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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ____________________ to ____________________
Commission File Number 1-10880
BET HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 52-1742995
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
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One BET Plaza
1900 W Place, N.E., Washington, D.C. 20018-1211
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(Address of principal executive offices)
(202) 608-2000
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(Registrant's phone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------------------------- -----------------------------------------
Class A Common Stock, $.02 Par Value New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to the Form 10-K.
As of October 11, 1996, there were 10,106,205 shares of the Registrant's Class A
Common Stock, $.02 par value per share, outstanding and the aggregate market
value of such shares held by non-affiliates of the registrants (based on the
closing price of such shares on the New York Stock Exchange composite tape on
October 11, 1996) was approximately $178,751,554. As of October 11, 1996,
there were 1,831,600 shares and 4,820,000 shares of the registrant's Class B
Common Stock and Class C Common Stock, respectively, outstanding, none of which
were held by non-affiliates of the registrant.
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BET HOLDINGS, INC.
FISCAL YEAR 1996 10-K ANNUAL REPORT
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's 1996 Annual Report to Shareholders are
incorporated by reference in Part I, Item 1 and Part II, Items 5-8 of this
report (to the extent described herein).
(2) Portions of the registrant's definitive Proxy Statement to be used in
connection with its 1996 Annual Meeting of Shareholders are incorporated by
reference in Part III, Items 10-13, of this report (to the extent described
herein).
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BET HOLDINGS, INC.
FISCAL YEAR 1996 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
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PART I
Item 1. Business........................................... 1
Item 2. Properties......................................... 10
Item 3. Legal Proceedings.................................. 10
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters........................ 13
Item 6. Selected Consolidated Financial Data............... 13
Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition...... 13
Item 8. Consolidated Financial Statements and
Supplementary Data................................. 13
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............. 13
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation............................. 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management..................................... 14
Item 13. Certain Relationships and Related Transactions..... 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K................................ 15
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PART I
ITEM 1. BUSINESS
A. GENERAL DEVELOPMENT OF BUSINESS
In connection with the initial public offering of its Class A common stock,
BET Holdings, Inc. ("BET Holdings") was incorporated in Delaware in July 1991.
As a result of a series of related transactions completed in September 1991,
Black Entertainment Television, Inc. ("BET"), a District of Columbia corporation
formed in 1979, became a wholly owned subsidiary of BET Holdings. In November
1991, BET Holdings completed its initial public stock offering and became the
first black majority-controlled company listed on the New York Stock Exchange.
Unless the context otherwise requires, as used in this report, the terms
"Registrant" and "Company" means BET Holdings and its consolidated subsidiaries,
including BET. Substantially all of the Company's operations are conducted by
BET through its operation of the Black Entertainment Television cable network
("BET Cable Network"), an advertiser supported basic cable network.
BET Cable Network commenced operations in 1980 by providing two hours of
programming per week targeted to the interests and concerns of African-American
viewers to affiliated cable system operators serving approximately 3.8 million
cable subscribers. In 1984, BET Cable Network began cablecasting 24 hours per
day. As of July 31, 1996, BET Cable Network reached over 45.2 million
households, as estimated by Nielsen Media Research ("Nielsen"), providing a
broad mix of music videos, off-network situation comedies and original
programming.
In August 1991, the Company entered the publishing industry when its newly
formed wholly owned subsidiary, Paige Publications, Inc., began publishing Young
Sisters and Brothers (YSB) magazine , a national lifestyle magazine targeted to
black American teenagers and young adults.
In December 1991, the Company acquired a 44% interest in Emerge
Communications, Inc. ("ECI"), the publisher of Emerge magazine, an issue-
oriented publication providing news, commentary and analysis from the black
American perspective. During its 1995 fiscal year, the Company increased its
ownership interest in ECI to 100%.
In July 1993, the Company acquired 81% of the common stock of Avalon
Pictures, Inc. ("Avalon"), which operates BET Action Pay-Per-View ("Action"), a
cable television network providing programming on a pay-per-view basis. During
its 1994 fiscal year, the Company completed its acquisition of Avalon by
increasing its ownership interest to approximately 100%.
In January 1996, the Company launched BET on Jazz: The Cable Jazz Channel
("BET on Jazz"), its third cable network. BET on Jazz features a broad range
of jazz-oriented musical programming.
In February 1996, the Company, in a joint venture with the New York Daily
News, began publication of BET Weekend, a Sunday newspaper supplement.
In May 1996, the Company's wholly owned subsidiary, BET Direct, Inc. ("BET
Direct"), launched the Color Code line of skin-care products, which are offered
for sale in drug stores and other retail outlets in the United States.
In September 1996, the Company announced that it would discontinue
publishing YSB magazine.
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B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The contribution to revenues and earnings from operations of each industry
segment and the identifiable assets of each industry segment for each of the
last three fiscal years are set forth in Note 11 ("Segment Information") to the
Consolidated Financial Statements of the Company, which are incorporated herein
by reference to the Company's 1996 Annual Report to Shareholders.
C. DESCRIPTION OF BUSINESS
The Company operates in two principal business segments: cable television
programming and magazine publishing. The Company's cable television programming
operations are conducted by its Entertainment Group, which includes BET Cable
Network, BET on Jazz and Action. Ancillary Entertainment Group businesses
established to leverage and expand the BET brand name include BET Direct, which
sells the Color Code line of skin care products on a retail basis and musical
recordings on compact discs and cassettes primarily through short-form direct
advertising. The Company's publishing operations are conducted through its
Publishing Group, which publishes Emerge magazine and published YSB magazine
until its discontinuance in September 1996. The Company has equity ownership
interests in certain unconsolidated affiliated companies, including BET Film
Productions and BET Pictures, which produce low-budget feature length motion
pictures, and a joint venture with the New York Daily News which publishes BET
Weekend, a Sunday newspaper supplement. A description of each of the Company's
business segments follows.
ENTERTAINMENT GROUP
BET Cable Network
The BET Cable Network provides a broad mix of programming targeted to the
interests and concerns of African-American viewers. Programming is produced in-
house or acquired from a variety of sources. BET Cable Network's in-house
productions include hosted music video programs, talk shows, sports, news and
public affairs, children's programs and comedy shows, and are produced in the
Company's studios in Washington, D.C., and Burbank, California. Acquired
programs include situation comedies, gospel music programs and sports and
entertainment specials. For the fiscal year ended July 31, 1996, revenues from
the BET Cable Network represented 88% of the Company's consolidated revenues.
BET Cable Network Affiliated Cable Systems and Subscribers
BET Cable Network contracts with cable system operators to receive a monthly
per subscriber fee under long-term affiliation agreements, which are subject to
renewal from time to time. BET Cable Network's current affiliation agreement
provides for a monthly per subscriber rate of $.11, $.12 and $.13 in calendar
years 1996, 1997 and 1998, respectively, with the monthly per subscriber rate
increasing $.005 per year through calendar year 2003, at which time the monthly
per subscriber rate will be $.155. BET Cable Network's affiliation agreements
are subject to cancellation by either BET Cable Network or cable system
operators under certain circumstances. Additionally, substantially all of BET
Cable Network's affiliation agreements include a "most favored nations"
provision under which BET Cable Network is obligated to extend the terms and
provisions of its most favorable contractual rate to covered affiliates.
Accordingly, in the event BET Cable Network enters into a new or renewed
affiliation agreement with terms more favorable than those included in its
current standard affiliation agreement, it would be obligated to extend the more
favorable terms to substantially all other affiliates. The BET Cable Network
currently generates approximately 43% of its revenues from subscriber fees paid
by cable systems affiliates.
BET Cable Network affords cable system operators the opportunity both to
attract subscribers from a significant market segment not specifically targeted
by other programming services, and, by diversifying the mix of programming
offered on their systems, to satisfy certain social objectives mandated by many
franchising authorities. The BET Cable Network is also attractive to cable
operators seeking to respond to cable subscribers' demands for black-oriented
entertainment, sports and public affairs programming.
