-laws specifically
provide that the indemnification provided thereunder is not exclusive and
contemplate that indemnification agreements may be entered into between the
Company and its directors and officers.
WHEREAS, in recognition of the Indemnitee's need for additional protection
against personal liability in order to enhance the Indemnitee's continued
service to the Company in an effective manner, and in order to induce the
Indemnitee to continue to provide services to the Company as a director or
officer thereof, the Company wishes to provide in this Agreement for the
indemnification of the Indemnitee to the fullest extent permitted by law and as
set forth in this Agreement;
NOW THEREFORE, in consideration of the foregoing, the covenants contained
herein and the Indemnitee's continued service to the Company, the Company and
the Indemnitee, intending to be legally bound, hereby agree as follows:
1
<PAGE> 2
Section 1. Definitions. The following terms, as used herein, shall have the
following respective meanings:
"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 specified 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;
and the terms "controlling" and "controlled" have meanings relative to the
foregoing.
"Change in Control" shall be deemed to have taken place if: (i) any person
or entity, including a "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended ("Exchange Act") other than the Company or a
wholly-owned subsidiary thereof or any employee benefit plan of the Company or
any of its subsidiaries, becomes the beneficial owner of the Company's
securities having 40% or more of the combined voting power of the then
outstanding securities of the Company that may be cast for the election of
directors of the Company (other than as a result of an issuance of securities
initiated by the Company in the ordinary course of business); or (ii) as the
result of, or in connection with, any cash tender or exchange offer, merger or
other business combination, sale of substantially all of the assets or contested
election, or any combination of the foregoing transactions less than a majority
of the combined voting power of the then-outstanding securities of the Company
or any successor corporation or entity entitled to vote generally in the
election of the directors of the Company or such other corporation or entity
after such transaction is held in the aggregate by the holders of the Company's
securities entitled to vote generally in the election of directors of the
Company immediately prior to such transaction; or (iii) during any period of two
consecutive years, individuals who at the beginning of any such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the Company's stockholders, of each director of the Company
first elected during such period was approved by a vote of at least two-thirds
of the directors of the Company then still in office who were directors of the
Company at the beginning of any such period.
"Claim" means (a) any threatened, pending or completed action, suit,
proceeding or arbitration or other alternative dispute resolution mechanism, or
(b) any inquiry, hearing or investigation, whether conducted by the Company or
any other Person, that the Indemnitee in good faith believes might lead to the
institution of any such action, suit, proceeding or arbitration or other
alternative dispute resolution mechanism, in each case whether civil, criminal,
administrative or other (whether or not the claims or allegations therein are
groundless, false or fraudulent) and includes, without limitation, those brought
by or in the name of the Company or any director or officer of the Company.
"Company Agent" means any director, officer, partner, employee, agent,
trustee or fiduciary of the Company, any Subsidiary or any Other Enterprise.
2
<PAGE> 3
"Covered Event" means any event or occurrence on or after the effective
date of this Agreement related to the fact that the Indemnitee is or was a
Company Agent or related to anything done or not done by the Indemnitee in any
such capacity, and includes, without limitation, any such event or occurrence
(a) arising from performance of the responsibilities, obligations or duties
imposed by ERISA or any similar applicable provisions of state or common law, or
(b) arising from any merger, consolidation or other business combination
involving the Company, any Subsidiary or any Other Enterprise, including without
limitation any sale or other transfer of all or substantially all of the
business or assets of the Company, any Subsidiary or any Other Enterprise.
"Determination" means a determination made by (a) a majority vote of a
quorum of Disinterested Directors; (b) Independent Legal Counsel, in a written
opinion addressed to the Company and the Indemnitee; (c) the stockholders of the
Company; or (d) a decision by a court of competent jurisdiction which is not
subject to further appeal or not appealed in a timely manner.
"Disinterested Director" shall be a director of the Company who is not or
was not a party to the Claim giving rise to the subject matter of a
Determination.
"Expenses" includes attorneys' fees and all other costs, travel expenses,
fees of experts, transcript costs, filing fees, witness fees, telephone charges,
postage, copying costs, delivery service fees and other expenses and obligations
of any nature whatsoever paid or incurred in connection with investigating,
prosecuting or defending, being a witness in or participating in (including on
appeal), or preparing to prosecute or defend, be a witness in or participate in
any Claim, for which the Indemnitee is or becomes legally obligated to pay.