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At July 31, 1996, BET Cable Network had over 41.4 million subscribers, based
on reports to the Company from cable system affiliates, an increase of 11% as
compared to July 31, 1995. This growth is attributable both to incremental
growth in household penetration by cable systems nationwide and to the Company's
success in obtaining affiliation agreements with cable systems not previously
carrying the BET Cable Network. The Company believes that while it will
continue to experience subscribership growth, growth rates experienced in
previous years may not be attainable in the future. Continued subscribership
growth will be encouraged by new cable system construction in the central cities
of a number of metropolitan areas as well as by upgrades of existing cable
systems and, eventually, from the expected significant expansion of channel
capacity of cable television systems, which is expected to occur over the next
several years. Increased rate regulation and structural changes in the cable
industry generally, however, could place downward pressure on rates charged by
cable programming services and could cause cable system operators not to expand
channel capacity as rapidly as expected. The rate of subscribership growth also
may be restricted, in management's view, as a result of re-regulation of the
cable industry and competition for limited channel capacity, both of which may
make it more difficult to increase the BET Cable Network's distribution in those
markets with less than 5% black populations.
Advertising
BET Cable Network's advertising revenues are derived primarily from sales of
national spot advertising, infomercial advertising and direct response
advertising. Advertisers on the BET Cable Network include nationally known
companies in the entertainment, beverage, packaged goods, fast food, automotive,
retail, insurance and travel industries. BET Cable Network currently earns
approximately 55% of its revenues from advertising.
The Company believes that advertising on BET Cable Network is attractive to
advertisers because it allows them to execute a general market strategy of
reaching more cable television viewers and to target a specific population that
frequently uses their product or service. Over the past 10 years, cable
television has captured a greater share of advertising budgets. During this
period, the overall ratings for the major networks (ABC, CBS and NBC), and for
local broadcast stations, have declined, while over the same period the overall
ratings for basic cable television programming services have increased. Because
ratings are a significant factor in determining both advertisers' placement
strategy and the pricing of advertising time, during this period cable
advertising revenues have grown significantly faster than those of broadcast
networks. The Federal Communications Commission has predicted that this trend
will continue throughout the 1990's. The Company believes that the BET Cable
Network has benefited, and will continue to benefit, from this trend.
In addition, the Company believes that the BET Cable Network will benefit
from the trend in advertising strategies toward greater market segmentation and
that a significant number of major national advertisers are dedicating a larger
share of their advertising budgets to target the black consumer in an effort to
increase their share of this large and rapidly growing market. These
advertisers, as well as manufacturers of black consumer products, purchase
advertising on the BET Cable Network because it provides them with a cost
effective means to reach a significant number of black consumers. In addition to
the other factors that normally motivate advertisers to purchase advertising
time on the BET Cable Network, certain advertisers may believe that they derive
indirect corporate benefits from supporting culturally diverse programming
services such as the BET Cable Network.
Advertising time on the BET Cable Network is marketed and sold by the
Company's advertising sales force located in New York, Chicago, Los Angeles and
Detroit.
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National Spot Advertising
National spot advertising primarily consists of 30 second advertisements for
products and services. BET Cable Network sells national spot advertising time
to agencies representing national advertisers and directly to advertisers. The
Company believes that its advertising rates are among the most cost effective of
the cable networks. In fiscal 1996, national spot advertising accounted for 67%
of BET Cable Network advertising revenues.
Infomercial Advertising
Infomercial advertising, such as instructional, ministry, health, beauty and
other programming, ranges in length from 30 to 60 minutes. These programs
frequently take the form of talk shows or game shows. Infomercial advertising
is generally aired during less desirable programming hours. Infomercial
advertising revenue accounted for 27% of BET Cable Network advertising revenue
in fiscal 1996.
During fiscal 1996, Robert Rosenheim Associates ("Rosenheim") purchased
$15.3 million of infomercial advertising from BET, representing 12% of the
Company's total consolidated revenues. The Company's long-term contract with
Rosenheim extends through its 1999 fiscal year and provides for annual rate
increases of 22%, 10%, and 10% in fiscal years 1997, 1998 and 1999,
respectively.
Direct Response Advertising
Direct response advertising consists of 30 and 60 second commercials for
various consumer products, such as musical recordings and kitchenware, which
direct consumers to dial an 800 or 900 telephone number in order to purchase the
particular product. In most cases, these products are not available on a retail
basis. In fiscal 1996, direct response advertising accounted for 6% of BET
Cable Network advertising revenues.
Market Demographics
The majority of the BET Cable Network's audience is comprised of black
viewers and at July 31, 1996, BET Cable Network reached over 97% of the 6.8
million U.S. black cable households, based on reports from Nielsen. The Company
believes that certain demographic characteristics of the BET Cable Network's
viewing audience favorably influence advertisers' decisions to purchase time on
the BET Cable Network. Generally, homes served by cable television watch more
television, have a higher per capita income and have more people per household
than the general population. Additionally, research indicates that black
households watch more television and are more brand conscious than the general
population.
The black population as a group is growing at a faster rate than the total
population of the United States. The United States Department of Commerce,
Bureau of the Census (the "Census Bureau") reported that the black population
grew by 15.6% to approximately 30.6 million between April 1, 1980 and April 1,
1990, a growth rate 1.5 times that of the total population. Another report by
the Census Bureau projected that this growth will continue, predicting that the
total black population of the United States will increase by approximately 15.8%
between 1990 and 2000. Because of the unique niche occupied by the BET Cable
Network, the Company believes that growth in the black population will generally
lead to increased viewership of the BET Cable Network and to increased
advertising revenues. The Census Bureau has projected that the black population
in the age group of 35-44 years old, which is particularly attractive to
advertisers, will grow by 30.8% between 1990 and 2000.
According to Census Bureau reports, approximately 57% of the black
population in the United States is concentrated in the central cities of
metropolitan areas, compared to 31% of the total population. BET Cable Network
has affiliation agreements with cable operators in each of the top 50
metropolitan areas and distributes its programming to cable systems in each of
the 10 media markets in the United States with the largest black populations.
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Ratings
Since 1987, Nielsen has provided the Company with metered audience
measurements. Nielsen's metered estimates are widely accepted by advertisers as
a basis for determining placement strategy. The Company also uses these
subscriber estimates for the purpose of determining the rates that the BET Cable
Network will charge advertisers for commercial air time within its programs.
According to Nielsen's most recent prime time audience measurements (July 1,
1996 to September 29, 1996), BET Cable Network's ratings averaged approximately
.6. This signifies that during that period (based on Nielsen estimates), on
average, approximately 284,000 homes were tuned in to the BET Cable Network
during prime time. In addition, Nielsen reports the BET Cable Network's prime
time rating for black cable households reached by the BET Cable Network. For the
most recent period (July 1, 1996 to September 29, 1996), the BET Cable Network's
prime time black household ratings averaged approximately 3.4 indicating that
approximately 233,000 black households were tuned in to the BET Cable Network
during prime time. The Company believes the BET Cable Network's average prime
time ratings are competitive with the average prime time ratings of other basic
cable programming services with a targeted viewing audience, which ranged from
.3 to 1.5 according to the most recent Nielsen report (July 1, 1996 to September
29, 1996).
Programming
The BET Cable Network provides a full range of black-oriented programming.
Most of BET Cable Network's programs feature black actors and performers in
leading or dominant roles or reflect the black cultural experience. BET Cable
Network independently produces the majority of its programming and acquires the
remainder from various external sources. Program offerings include hosted music
video programs, off-network sitcoms, stand-up comedy, news and public affairs
programming, entertainment specials and concert performances. The programs are
transmitted via satellite from the Company's facilities in Washington, D.C. to
BET Cable Network's cable system affiliates.