"Independent Legal Counsel" shall mean a law firm or a member of a law firm
that (a) neither is nor in the past five years has been retained to represent in
any material matter the Company, any Subsidiary, the Indemnitee or any other
party to the Claim, (b) under applicable standards of professional conduct then
prevailing would not have a conflict of interest in representing either the
Company or the Indemnitee in an action to determine the Indemnitee's rights to
indemnification under this Agreement and (c) is reasonably acceptable to the
Company and the Indemnitee.
"Loss" means any amount which the Indemnitee is legally obligated to pay as
a result of any Claim, including, without limitation (a) all judgments,
penalties and fines, and amounts paid or to be paid in settlement, (b) all
interest, assessments and other charges paid or payable in connection therewith
and (c) any federal, state, local or foreign taxes imposed (net of the value to
the Indemnitee of any tax benefits resulting from tax deductions or otherwise as
a result of the actual or deemed receipt of any payments under this Agreement,
including the creation of the Trust).
"Other Enterprise" means any corporation (other than the Company or any
Subsidiary), partnership, joint venture, association, employee benefit plan,
trust or other
3
<PAGE> 4
enterprise or organization to which the Indemnitee renders service at the
request of the Company or any Subsidiary.
"Parent" shall have the meaning set forth in the regulations of the
Securities and Exchange Commission under the Securities Act of 1933, as amended;
provided the term "Parent" shall not include the board of directors of a
corporation in its capacity as a board of directors, and provided further that
if the other party to any transaction referred to in Section 11.1.2 has no
Parent as so defined above, "Parent" shall mean such other party.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (or any subdivision, department, commission or agency thereof), and
includes without limitation any "person", as such term is used in Sections 13(d)
and 14(d) of the Exchange Act.
"Potential Change in Control" shall be deemed to have occurred if (a) the
Company enters into an agreement or arrangement the consummation of which would
result in the occurrence of a Change in Control, (b) any Person (including the
Company) publicly announces an intention to take or to consider taking actions
which if consummated would constitute a Change in Control or (c) the Board of
Directors of the Company adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
"Subsidiary" means any corporation of which more than 50% of the
outstanding stock having ordinary voting power to elect a majority of the board
of directors of such corporation is now or hereafter owned, directly or
indirectly, by the Company.
"Trust" has the meaning set forth in Section 8.2.
"Voting Securities" means any securities of the Company which vote
generally in the election of directors.
Section 2. Indemnification.
2.1. General Indemnity Obligation.
2.1.1. Subject to the remaining provisions of this Agreement,
the Company hereby indemnifies and holds the Indemnitee harmless for any Losses
or Expenses arising from any Claims relating to (or arising in whole or in part
out of) any Covered Event, including without limitation, any Claim the basis of
which is any actual or alleged breach of duty, neglect, error, misstatement,
misleading statement, omission or other act done or attempted by the Indemnitee
in the capacity as a Company Agent, whether or not the Indemnitee is acting or
serving in such capacity at the effective date of this Agreement, at the time
liability is incurred or at the time the Claim is initiated.
2.1.2. The obligations of the Company under this Agreement shall
apply to the fullest extent authorized or permitted by the provisions of
applicable law, as
4
<PAGE> 5
presently in effect or as changed after the effective date of this Agreement,
whether by statute or judicial decision (but, in the case of any subsequent
change, only to the extent that such change permits the Company to provide
broader indemnification than permitted prior to giving effect thereto).
2.1.3. The Indemnitee shall not be entitled to indemnification
pursuant to this Agreement in connection with any Claim initiated by the
Indemnitee against the Company or any director or officer of the Company, unless
the Company has joined in or consented to the initiation of such Claim;
provided, the provisions of this Section 2.1.3 shall not apply following a
Change in Control to Claims seeking enforcement of this Agreement, the Company's
Certificate of Incorporation the Company's By-laws or any other agreement now or
hereafter in effect relating to indemnification for Covered Events.