Originally Produced Programming
In fiscal 1996, most of the BET Cable Network's programmed hours (excluding
infomercial advertising) were produced by the Company. The majority of the
programming produced by the Company consists of hosted music video programs,
such as Video Soul and its successor UnReal, featuring urban contemporary music,
and Rap City, featuring rap music. The programs also feature live entertainment
and in-depth interviews with guest artists. Record companies provide the Company
with music videos in exchange for the promotional benefits gained by their
artists through exposure on BET Cable Network.
Regularly produced programs also include entertainment related shows, such
as Comic View, a stand-up comedy show, Teen Summit, a daily program which
addresses issues affecting black youth, and Screen Scene, an entertainment
oriented magazine style show. The Company also produces a variety of news and
public affairs programming such as BET News, a weekly, half-hour news program
dealing with issues of primary concern to black Americans, BET Talk, an issues
oriented talk show featuring viewer participation, Lead Story, a news digest
examining national issues of particular concern to black Americans, and Our
Voices, a half-hour live call-in talk show designed to permit viewers to express
their opinions on various issues of interest to black Americans.
Programming is produced in two state-of-the-art production facilities owned
by the Company and located in Washington, D.C. Another studio is leased and is
located in Burbank, California. The production facilities in Washington, D.C.,
include four major production studios and six edit suites, while the facility in
Burbank has one production studio and two edit suites.
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Acquired Programming
To complement its originally produced programming, the Company acquires
programs from various sources, including the broadcast networks, film companies
and program syndicators. The Company exhibits acquired programming pursuant to
licensing agreements with suppliers who generally own the copyrights to such
programming. Licenses to air acquired programming generally run for two years
and entitle the Company to show each episode several times. During fiscal 1997,
acquired programming will include situation comedies, such as Sanford, Thea and
Benson and specialty shows, such as The Bobby Jones Gospel Show and concerts
featuring various music talent.
Most of these acquired programs consist of off-network productions obtained
from the major syndicators. Management believes that acquiring the rights to air
high quality, off-network programming, such as situation comedies and
entertainment specials (rather than attempting to produce them independently) is
the most cost-effective way to provide its viewers with this kind of
programming. Although many of these programs are very popular with black
viewers, they may not have achieved ratings sufficient to justify their
continuation on a major broadcast network or as a first-run syndicated program.
Historically, BET Cable Network has often been the only national television
medium for many of these types of programs and, therefore, exhibition rights
have been relatively inexpensive. However, with the recent proliferation of
cable television programmers, obtaining rights to such programming has become
increasingly competitive and expensive.
Patents, Trademarks, Licenses
BET Cable Network neither holds nor depends upon any material patent,
trademark, license, franchise or concession except its registered trademark for
the letters "BET".
Competition
There is intense competition for viewers among companies providing
programming services via cable television and through other video delivery
systems. Accordingly, BET Cable Network also competes for available channel
space on cable television systems and for subscriber fees from cable operators
with other cable programming services and nationally distributed and local
television stations. BET Cable Network also competes for advertising revenues
with other national cable programming services, including superstations,
broadcast networks, local over-the-air television stations, broadcast radio and
the print media. In addition, BET Cable Network competes for advertising revenue
with other black targeted media, including black-oriented radio stations,
magazines, such as Ebony, Black Enterprise, Jet and Essence, and black-oriented
television programs, such as Soul Train. More generally, BET Cable Network
competes with various other leisure-time activities such as home videos, movie
theaters, and other alternative forms of information and entertainment.
Currently, music videos are included in approximately 60% of the Company's
programming. As is customary in the record industry, record companies provide
the Company with music videos in exchange for promotional considerations. If
the record industry were to change its current practice and begin to charge for
music videos, the Company's programming costs and operating margins may be
materially adversely affected if the Company was unable to receive adequate
compensation for the promotional value of its related airtime. The Company is
aware of one programming service, MTV, that has entered into exclusive
arrangements with record companies covering a limited number of artists.
Cable system channel capacity and competition in the cable industry may be
affected by technological advances, such as digital compression, which allows
cable systems to expand channel capacity, and "multiplexing", which allows
programming services to offer more than one feed of their programming. As a
result of the increased segmentation made possible by these advances, another
programming service might be able to provide programming that targets the
Company's viewing audience. MTV has announced plans to produce three separate
channels of programming, one of which might feature black urban contemporary
music. To the Company's knowledge, MTV does not have any present plan to offer
such a channel in the near future. The Company is
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aware, however, of several cable programmers that have announced plans to offer
programming targeted to the BET Cable Network's audience. Although there can be
no assurance, the Company believes that it will be able to compete effectively
against other programming services distributing music video programming targeted
to black Americans because of its extensive experience, capitalization,
established relationships within the cable industry, its reputation for
providing a broad mix of quality black-oriented programming and its identity as
a black owned and operated enterprise.
Other Entertainment Group Ventures
BET on Jazz: The Cable Jazz Channel
The Company launched BET on Jazz: The Cable Jazz Network ("BET on Jazz") in
January 1996. BET on Jazz is an advertiser-supported basic cable network
featuring jazz concerts, music videos and interviews with jazz artists. In
June 1996, BET on Jazz expanded overseas when it began providing programming to
cable systems located in the United Kingdom and South Africa. At July 31, 1996,
BET on Jazz reached over one million domestic and international households.
While BET on Jazz's domestic rate card provides for a monthly per subscriber fee
of $.05, its affiliation agreements provide for up to a two year free carriage
period. While current marketing efforts indicate that it may be able to
negotiate more favorable affiliation fees and launch support terms with
international cable system operators, such terms are not assured until
significant international subscriber penetration is achieved. Accordingly, BET
on Jazz is not expected to earn a significant level of revenue in the near
future.
Action Pay-Per-View
The Company's pay-per-view operations are conducted by Action Pay-Per-View
("Action") and represented approximately 7% of the Company's revenues in fiscal
1996. Action is a satellite-delivered television network which offers
programming on a pay-per-view basis to cable systems operators and, to a lesser
extent, home satellite dish owners.
Action has entered into affiliation agreements with cable system operators
which provide for the offering of Action's programming to affiliated cable
system subscribers on a pay-per-view basis. Cable system subscribers purchase
Action's programming from their cable system operator on a one-time viewing for
a fixed charge basis of approximately $5. Affiliated cable systems remit to
Action a contractually specified portion of such revenues. At July 31, 1996,
Action's programming was available to approximately 8.2 million addressable
homes.
Action acquires all of its programming from third parties including major
film studios such as Warner Bros., Paramount, Universal, Twentieth Century Fox,
Columbia/Tri Star, Disney, MGM and others. Typical pay-per-view licenses entitle
film studios to the greater of a minimum rental amount or a share of the gross
revenue generated at the consumer level from the purchase of the pay-per-view
film.
Action competes with several other companies which offer feature film
programming on a pay-per-view basis, some of which may have substantially
greater resources than Action and the Company. More generally, Action competes
with other segments of the entertainment industry, including network and cable
television, theater showing of films and video tape sales and rentals.
Direct Marketing
In May 1996, the Company's merchandising subsidiary, BET Direct, Inc.,
launched the Color Code line of skin care products for women of color. Initial
distribution has been limited with national distribution scheduled for February
1997.
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PUBLISHING GROUP
Advertising and subscriber revenues earned by the Publishing Group
represented 4% of the Company's total operating revenues in fiscal 1996.
Emerge Communications, Inc.
On December 31, 1991, the Company acquired control of ECI, the publisher of
Emerge, a general interest magazine aimed at a predominantly black audience that
is published ten times a year. Since December 31, 1991, the Company has
consolidated the entire results of operations for ECI into the Company's
financial statements. During the year ended July 31, 1995, the Company
increased its ownership interest in ECI to 100%.
For the fiscal year ended July 31, 1996, Emerge's paid circulation
(including subscriptions and newsstand sales) approximated 160,000.
Paige Publications, Inc.