2.1.4. If the Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the Losses
or Expenses paid with respect to a Claim but not, however, for the total amount
thereof, the Company shall nevertheless indemnify and hold the Indemnitee
harmless against the portion thereof to which the Indemnitee is entitled.
2.1.5. Notwithstanding any other provision of this Agreement, to
the extent that the Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating to (or arising in whole or in part out of)
a Covered Event or in defense of any issue or matter therein, including
dismissal without prejudice, the Company shall indemnify and hold the Indemnitee
harmless against all Expenses incurred in connection therewith.
2.2. Indemnification for Serving as Witness and Certain Other Claims.
Notwithstanding any other provision of this Agreement, the Company hereby
indemnifies and holds the Indemnitee harmless for all Expenses in connection
with (a) the preparation to serve or service as a witness in any Claim in which
the Indemnitee is not a party, if such actual or proposed service as a witness
arose by reason of the Indemnitee having served as a Company Agent on or after
the effective date of this Agreement and (b) any Claim initiated by the
Indemnitee on or after the effective date of this Agreement (i) for recovery
under any directors' and officers' liability insurance maintained by the Company
or (ii) following a Change in Control, for enforcement of the indemnification
obligations of the Company under this Agreement, the Company's Certificate of
Incorporation or Bylaws or any other agreement now or hereafter in effect
relating to indemnification for Covered Events, regardless of whether the
Indemnitee ultimately is determined to be entitled to such insurance recovery or
indemnification, as the case may be.
Section 3. Limitations on Indemnification.
3.1. Coverage Limitations. No indemnification is available pursuant
to the provisions of this Agreement:
5
<PAGE> 6
3.1.1. If such indemnification is not lawful;
3.1.2. If the Indemnitee's conduct giving rise to the Claim with
respect to which indemnification is requested was knowingly fraudulent, a
knowing violation of law, deliberately dishonest or in bad faith or constituted
willful misconduct;
3.1.3. In respect of any Claim based upon or attributable to the
Indemnitee's gaining any personal profit or advantage to which the Indemnitee
was not legally entitled;
3.1.4. In respect of any Claim for an accounting of profits made
from the purchase or sale by the Indemnitee of securities of the Company within
the meaning of Section 16(b) of the Exchange Act;
3.1.5. If the Indemnitee's conduct giving rise to the Claim with
respect to which indemnification is requested constituted a breach of the duty
of loyalty to the Company or its stockholders; or
3.1.6. In respect of any Claim based upon any violation of
Section 174 of the Delaware General Corporation Law, as amended.
3.2. No Duplication of Payments. The Company shall not be liable
under this Agreement to make any payment otherwise due and payable to the extent
the Indemnitee has otherwise actually received payment (whether under the
Company's Certificate of Incorporation, By-laws, any directors' and officers'
liability insurance or otherwise) of any amounts otherwise due and payable under
this Agreement.
Section 4. Payments and Determinations.
4.1. Advancement and Reimbursement of Expenses. If requested by the
Indemnitee, the Company shall advance to Indemnitee, no later than two business
days following any such request, any and all Expenses for which indemnification
is available under Section 2. In order to obtain such advancement or
reimbursement, the Indemnitee must also furnish to the Company a written
affirmation of his good faith belief that he has conducted himself in good faith
and that he reasonably believed that: (1) in the case of conduct in his official
capacity with the Company, that his conduct was in the Company's best interest;
and (2) in all other cases, that his conduct was at least not opposed to the
Company's best interests; and (3) in the case of any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful. In
addition, the Indemnitee must furnish to the Company a written undertaking,
executed personally or on his behalf, to repay the advance if it is ultimately
determined that he is not entitled to indemnification. Upon any Determination
that the Indemnitee is not permitted to be indemnified for any Expenses so
advanced, the Indemnitee hereby agrees to reimburse the Company (or, as
appropriate, any Trust established pursuant to Section 8.2) for all such amounts
previously paid. Such obligation of reimbursement shall be unsecured and no
interest shall be charged thereon.
6
<PAGE> 7
4.2. Payment and Determination Procedures.
4.2.1. To obtain indemnification under this Agreement, the
Indemnitee shall submit to the Company a written request, together with such
documentation and information as is reasonably available to the Indemnitee and
is reasonably necessary to determine whether and to what extent the Indemnitee
is entitled to indemnification. The Secretary of the Company shall, promptly
upon receipt of such a request for indemnification, advise the Board of
Directors in writing that the Indemnitee has requested indemnification.