The Company's wholly owned subsidiary, Paige Publications, Inc., publishes
YSB, a general lifestyle magazine aimed at black teenagers and young adults, ten
times a year. In September 1996, the Company announced that it would
discontinue publishing YSB, which incurred operating losses of approximately $2
million during each of fiscal years 1996 and 1995.
EQUITY INVESTEES
Film Production
BET Film Productions
In fiscal 1994, the Company, in a joint venture with Encore Media Corp. and
LIVE Entertainment, Inc., established BET Film Productions, which was formed to
produce and distribute black, action-oriented independent feature films. BET
Film Productions has produced two films: Out of Sync and Spirit Lost, which is
scheduled for release in February 1997.
BET Pictures
In fiscal 1994, the Company, in a joint venture with Blockbuster
Entertainment Corp., formed BET Pictures to produce and distribute black,
family-oriented films. BET Pictures has produced one film, Once Upon a
Time...When We Were Colored.
United Image Entertainment
United Image Entertainment ("UIE"), a joint venture with actor and producer
Tim Reid and his production company and Butch Lewis Productions, Inc., produces
black-oriented films, mini-series and situation comedies for cable television,
pay television and the broadcast networks by developing concepts for such
vehicles and then seeking the financial support of programmers to produce
particular projects. Certain projects co-produced by UIE, such as Race to
Freedom: The Underground Railroad, are aired on the BET Cable Network.
Additionally, UIE has co-produced all of the films produced by BET Film
Productions and BET Pictures.
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Publishing
BET Weekend
In fiscal year 1996, in a joint venture with the New York Daily News, the
Company began publication of BET Weekend, a Sunday newspaper supplement. BET
Weekend is currently published quarterly and distributed by seven metropolitan
newspapers to over one million subscribers. As reader and advertiser interest
increases, the joint venture expects to move to monthly and ultimately to weekly
publication.
SATELLITE DISTRIBUTION
The Company transmits all BET Cable Network programming from its production
facility located in Washington, D.C., by means of an earth station transmitting
antenna (called an "uplink") which the Company owns. The Company operates the
uplink facility, which transmits the BET Cable Network's programming signal over
Galaxy V, an orbiting communications satellite on which the Company owns a
transponder, to cable system headend receiving antennae throughout the United
States, its territories and possessions.
The Company contracts with IDB Communications Group, Inc. ("IDB") to
transmit BET Action Pay-Per-View programming by means of an uplink. IDB
transmits Action's programming signal over Galaxy VII, an orbiting
communications satellite on which the Company owns a transponder, to cable
system headend receiving antennae throughout the United States. The Company
leases an additional transponder on Galaxy VII which it uses to distribute BET
on Jazz.
REGULATION
Although the vast majority of the Company's operations are not subject to
federal regulation, the operations of cable television systems, satellite
distribution systems and broadcast television program distribution companies are
subject to the Communications Act of 1934, as amended, and to regulatory
supervision thereunder by the Federal Communications Commission (the "FCC").
The Company's uplink and microwave facilities are licensed by the FCC and must
be operated in conformance with the terms and conditions of those licenses.
Cable systems are also subjected to local franchise authority regulation.
Local Cable Regulation
The cable television industry is regulated by municipalities or other local
government authorities which have the jurisdiction to grant and to assign
franchises and to negotiate generally the terms and conditions of such
franchises, including rates charged to subscribers, except to the extent that
such jurisdiction is pre-empted by federal law. Any such rate regulation may
place downward pressure on the subscriber fees earned by the Company.
Federal Cable Re-regulation
The Company is regulated under the Communications Act of 1934 (the
"Communications Act"), as it was most recently amended by the Telecommunications
Act of 1996. The Telecommunications Act of 1996 (the "1996 Act" or sometimes
the "Act") is responsible for the most significant changes in communications law
and regulation since enactment of the Communications Act. The 1996 Act amends
the provisions of the Communications Act concerning cable television systems and
other multichannel video programming services. For example, the Act provides
guidelines for the entry of telephone companies into the provision of video
services within their telephone service areas and alters existing rate
regulation. More specifically, rate regulation for cable programming service
("CPS") or "expanded basic" tiers will end immediately for certain small cable
operators, and will end for all cable systems in 1999. Rate regulation will
also end for particular cable operators if a local exchange carrier, or any
other multichannel distributor using the telephone company's facilities, offers
comparable programming services in
9
<PAGE>
such cable operators' franchise areas by any means other than direct broadcast
satellite ("DBS"). These changes in federal regulation are expected to have a
beneficial impact, to some degree, on the future growth of BET and BET on Jazz,
although the extent of such impact cannot yet be determined.
EMPLOYEES
As of July 31, 1996, the Company employed 436 people. Although none of the
Company's employees are subject to collective bargaining agreements, as of July
31, 1996, the BET Cable Network was in negotiations with a local labor
bargaining agent with respect to a group of approximately 40 of the BET Cable
Network's labor force. The Company does not believe any collective bargaining
agreement resulting from such negotiations will have a material effect on the
Company as its scope would affect personnel whose skills are readily available
in the local labor market. The Company has never experienced a strike or work
stoppage.
ITEM 2. PROPERTIES
The company owns its corporate office facility, which is located at One BET
Plaza, 1900 W Place, N.E. in Washington, D.C. The Company's corporate office
facility houses its executive staff, administrative staff, BET Cable Network's
and BET on Jazz's principal affiliate sales offices and the principal offices of
Emerge and BET Direct. The Company also owns its production facility located at
1899 9th Street, N.E. in Washington, D.C., which is adjacent to the Company's
corporate office facility. The corporate office and production facilities are
constructed on property that the Company leases from the District of Columbia
pursuant to a long-term lease. The initial expiration date of the lease is
October 1, 2013. At the Company's option, the Company may extend the term for
three successive 15 year periods. The lease also contains an option to purchase
the land.
Additionally, the Company currently leases a production studio and office
space at 2801 West Olive Avenue in Burbank, California. The lease for this
commercial space has been extended to January 1997. The lease is not renewable
by its terms but the Company has not experienced difficulties in negotiating
extensions to the lease in the past.
BET Cable Network's principal advertising sales offices are located at 380
Madison Avenue in New York City, where the Company leases space under a long-
term lease expiring in December 2002. The Company also leases office space at
2425 West Olympic Boulevard in Santa Monica, California under a lease expiring
in December 1997. The space is used to house substantially all of Action's
staff as well as certain members of BET Cable Network's advertising sales and
affiliate sales staffs. Additional advertising sales offices are located in
Chicago and the Detroit area.
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time engaged in legal proceedings incidental to
its business. The Company does not believe that any legal proceedings that it
is currently engaged in, either individually or in the aggregate, will have a
material adverse effect on the Company's financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1996.
10
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of October 11, 1996 and their ages
and positions with the Company are set forth below.
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------------------------------------------------------
<S> <C> <C>
Robert L. Johnson 50 Chairman of the Board of Directors, Chief
Executive Officer
Debra L. Lee 42 President and Chief Operating Officer
William T. Gordon, III 43 Executive Vice President, Chief Financial
Officer and Treasurer
James A. Ebron 42 Executive Vice President, Media Sales
Sheila Crump Johnson 47 Executive Vice President, Corporate Affairs
and Director
Jefferi K. Lee 39 Executive Vice President, Network Operations
and Programming
Curtis N. Symonds 41 Executive Vice President, Affiliate Sales and
Marketing
Janis P. Thomas 41 Executive Vice President, Marketing and
Merchandising
</TABLE>
The executive officers of the Company serve at the pleasure of the Board of
Directors. The following is a brief description for at least the past five
years of the current executive officers of the Company.
Mr. Johnson founded BET, the Company's primary operating subsidiary, in 1979.
Mr. Johnson has served as President, Chief Executive Officer and a director of
BET since its creation. Since 1991 Mr. Johnson also served as the Chairman of
the Board of Directors. Since 1991, Mr. Johnson also served as Chief Executive
Officer of the Company and has served as its President from 1991 until March
1996. Mr. Johnson is also the Chairman of District Cablevision, Inc., a
Washington, D.C. cable system operating company which he founded in 1980, and
has served as a director of Liberty Media Corporation since December 1991. Since
January 1994, Mr. Johnson has served as a director of Hilton Hotels Corporation.
Ms. Lee has served as President and Chief Operating Officer since March 1996.
Prior to that time Ms. Lee served as an Executive Vice President of the Company
since September 1992. Since September 1991, she has also served as the General
Counsel and Secretary of the Company. From September 1991 to September 1992,
she served as a Vice President of the Company. Ms. Lee has also served as Vice
President and General Counsel of BET since April 1986. In July 1991, she became
the Secretary of BET.
Mr. Gordon has served as Executive Vice President, Chief Financial Officer and
Treasurer since August 1993. From 1987 to 1993, Mr. Gordon was a partner with
the accounting firm of Price Waterhouse LLP. Mr. Gordon was BET's audit partner
on behalf of Price Waterhouse, LLP between 1989 and early 1992. Mr. Gordon
joined Price Waterhouse in 1975.
Mr. Ebron has served as Executive Vice President, Media Sales since September
1992. Prior to that time, Mr. Ebron served as Vice President, Network Sales of
the Company from September 1991 to September 1992. He served as Vice President,
Network Sales of BET from August 1983 until September 1991.
Since September 1992, Mrs. Johnson has served as Executive Vice President,
Corporate Affairs of the Company. From September 1991 to September 1992, she
served as Vice President, Corporate Affairs of the Company. Since 1979 she has
served as a director of BET and, since 1990, as Vice President, Corporate
Affairs of BET. Prior to 1990, Mrs. Johnson was a lecturer and author in the
area of early childhood music education.
Mr. Lee has served as Executive Vice President, Network Operations and
Programming since September 1992. Mr. Lee served as Vice President, Network
Operations of the Company from September 1991 to September 1992 and of BET
since September 1982.
Mr. Symonds has served as Executive Vice President, Affiliate Sales and
Marketing since September 1992. Mr. Symonds served as Vice President, Affiliate
Marketing of the Company from September 1991 to September 1992 and of BET since
July 1988.
11
<PAGE>
Ms. Thomas is Executive Vice President, Marketing and Merchandising. She
previously served as Executive Vice President, Direct Marketing and Advertising
Services since September 1992. Ms. Thomas served as Vice President, Advertising
of the Company from September 1991 to September 1992 and of BET since September
1982.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information regarding the market for the Company's Class A Common Stock,
number of shareholders and dividends is included under the captions entitled
"Price Range of Common Stock" and "Selected Consolidated Financial Data" and in
the Notes to Consolidated Financial Statements in the Company's 1996 Annual
Report to Shareholders and is incorporated herein by reference.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
A summary of selected consolidated financial data for the Company for the
five years in the period ended July 31, 1996 is included under the caption
entitled "Selected Consolidated Financial Data" on page 24 of the Company's 1996
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Information regarding the Company's results of operations and financial
condition is included under the caption entitled "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 25 through
29 of the Company's 1996 Annual Report to Shareholders and is incorporated
herein by reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The consolidated financial statements, notes thereto and supplementary data
of the Company, which are included on pages 30 through 42 of the 1996 Annual
Report to Shareholders under the following captions listed below, are
incorporated herein by reference.
Consolidated Balance Sheets at July 31, 1996 and 1995.
Consolidated Statements of Income for the three years in the period ended
July 31, 1996.
Consolidated Statements of Cash Flows for the three years in the period
ended July 31, 1996.
Consolidated Statements of Changes in Shareholders' Equity for the three
years in the period ended July 31, 1996.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
Unaudited Quarterly Financial Information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to directors of the Company is set forth under the
caption entitled "Election of Directors" in the Company's 1996 Proxy Statement
and is incorporated herein by reference. Certain information concerning the
executive officers of the Company is set forth in Part I of this report pursuant
to General Instruction G(3) of Form 10-K under the caption entitled "Executive
Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
The information regarding compensation of officers and directors of the
Company is set forth under the caption entitled "Executive Compensation" in the
Company's 1996 Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding ownership of certain of the Company's securities is set
forth under the captions entitled "Security Ownership of Certain Beneficial
Owners" and "Security Ownership of Management" in the Company's 1996 Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions with the
Company is set forth under the caption entitled "Certain Relationships and
Related Transactions" in the Company's 1996 Proxy Statement and is incorporated
herein by reference.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements and report of independent accountants
(which are set forth on pages 30 through 41 of the Company's 1996 Annual Report
to Shareholders) are incorporated herein by reference (see Exhibit 13).
Consolidated Balance Sheets at July 31, 1996 and 1995.
Consolidated Statements of Income for the three years in the period ended July
31, 1996.
Consolidated Statements of Cash Flows for the three years in the period ended
July 31, 1996.
Consolidated Statements of Changes in Shareholders' Equity for the three years
in the period ended July 31, 1996.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
(a)(2) Financial Statement Schedules for the three years in the period ended
July 31, 1996
Schedule Page
Number Description Number
- ------ ----------- ------
II Valuation and Qualifying Accounts and Reserves S-1
The report of the Company's independent accountants with respect to the
above-referenced financial statement schedule appears on page 20 of this report.
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
15
<PAGE>
(a)(3) Exhibits
Exhibit
Number Description
_______ ___________
3(i) Restated Certificate of Incorporation of Registrant (incorporated by
reference to Exhibit 3.3 to Amendment No. 4 to the Company's
Registration Statement on Form S-1, Registration No. 33-42853, filed
with the Commission on October 30, 1991)
3(ii) Bylaws, as amended, of Registrant (incorporated by reference to
Exhibit 3.4 to Amendment No. 4 to the Company's Registration Statement
on Form S-1, Registration No. 33-42853, filed with the Commission on
October 30, 1991)
4.1 Note Agreement, dated January 30, 1990, between Aetna Life Insurance
Company and Black Entertainment Television, Inc., as amended by the
Guaranty, Consent and Amendment to Note Agreement, dated September 5,
1991 (incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-1, Registration No. 33-42853, filed
with the Commission on September 18, 1991)
4.2 Revolving Credit and Guaranty Agreement among Bank of New York, Black
Entertainment Television, Inc. and BET Holdings, Inc. dated December
13, 1995
10.1 Ground Lease, dated as of March 18, 1988, by and between the District
of Columbia and Black Entertainment Television, Inc. (incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement on
Form S-1, Registration No. 33-42853, filed with the Commission on
September 18, 1991)
10.2 Ground Lease, dated May 4, 1993 between BET Acquisition, Inc. and the
District of Columbia (incorporated by reference to Exhibit 10.18 to
the Company's Form 10-K for the fiscal period ended July 31, 1992)
10.3 Plan of Recapitalization for BET Holdings, Inc. (incorporated by
reference to Exhibit 3.3 of Amendment No. 4 to the Company's
Registration Statement on Form S-1, Registration No. 33-42853, filed
with the Commission on October 30, 1991)
10.4 Trustee's Assignment of Ground Lease, dated March 19, 1992, by and
between Leonard W. Harrington, Jr., Substitute Trustee, appointed by
Deed of Appointment of Substitute Trustee dated August 29, 1990, and
recorded August 31, 1990, as instrument no. 48429, and Black
Entertainment Television, Inc. (incorporated by reference to Exhibit
10.11 to the Company's Form 10-K for the fiscal period ended July 31,
1992)
10.5 Assignment of Purchase Agreement, dated March 17, 1992, between Black
Entertainment Television, Inc. and BET Acquisition Corp. (incorporated
by reference to Exhibit 10.12 to the Company's Form 10-K for the
fiscal period ended July 31, 1992)
10.6 Form of Agreement Among Stockholders among BET Holdings, Inc., Robert
L. Johnson, TW/BET Holdings Co. and LMC BET Inc. dated November 6,
1991 (incorporated by reference to Exhibit 10.6 to the Company's Form
10-K for the fiscal period ended July 31, 1994)
16
<PAGE>
(a)(3) Exhibits
Exhibit
Number Description
_______ ___________
10.7 Affiliation Agreement, dated as of January 1, 1989, between Black
Entertainment Television, Inc. and American Television and
Communications Corporation (incorporated by reference to Exhibit 10.4
to the Company's Registration Statement on Form S-1, Registration No.