4.2.2. Upon written request by the Indemnitee for
indemnification pursuant to Section 4.2.1, a Determination with respect to the
Indemnitee's entitlement to indemnification thereto shall be made in the
specific case (a) if a Change in Control shall have occurred, as provided in
Section 8.1; and (b) if a Change in Control shall not have occurred, by (i) the
Board of Directors by a majority vote of a quorum of Disinterested Directors,
(ii) Independent Legal Counsel, if either (A) a quorum of Disinterested
Directors is not obtainable or (B) a majority vote of a quorum of Disinterested
Directors otherwise so directs or (iii) the stockholders of the Company (if
submitted by the Board of Directors) but shares of stock owned by or voted under
the control of any Indemnitee who is at the time party to the proceeding may not
be voted. If a Determination is made that the Indemnitee is entitled to
indemnification, payment to the Indemnitee shall be made within 10 days after
such Determination.
4.2.3. If no Determination is made within 60 days after receipt
by the Company of a request for indemnification by the Indemnitee pursuant to
Section 4.2.1, a Determination shall be deemed to have been made that the
Indemnitee is entitled to the requested indemnification (and the Company shall
pay the related Losses and Expenses no later than 10 days after the expiration
of such 60-day period), except where such indemnification is not lawful;
provided, however, that (a) such 60-day period may be extended for a reasonable
time, not to exceed an additional 30 days, if the Person or Persons making the
Determination in good faith require such additional time for obtaining or
evaluating the documentation and information relating thereto; and (b) the
foregoing provisions of this Section 4.2.3 shall not apply (i) if the
Determination is to be made by the stockholders of the Company and if (A) within
15 days after receipt by the Company of the request by the Indemnitee pursuant
to Section 4.2.1 the Board of Directors has resolved to submit such
Determination to the stockholders at an annual meeting of the stockholders to be
held within 75 days after such receipt, and such Determination is made at such
annual meeting, or (B) a special meeting of stockholders is called within 15
days after such receipt for the purpose of making such Determination, such
meeting is held for such purpose within 60 days after having been so called and
such Determination is made at such special meeting, or (ii) if the Determination
is to be made by Independent Legal Counsel.
Section 5. Subrogation. In the event of any payment under this Agreement to
or on behalf of the Indemnitee, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of the Indemnitee against any
Person other than
7
<PAGE> 8
the Company or the Indemnitee in respect of the Claim giving rise to such
payment. The Indemnitee shall execute all papers reasonably required and shall
do everything reasonably necessary to secure such rights, including the
execution of such documents reasonably necessary to enable the Company
effectively to bring suit to enforce such rights and providing deposition or
oral testimony at trial.
Section 6. Notifications and Defense of Claims.
6.1. Notice by Indemnitee. The Indemnitee shall give notice in
writing to the Company as soon as practicable after the Indemnitee becomes aware
of any Claim with respect to which indemnification will or could be sought under
this Agreement; provided the failure of the Indemnitee to give such notice, or
any delay in giving such notice, shall not relieve the Company of its
obligations under this Agreement except to the extent the Company is actually
prejudiced by any such failure or delay.
6.2. Defense.
6.2.1. In the event any Claim relating to Covered Events is by
or in the right of the Company, the Indemnitee may, at the option of the
Indemnitee, either control the defense thereof or accept the defense provided;
provided, however, that the amounts expended by the Company shall be reimbursed
to the Company by the Indemnitee if the provisions of Section 145 of the
Delaware General Corporation Law so require.
6.2.2. In the event any Claim relating to Covered Events is
other than by or in the right of the Company, the Indemnitee may, at the option
of Indemnitee, either control the defense thereof or require the Company to
defend. In the event that the Indemnitee requires the Company to so defend, the
Company shall promptly undertake to defend any such Claim, at the Company's sole
cost and expense, utilizing counsel of the Indemnitee's choice who has been
approved by the Company. If appropriate, the Company shall have the right to
participate in the defense of any such Claim.
6.2.3. In the event the Company shall fail, as required by any
election by the Indemnitee pursuant to Section 6.2.2, to timely defend the
Indemnitee against any such Claim, the Indemnitee shall have the right to do so,
including without limitation, the right (notwithstanding Section 6.2.4) to make
any settlement thereof, and to recover from the Company, to the extent otherwise
permitted by this Agreement, all Expenses and Losses paid as a result thereof.
6.2.4. The Company shall have no obligation under this
Agreement with respect to any amounts paid or to be paid in settlement of any
Claim without the express prior written consent of the Company to any related
settlement. In no event shall the Company authorize any settlement imposing any
liability or other obligations on the Indemnitee without the express prior
written consent of the Indemnitee. Neither the Company nor the Indemnitee shall
unreasonably withhold consent to any proposed settlement.
8
<PAGE> 9
Section 7. Determinations and Related Matters.
7.1. Presumptions.
7.1.1. If a Change in Control shall have occurred, the
Indemnitee shall be entitled to a rebuttable presumption that the Indemnitee is
entitled to indemnification under this Agreement and the Company shall have the
burden of proof in rebutting such presumption.
7.1.2. The termination of any Claim by judgment, order,
settlement (whether with or without court approval), conviction, or upon a plea
of nolo contendere or its equivalent shall not adversely affect either the right
of the Indemnitee to indemnification under this Agreement or the presumptions to
which the Indemnitee is otherwise entitled pursuant to the provisions of this
Agreement nor create a presumption that the Indemnitee did not meet any
particular standard of conduct or have a particular belief or that a court has
determined that indemnification is not permitted by applicable law.
7.2. Appeals: Enforcement.
7.2.1. In the event that (a) a Determination is made that the
Indemnitee shall not be entitled to indemnification under this Agreement, (b)
any Determination to be made by Independent Legal Counsel is not made within 90
days of receipt by the Company of a request for indemnification pursuant to
Section 4.2.1 or (c) the Company fails to otherwise perform any of its
obligations under this Agreement (including, without limitation, its obligation
to make payments to the Indemnitee following any Determination made or deemed to
have been made that such payments are appropriate), the Indemnitee shall have
the right to commence a Claim in any court of competent jurisdiction, as
appropriate, to seek a Determination by the court, to challenge or appeal any
Determination which has been made, or to otherwise enforce this Agreement. If a
Change of Control shall have occurred, the Indemnitee shall have the option to
have any such Claim conducted by a single arbitrator pursuant to the rules of
the American Arbitration Association. Any such judicial proceeding challenging
or appealing any Determination shall be deemed to be conducted de novo and
without prejudice by reason of any prior Determination to the effect that the
Indemnitee is not entitled to indemnification under this Agreement. Any such
Claim shall be at the sole expense of the Indemnitee except as provided in
Section 8.3.
7.2.2. If a Determination shall have been made or deemed to
have been made pursuant to this Agreement that the Indemnitee is entitled to
indemnification, the Company shall be bound by such Determination in any
judicial proceeding or arbitration commenced pursuant to this Section 7.2,
except if such indemnification is unlawful.
7.2.3. The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 7.2 that
the procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the
9
<PAGE> 10
provisions of this Agreement. The Company hereby consents to service of process
and to appear in any judicial or arbitration proceedings and shall not oppose
the Indemnitee's right to commence any such proceedings.
7.3. Procedures. The Indemnitee shall cooperate with the
Company and with any Person making any Determination with respect to any Claim
for which a request for indemnification under this Agreement has been made, as
the Company may reasonably require. The Indemnitee shall provide to the Company
or the Person making any Determination, upon reasonable advance request, any
documentation or information reasonably available to the Indemnitee and
necessary to (a) the Company with respect to any such Claim or (b) the Person
making any Determination with respect thereto.
Section 8. Change in Control Procedures.
8.1. Determinations. If there is a Change in Control, any
Determination to be made under Section 4 shall be made by Independent Legal
Counsel selected by the Indemnitee and approved by the Company, which approval
shall not be unreasonably withheld. The Company shall pay the reasonable fees of
the Independent Legal Counsel and indemnify fully such Independent Legal Counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or the engagement of
Independent Legal Counsel pursuant hereto.