33-42853, filed with the Commission on September 18, 1991)
10.8 Affiliation Agreement, dated as of January 1, 1989, between Black
Entertainment Television, Inc. and Satellite Services, Inc.
(incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-1, Registration No. 33-42853, filed
with the Commission on September 18, 1991)
10.9 Amended Affiliation Agreement dated March 3, 1993 between Black
Entertainment Television, Inc. and Satellite Services, Inc.
(incorporated by reference to Exhibit 10.9 to the Company's Form 10-K
for the fiscal period ended July 31, 1993)
10.10 Letter Agreement, dated January 29, 1991, among Time Warner Inc.,
Butch Lewis Productions, Inc. and Black Entertainment Television,
Inc., together with Agreement, dated as of January 1, 1991, among
Butch Lewis Productions, Inc., Black Entertainment Television, Inc.,
Joe Brown and Adrienne L. Brown (incorporated by reference to Exhibit
10.6 to the Company's Registration Statement on Form S-1, Registration
No. 33-42853, filed with the Commission on September 18, 1991)
10.11 Transponder Lease Agreement, dated January 1, 1993, between Avalon
Pictures, Inc. and IDB Communications Group, Inc. (incorporated by
reference to Exhibit 10.11 to the Company's 10-K for the fiscal period
ended July 31, 1993)
10.12 Black Entertainment Television, Inc. TVRO Affiliation Agreement with
HBO Satellite Services, Inc., dated as of February 9, 1990, together
with Letter Agreement from HBO Satellite Services, Inc. to Black
Entertainment Television, Inc. dated March 24, 1992 (incorporated by
reference to Exhibit 10.18 to the Company's Form 10-K for the fiscal
period ended July 31, 1992)
10.13 Purchase Agreement among Black Entertainment Television, Inc., The
Time Inc. Magazine Company and Emerge Communications, Inc., dated as
of December 31, 1991 (incorporated by reference to Exhibit 10.19 to
the Company's Form 10-K for the fiscal period ended July 31, 1992)
10.14 BET Holdings, Inc. Incentive Plan (incorporated by reference to
Exhibit 10.9 to the Company's Registration Statement on Form S-1,
Registration No. 33-42853, filed with the Commission on September 18,
1991)
10.15 BET Holdings, Inc. 1991 Executive Stock Option Plan as amended and
restated August 1, 1994 (incorporated by reference to Exhibit 10.15 to
the Company's Form 10-K for the fiscal period ended July 31, 1995)
10.16 Black Entertainment Television, Inc. 401(k) Profit Sharing Plan
(incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-1, Registration No. 33-42853, filed
with the Commission on September 18, 1991)
17
<PAGE>
(a)(3) Exhibits
Exhibit
Number Description
_______ ___________
10.17 Agreement by and between BET Pictures, Inc., Live Ventures, Inc. and
QE+ Limited dated February 1, 1994 (incorporated by reference to
Exhibit 10.17 to the Company's Form 10-K for the fiscal period ended
July 31, 1994)
10.18 Agreement by and between BET Pictures, Inc., and New River
Entertainment Corp. dated December 21, 1993 (incorporated by reference
to Exhibit 10.18 to the Company's Form 10-K for the fiscal period
ended July 31, 1994)
10.19 Purchase Agreement among Black Entertainment Television, Inc., Syncom
Capital corporation, Towers Ventures, Inc., Future Value Ventures,
Inc., Opportunity Capital Corporation, District Cablevision, Inc., the
Estate of Dean E. Stetz, and Emerge Communications, Inc., dated
September 26, 1994 (incorporated by reference to Exhibit 10.19 to the
Company's Form 10-K for the fiscal period ended July 31, 1994)
10.20 Purchase Agreement among Black Entertainment Television, Inc., Time
Inc. and Emerge Communications, Inc. dated October 7, 1994
(incorporated by reference to Exhibit 10.20 to the Company's Form 10-K
for the fiscal period ended July 31, 1994)
10.21 Transponder Lease Agreement for Galaxy VII between Hughes
Communication Galaxy, Inc., and BET Satellite Services, Inc.,
(incorporated by reference to Exhibit 10.21 to the Company's Form 10-K
for the fiscal period ended July 31, 1994 as amended by Form 10K-A
Amendment No.2 the Form 10K).
10.22 Transponder Lease Agreement for Galaxy VII between Hughes
Communications Galaxy, Inc., and BET Satellite Services, Inc.,
(incorporated by reference to Exhibit 10.22 to the Company's Form 10-K
for the fiscal period ended July 31, 1994 as amended by Form 10K-A
Amendment No.2 the Form 10K).
10.23 BET Holdings, Inc. Incentive Plan for the President, effective August
1, 1994 (incorporated by reference to Exhibit 10.23 to the Company's
Form 10-K for the fiscal period ended July 31, 1995)
10.24 Amendment No. 1 to the BET Holdings, Inc. Incentive Plan (incorporated
by reference to Exhibit 10.24 to the Company's Form 10-K for the
fiscal period ended July 31, 1995)
10.25 Addendum to Transponder Lease Agreement for Galaxy VII between Hughes
Communications Galaxy, Inc. and BET Satellite Services, Inc.
(incorporated by reference to Exhibit 10.25 to the Company's Form 10-Q
for the fiscal period ended January 31, 1996)
10.26 Stock Purchase Agreement between Time Warner Entertainment Company,
L.P. and BET Holdings, Inc. dated November 1, 1995 (incorporated by
reference to Exhibit 10.1 to the Company's Form 8-K filed November 1,
1995)
10.27 Transponder Lease Agreement between Orion Atlantic, L.P. and BET
Satellite Services, Inc. dated June 1, 1996
10.28 Joint Venture Agreement between Daily News, L.P. and Black
Entertainment Television, Inc. dated July 31, 1996
13 1996 Annual Report to Shareholders (with the exception of the
information expressly incorporated by reference in Items 1,5,6,7 and 8
of this report, the 1996 Annual Report to Shareholders is not to be
deemed "filed" with the Securities and Exchange Commission or
otherwise subject to the liabilities of Section Exchange Act of 1934)
21 Subsidiaries of the Company
23 Consent of Independent Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of fiscal year
1996.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the 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.
BET HOLDINGS, INC.
By: /s/ Robert L. Johnson
----------------------------------------------
Robert L. Johnson
Chairman of the Board and
Chief Executive Officer
Date: October 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert L. Johnson Chief Executive Officer and Director October 29, 1996
- ------------------------------------
Robert L. Johnson
/s/ William T. Gordon, III Chief Financial Officer and Treasurer October 29, 1996
- ------------------------------------ (Principal Financial and Accounting Officer)
William T. Gordon, III
/s/ Peter Barton Director October 29, 1996
- ------------------------------------
Peter Barton
/s/ Sheila Crump Johnson Director October 29, 1996
- ------------------------------------
Sheila Crump Johnson
/s/ Delano E. Lewis Director October 29, 1996
- ------------------------------------
Delano E. Lewis
/s/ John C. Malone Director October 29, 1996
- ------------------------------------
John C. Malone
/s/ Herbert P. Wilkins, Sr. Director October 29, 1996
- ------------------------------------
Herbert P. Wilkins, Sr.
</TABLE>
19
<PAGE>
Report of Independent Accountants on Financial Statement Schedule
-----------------------------------------------------------------
To the Board of Directors of BET Holdings, Inc.
Our audits of the consolidated financial statements referred to in our report
dated September 20, 1996 appearing on page 41 of the BET Holdings, Inc. 1996
Annual Report (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-
K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ Price Waterhouse LLP
- ------------------------------
PRICE WATERHOUSE LLP
Washington, D.C.
September 20, 1996
20
<PAGE>
SCHEDULE II
BET HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands of dollars)
<TABLE>
<CAPTION>
Additions
------------------------------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end
Description of period expenses accounts Deductions of period
----------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended July 31, 1994
Allowance for doubtful
accounts $ 379 $1,182 $ - $ 588 (1) $ 973
====== ====== ====== ===== ======
Year ended July 31, 1995
Allowance for doubtful
accounts $ 973 $1,266 $ - $876 (1) $1,363
Deferred tax asset
valuation allowance - - 3,893 (2) - 3,893
------ ------ ------ ---- ------
$ 973 $1,266 $3,893 $876 $5,256
Year ended July 31, 1996 ====== ====== ====== ==== ======
Allowance for doubtful
accounts $1,363 $ 599 $ - $419 (1) $1,543
Deferred tax asset
valuation allowance 3,893 - - - 3,893
------ ------ ------- ---- ------
$5,256 $ 599 $ - $419 $5,436
====== ====== ======= ==== ======
</TABLE>
- ----------------------------
(1) Write-off of uncollectible amounts, net of recoveries.
(2) Represents valuation allowance related to net operating loss carryforwards
of Emerge Communications, Inc. (ECI) for income tax reporting purposes
established pursuant to the purchase method of accounting in connection
with the Company's increased ownership interest in ECI.
S-1
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REVOLVING CREDIT AND GUARANTY AGREEMENT
by and among
BLACK ENTERTAINMENT TELEVISION, INC.,
as Borrower,
BET HOLDINGS, INC.,
as Guarantor,
THE LENDERS PARTY HERETO,
AND
THE BANK OF NEW YORK, AS AGENT
________________
$75,000,000
________________
Dated as of December 13, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INDEX
1. Revolving Credit and Guaranty Agreement, dated as of December 13, 1995, by
and among Black Entertainment Television, Inc. (the "Borrower"), BET
--------
Holdings, Inc. (the "Guarantor"), the Lenders party thereto and The Bank of
---------
New York, as Agents (the "Agent").
-----
2. Notes, each dated December 13, 1995, made by the Borrower to:
(i) The Bank of New York Company, Inc.;
(ii) The Riggs National Bank of Washington, D.C.;
(iii) Crestar Bank;
(iv) Industrial Bank N.A.; and
(v) Nationsbank of Texas, N.A.
3. Secretary's Certificate of the Borrower, dated as of December 13, 1995,
certifying as to the incumbency of certain officers and setting forth
signature specimens of the same and attaching:
(a) Articles of Incorporation;
(b) By-Laws;
(c) Resolutions of the Board of Directors;
(d) Good standing certificate issued by the Department of Consumer and
Regulatory Affairs of the District of Columbia; and
(e) Note Agreement, dated as of January 30, 1990, between the Borrower
and the purchasers named therein, as amended by the Guaranty,
Consent and Amendment, dated as September 5, 1991.
4. Secretary's Certificate of the Guarantor, dated as of December 13, 1995,
certifying as to the incumbency of certain officers and setting forth
signature specimens of the same and attaching:
(a) Amended and Restated Certificate of Incorporation;
(b) By-Laws;
(c) Resolutions of the Board of Directors;
(d) Good standing certificate issued by the Secretary of State of the
State Delaware;
(e) Stock Purchase Agreement between the Guarantor and Time Warner
Entertainment Company, L.P., dated as of November 1, 1995; and
(f) Noncompetition Agreement by and between the Guarantor Time Warner
Inc., dated as of November 1, 1995.
5. Certificate of the Executive Vice President and General Counsel of the
Borrower and the Guarantor, dated as of December 13, 1995, certifying (i)
as to the absence of litigation and (ii) that all approvals and consents
have been obtained, all required notices have been given and all required
waiting periods have expired.
<PAGE>
6. Certificate of the Executive Vice-President, Finance, Chief Financial
Officer and Treasurer of the Borrower and the Guarantor, dated as of
December 13, 1995, certifying (i) the Leverage Ratio is 1.68:1.00, (ii) the
ratio of EBITDA to Pro-Forma Debt Service is 5.23:100, (iii) the ratio of
EBITDA to Interest Expense is 13.62:1.00, (iv) there exists no Default or
Event of Default and (v) the representations and warranties contained in
the Loan Documents are true and correct in all material respects.
7. Borrowing Request, dated December 13, 1995, made by the Borrower and the
Guarantor to the Agent.
8. Opinion of Skadden, Arps, Slate, Meagher & Flom, special counsel to the
Borrower and the Guarantor, dated December 13, 1995.
9. Opinion of Debra L. Lee, Executive Vice President and General Counsel of
the Borrower and the Guarantor, dated December 13, 1995.
10. Opinion of Weil, Gotshal & Manges, special counsel to the Borrower, dated
December 12, 1995.
11. Opinion of Emmet, Marvin & Martin, LLP, Special Counsel to the Agent, dated
December 13, 1995.
-2-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.............................. 1
1.1. Definitions....................................................... 1
1.2. Principles of Construction........................................ 14
2. AMOUNT AND TERMS OF LOANS............................................... 15
2.1. Loans............................................................. 15
2.2. Notes............................................................. 15
2.3. Procedure for Borrowing........................................... 15
2.4. Termination or Reduction of Aggregate Commitments................. 17
2.5. Prepayments of the Loans.......................................... 17
2.6. Conversions and Continuations..................................... 17
2.7. Interest Rate and Payment Dates................................... 19
2.8. Substituted Interest Rate......................................... 20
2.9. Taxes............................................................. 21
2.10. Illegality........................................................ 22
2.11. Increased Costs................................................... 22
2.12. Indemnification for Loss.......................................... 23
2.13. Survival of Certain Obligations................................... 24
2.14. Use of Proceeds................................................... 24
2.15. Capital Adequacy.................................................. 25
2.16. Agent's Records................................................... 25
3. FEES; PAYMENTS.......................................................... 25
3.1. Commitment Fee.................................................... 25
3.2. Agent's Fees...................................................... 26
3.3. Pro Rata Treatment and Application of Principal Payments.......... 26
4. REPRESENTATIONS AND WARRANTIES.......................................... 26
4.1. Subsidiaries; Capitalization...................................... 26
4.2. Existence and Power............................................... 27
4.3. Authority......................................................... 27
4.4. Binding Agreement................................................. 27
4.5. Litigation........................................................ 27
4.6. Required Consents................................................. 27
4.7. No Conflicting Agreements......................................... 28
4.8. Compliance with Applicable Laws................................... 28
4.9. Taxes............................................................. 28
4.10. Governmental Regulations.......................................... 28
4.11. Federal Reserve Regulations; Use of Loans Proceeds................ 29
4.12. Plans............................................................. 29
4.13. Financial Statements.............................................. 29
4.14. Property.......................................................... 30
4.15. Franchises, Intellectual Property, Etc............................ 30
4.16. Environmental Matters............................................. 30
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.17. Labor Relations................................................. 31
4.18. Solvency........................................................ 31
4.19. Absence of Certain Restrictions................................. 31
4.20. Burdensome Obligations.......................................... 32
4.21. FCC and Copyright Matters....................................... 32
5. CONDITIONS TO FIRST LOANS.............................................. 32
5.1. Evidence of Action.............................................. 32
5.2. This Agreement.................................................. 33
5.3. Notes........................................................... 33
5.4. Litigation...................................................... 33
5.5. Certain Documents............................................... 33
5.6. Approvals....................................................... 33
5.7. Opinion of Counsel to the Borrower and the Guarantor............ 34
5.8. Opinion of Special Counsel...................................... 34
5.9. Fees............................................................ 34
5.10. Fees and Expenses of Special Counsel............................ 34
5.11. Cancellation of Stock of Guarantor.............................. 34