8.2. Establishment of Trust. Following the occurrence of any
Potential Change in Control, the Company, upon receipt of a written request from
the Indemnitee, shall create a Trust (the "Trust") for the benefit of the
Indemnitee, the trustee of which shall be a bank or similar financial
institution with trust powers chosen by the Indemnitee. From time to time, upon
the written request of the Indemnitee, the Company shall fund the Trust in
amounts sufficient to satisfy any and all Losses and Expenses reasonably
anticipated at the time of each such request to be incurred by the Indemnitee
for which indemnification may be available under this Agreement. The amount or
amounts to be deposited in the Trust pursuant to the foregoing funding
obligation shall be determined by mutual agreement of the Indemnitee and the
Company or, if the Company and the Indemnitee are unable to reach such an
agreement or if, a Change in Control has occurred, by Independent Legal Counsel
(selected pursuant to Section 8.1). The terms of the Trust shall provide that,
except upon the prior written consent of the Indemnitee and the Company, (a) the
Trust shall not be revoked or the principal thereof invaded, other than to make
payments to unsatisfied judgment creditors of the Company if payment to such
judgement creditors cannot be made from any other source, (b) the Trust shall
continue to be funded by the Company in accordance with the funding obligations
set forth in this Section, (c) the Trustee shall promptly pay or advance to the
Indemnitee any amounts to which the Indemnitee shall be entitled pursuant to
this Agreement, and (d) all unexpended funds in the Trust shall revert to the
Company upon a Determination by Independent Legal Counsel (selected pursuant to
Section 8.1) or a court of competent jurisdiction that the Indemnitee has been
fully indemnified under the terms of this Agreement. All income earned on the
assets held in the trust shall be reported as income by the Company for federal,
state and local tax purposes.
10
<PAGE> 11
8.3. Expenses. Following any Change in Control, the Company
shall be liable for, and shall pay the Expenses paid or incurred by the
Indemnitee in connection with the making of any Determination (irrespective of
the determination as to the Indemnitee's entitlement to indemnification) or the
prosecution of any Claim pursuant to Section 7.2, and the Company hereby agrees
to indemnify and hold the Indemnitee harmless therefrom. If requested by counsel
for the Indemnitee, the Company shall promptly give such counsel an appropriate
written agreement with respect to the payment of its fees and expenses and such
other matters as may be reasonably requested by such counsel.
Section 9. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company, any
Subsidiary, any Other Enterprise or any Affiliate of the Company against the
Indemnitee or the Indemnitee's spouse, heirs, executors, administrators or
personal or legal representatives after the expiration of two years from the
date of accrual of such cause of action, and any claim or cause of action of the
Company, any Subsidiary, any Other Enterprise or any Affiliate of the Company
shall be extinguished and deemed released unless asserted by the timely filing
of a legal action within such two-year period; provided, however, that if any
shorter period of limitations, whether established by statute or judicial
decision, is otherwise applicable to any such cause of action, such shorter
period shall govern.
Section 10. Contribution. If the indemnification provisions of this
Agreement should be unenforceable under applicable law in whole or in part or
insufficient to hold the Indemnitee harmless in respect of any Losses and
Expenses incurred by the Indemnitee, then for purposes of this Section 10, the
Company shall be treated as if it were, or was threatened to be made, a party
defendant to the subject Claim and the Company shall contribute to the amounts
paid or payable by the Indemnitee as a result of such Losses and Expenses
incurred by the Indemnitee in such proportion as is appropriate to reflect the
relative benefits accruing to the Company on the one hand and the Indemnitee on
the other and the relative fault of the Company on the one hand and the
Indemnitee on the other in connection with such Claim, as well as any other
relevant equitable considerations. For purposes of this Section 10 the relative
benefit of the Company shall be deemed to be the benefits accruing to it and to
any Subsidiary, and other Enterprise, or any Affiliate of the Company and all of
their respective directors, officers, employees and agents (other than the
Indemnitee) on the one hand, as a group and treated as one entity, and the
relative benefit of the Indemnitee shall be deemed to be an amount not greater
than the Indemnitee's yearly base salary or the Indemnitee's compensation from
the Company during the first year in which the Covered Event forming the basis
for the subject Claim was alleged to have occurred. The relative fault shall be
determined by reference to, among other things, the fault of the Company and to
any Subsidiary, any other Enterprise, or any Affiliate of the Company and all of
their respective directors, officers, employees and agents (other than the
Indemnitee) on the one hand, as a group and treated as one entity, and the
Indemnitee's and such group's relative intent, knowledge, access to information
and opportunity to have altered or prevented the Covered Event forming the basis
for the subject Claim.
11
<PAGE> 12
Section 11. Miscellaneous Provisions.
11.1. Successors and Assigns. Etc.
11.1.1. This Agreement shall be binding upon and inure to the
benefit of (a) the Company, its successors and assigns (including any direct or
indirect successor by merger, consolidation or operation of law or by transfer
of all or substantially all of its assets) and (b) the Indemnitee and the heirs,
personal and legal representatives, executors, administrators or assigns of the
Indemnitee.
11.1.2. The Company shall not consummate any consolidation,
merger or other business combination, nor will it transfer 50% or more of its
assets (in one or a series of related transactions), unless the ultimate Parent
of the successor to the business or assets of the Company shall have first
executed an agreement, in form and substance satisfactory to the Indemnitee, to
expressly assume all obligations of the Company under this Agreement and agree
to perform this Agreement in accordance with its terms, in the same manner and
to the same extent that the Company would be required to perform this Agreement
if no such transaction had taken place; provided that, if the Parent is not the
Company, the legality of payment of indemnity by the Parent shall be determined
by reference to the fact that such indemnity is to be paid by the Parent rather
than the Company.
11.2. Severability. The provisions of this Agreement are severable.
If any provision of this Agreement shall be held by any court of competent
jurisdiction to be invalid, void or unenforceable, such provision shall be
deemed to be modified to the minimum extent necessary to avoid a violation of
law and, as so modified, such provision and the remaining provisions shall
remain valid and enforceable in accordance with their terms to the fullest
extent permitted by law.
11.3. Rights Not Exclusive: Continuation of Right of Indemnification.
Nothing in this Agreement shall be deemed to diminish or otherwise restrict the
Indemnitee's right to indemnification pursuant to any provision of the Company's
Certificate of Incorporation, By-laws, any agreement, vote of shareholders or
Disinterested Directors, applicable law or otherwise. This Agreement shall be
effective as of the effective date set forth above written and continue in
effect until no Claims relating to any Covered Event may be asserted against the
Indemnitee and until any Claims commenced prior thereto are finally terminated
and resolved, regardless of whether the Indemnitee continues to serve as a
director or officer of the Company, any Subsidiary or any Other Enterprise.
11.4. No Employment Agreement. Nothing contained in this Agreement
shall be construed as giving the Indemnitee any right to be retained in the
employ of the Company, any Subsidiary or any Other Enterprise.
11.5. Subsequent Amendment. No amendment, termination or repeal of any
provision of the Company's Certificate of Incorporation, or any respective
successor thereto, or of any relevant provision of any applicable law, shall
affect or diminish in any
12
<PAGE> 13
way the rights of the Indemnitee to indemnification, or the obligations of the
Company, arising under this Agreement, whether the alleged actions or conduct of
the Indemnitee giving rise to the necessity of such indemnification arose before
or after any such amendment, termination or repeal.
11.6. Notices. Notices required under this Agreement shall be given
in writing and shall be deemed given when delivered in person or sent by
certified or registered mail, return receipt requested, postage prepaid. Notices
shall be directed to the Company at One Gaylord Drive, Nashville, Tennessee
37214, Attention: Secretary, and to the Indemnitee at (or such other address as
either party may designate in writing to the other).
11.7. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and performed in such state without giving effect
to the principles of conflict of laws.
11.8. Headings. The headings of the Sections of this Agreement are
inserted for convenience only and shall not be deemed to discriminate part of
this Agreement or to affect the construction thereof.
11.9. Counterparts. This Agreement may be executed in any number of
counterparts all of which taken together shall constitute one instrument.
11.10. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by any
of the parties hereto. No waiver of this Agreement shall constitute, or be a
waiver of any other provisions hereof (whether or not similar) nor shall any
such waiver constitute a continuing waiver.
The parties hereto have caused this Agreement to be duly executed as of the
day and year first above written.
GAYLORD ENTERTAINMENT COMPANY
By:_______________________________
Title:______________________________
INDEMNITEE
----------------------------------
13
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF GAYLORD ENTERTAINMENT COMPANY
AS OF MARCH 21, 1997
<TABLE>
<CAPTION>
JURISDICTION
NAME OF ORGANIZATION
---- ---------------
<S> <C>
Acuff Rose Scandia AB....................................... Sweden
Acuff-Rose Music Limited.................................... England
Acuff Rose Music, Inc....................................... Tennessee
Cannanland Music, Inc....................................... Tennessee
CCK, Inc.................................................... Texas
CNR, Inc.................................................... Delaware
Country Music Television, Inc............................... Tennessee
Editions Acuff Rose France SARL............................. France
Fan Fair.................................................... Tennessee
Gaylord Broadcasting Company, L.P........................... Texas
Gaylord Communications, Inc................................. Texas
Gaylord Production Company.................................. Tennessee
Gaylord Broadcasting Company................................ Delaware
Gaylord Program Services, Inc............................... Delaware
Gaylord Investments, Inc.................................... Delaware
Grand Ole Opry Tours, Inc................................... Tennessee
Hickory Records, Inc........................................ Tennessee
Lunker Lake Productions, Inc................................ Delaware
Milene Music, Inc........................................... Tennessee
NV Broadcasting (Canada), Inc............................... Canada
NV International, Inc....................................... Georgia
Network Enterprises, Inc.................................... Tennessee
O & W Corporation........................................... Tennessee
Oklahoma City Athletic Club, Inc............................ Oklahoma
OLH, L.P.................................................... Tennessee
Opryland Attractions, Inc................................... Delaware
Opryland Hospitality, Inc................................... Tennessee
Opryland Music Group, Inc................................... Tennessee
Opryland Music Group, GmbH.................................. Germany
Opryland Productions, Inc................................... Tennessee
Opryland Theatricals, Inc................................... Delaware
Opryland USA Inc............................................ Delaware
Outdoor Entertainment, Inc.................................. Tennessee
Peppercorn Productions, Inc................................. Tennessee
Promiseland Music, Inc...................................... Tennessee
Showpark Management, Inc.................................... Delaware
Silver Spice Productions, LLC............................... Delaware
Springhouse Music, Inc...................................... Tennessee
WHS Licensing Limited Partnership........................... Tennessee
WHS GP Corporation.......................................... Tennessee
WHS Entertainment Ventures.................................. Tennessee
WHS Licensing GP Corporation................................ Tennessee
Word Entertainment, Inc..................................... Delaware
Word Entertainment (Canada), Inc............................ Canada
Word Entertainment, Ltd..................................... UK
Word Entertainment Direct, LLC.............................. Tennessee
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
JURISDICTION
NAME OF ORGANIZATION
---- ---------------
<S> <C>
Word Entertainment Group, Inc............................... Delaware
Word Music, Inc............................................. Tennessee
Word Music Group, Inc....................................... Tennessee
World Sports Enterprises.................................... Tennessee
WSM, Incorporated........................................... Tennessee
Z Music Management, Inc..................................... Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
registration statements on Form S-8 (No. 33-51260, No. 33-63682 and
No. 33-65626).
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Nashville, Tennesee
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GAYLORD ENTERTAINMENT COMPANY FOR THE YEAR ENDED
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,720
<SECURITIES> 0
<RECEIVABLES> 111,978
<ALLOWANCES> 3,276
<INVENTORY> 0
<CURRENT-ASSETS> 187,272
<PP&E> 974,188
<DEPRECIATION> 333,869
<TOTAL-ASSETS> 1,182,248
<CURRENT-LIABILITIES> 163,966
<BONDS> 363,409
0
0
<COMMON> 967
<OTHER-SE> 511,996
<TOTAL-LIABILITY-AND-EQUITY> 1,182,248
<SALES> 747,158
<TOTAL-REVENUES> 747,158
<CGS> 0
<TOTAL-COSTS> 617,551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,538
<INCOME-PRETAX> 204,714
<INCOME-TAX> 73,549
<INCOME-CONTINUING> 131,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,165
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 0
</TABLE>