5.12. Compliance Certificate.......................................... 34
6. CONDITIONS TO LENDING - ALL LOANS...................................... 34
6.1. Compliance...................................................... 35
6.2. Borrowing Request............................................... 35
6.3. Federal Reserve Forms FR U-1.................................... 35
6.4. Legal Matters and Other Documents............................... 35
7. AFFIRMATIVE COVENANTS.................................................. 35
7.1. Financial Statements............................................ 35
7.1. Certificates; Other Information................................. 36
7.3. Legal Existence................................................. 38
7.4. Taxes........................................................... 39
7.5. Insurance....................................................... 39
7.6. Payment of Indebtedness and Performance of Obligations.......... 39
7.7 Condition of Property........................................... 39
7.8. Observance of Legal Requirements................................ 40
7.9. Inspection of Property; Books and Records; Discussions.......... 40
7.10. Licenses, Intellectual Property................................. 40
7.11. FCC Licenses, Etc............................................... 40
7.12. Leverage Ratio.................................................. 40
7.13. EBITDA to Pro-Forma Debt Service................................ 40
7.14. EBITDA to Interest Expense...................................... 41
7.15. Margin Stock of Guarantor....................................... 41
8. NEGATIVE COVENANTS..................................................... 41
8.1. Indebtedness.................................................... 41
8.2. Liens........................................................... 41
8.3. Merger, Consolidation or Sale of Assets, Etc.................... 42
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
8.4. Restricted Payments............................................ 43
8.5. Investments, Acquisitions, Loans, Etc. ........................ 43
8.6. Business and Name Changes ..................................... 44
8.7. Subsidiaries................................................... 44
8.8. Certificate of Incorporation and By-Laws....................... 44
8.9. ERISA.......................................................... 44
8.10. Sale and Leaseback............................................. 44
8.11. Fiscal Year.................................................... 44
8.12. Amendments, Etc. of Certain Agreements......................... 44
8.13. Transactions with Affiliates................................... 44
8.14. Limitation on Certain Restriction on Subsidiaries.............. 45
8.15. Limitation on Negative Pledge Clauses.......................... 45
8.16. Investments in Margin Stock.................................... 45
9. DEFAULT............................................................... 45
9.1. Events of Default.............................................. 45
10. THE AGENT............................................................. 48
10.1. Appointment.................................................... 48
10.2. Delegation of Duties........................................... 48
10.3. Exculpatory Provisions......................................... 48
10.4. Reliance by Agent.............................................. 49
10.5. Notice of Default.............................................. 49
10.6. Non-Reliance on Agent and Other Lenders........................ 50
10.7. Indemnification................................................ 50
10.8. Agent in Its Individual Capacity............................... 51
10.9. Successor Agent................................................ 51
11. OTHER PROVISIONS...................................................... 51
11.1. Amendments and Waivers......................................... 51
11.2. Notices........................................................ 52
11.3. No Waiver; Cumulative Remedies................................. 53
11.4. Survival of Representations and Warranties..................... 54
11.5. Payment of Expenses and Taxes.................................. 54
11.6. Lending Offices................................................ 54
11.7. Assignments and Participants................................... 55
11.8. Counterparts................................................... 56
11.9. Adjustments; Set-off........................................... 57
11.10. Construction.................................................. 57
11.11. Indemnity..................................................... 58
11.12. Governing Law................................................. 58
11.13. Headings Descriptive.......................................... 58
11.14. Severability.................................................. 58
11.15. Integration................................................... 59
11.16. Consent to Jurisdiction....................................... 59
11.17. Service of Process............................................ 59
11.18. No Limitation on Service or Suit.............................. 59
11.19. WAIVER OF TRIAL BY JURY....................................... 59
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
12. GUARANTY............................................................... 60
12.1. Guaranty......................................................... 60
12.2. Absolute Obligation.............................................. 60
12.3. Guaranty of Payment.............................................. 61
12.4. Repayment in Bankruptcy.......................................... 61
12.5. Waiver of Subrogation............................................ 61
12.6. Other Provisions in Guaranty..................................... 62
</TABLE>
EXHIBITS
- --------
Exhibit A List of Commitments
Exhibit B Form of Note
Exhibit C Form of Borrowing Request
Exhibit D Form of Compliance Certificate
Exhibit E Form of Assignment and Acceptance Agreement
Exhibit F Form of Opinion of Counsel to the Borrower and the Guarantor
Exhibit G Form of Opinion of Special Counsel
Exhibit H Form of Notice of Conversion/Continuation
SCHEDULES
- ---------
Schedule 1.1 List of Domestic Lending Offices
Schedule 4.1 List of Subsidiaries; Capitalization
Schedule 4.5 List of Litigation
Schedule 4.12 List of Existing Pension Plans
Schedule 4.14 List of FCC Investigations, Violations, Etc.
Schedule 8.1 List of Existing Indebtedness
Schedule 8.2 List of Existing Liens
Schedule 8.5 List of Existing Investments
-iv-
<PAGE>
REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of December 13, 1995, by
and among BLACK ENTERTAINMENT TELEVISION, INC., a District of Columbia
corporation, as borrower (the "Borrower"), BET HOLDINGS, INC., a Delaware
--------
corporation, as guarantor (the "Guarantor"), the lenders party hereto (together
---------
with their respective assigns, the "Lenders", each a "Lender") and THE BANK OF
------
NEW YORK, as agent for the Lenders (in such capacity, the "Agent").
-----
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
------------------------------------------
1.1. Definitions
-----------
As used in this Agreement, terms defined in the preamble have the
meanings therein indicated, and the following terms have the following meanings:
"ABR Advances": the Loans (or any portions thereof) at such time as
------------
they (or such portions) are made and/or being maintained at a rate of interest
based upon the Alternate Base Rate.
"Accountants": Price Waterhouse LLP (or any successor thereto), or
-----------
such other firm of certified public accountants of recognized national standing
selected by the Guarantor and reasonably satisfactory to the Agent.
"Accumulated Funding Deficiency": as defined in Section 302 of
------------------------------
ERISA.
"Advance": an ABR Advance or a Eurodollar Advance, as the case may
-------
be.
"Affected Advance": as defined in Section 2.8.
----------------
"Affiliate": as to any Person, any other Person which, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, control of a Person shall mean
the power, direct or indirect, (i) to vote 5% or more of the securities or other
interests having ordinary voting power for the election of directors or other
managing Persons thereof or (ii) to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Aggregate Commitments": on any date, the sum of all Commitments on
---------------------
such date.
"Agreement": this Revolving Credit and Guaranty Agreement, as the
---------
same may be amended, supplemented or otherwise modified from time to time.
"Alternate Base Rate": on any date, a rate of interest per annum
-------------------
equal to the higher of (i) the Federal Funds Rate in effect on such date plus
1/2 of 1% or (ii) the BNY Rate in effect on such date.
"Applicable Lending Office": in respect of any Lender, (i) in the
-------------------------
case of such Lender's ABR Advances, its Domestic Lending Office and (ii) in the
case of such Lend er's Eurodollar Advances, its Eurodollar Lending Office.
<PAGE>
"Applicable Margin": at all times during the applicable periods set
-----------------
forth below: (i) with respect to the unpaid principal amount of ABR Advances,
the applicable percentage set forth below next to the words "Alternate Base
Rate" and (ii) with respect to the unpaid principal amount of Eurodollar
Advances, the applicable percentage set forth below next to the words
"Eurodollar Rate":
<TABLE>
<CAPTION>
Applicable
Period Rate Margin
------ ---- ----------
<S> <C> <C>
when the Leverage Alternate Base Rate 0.0%
Ratio is greater Eurodollar Rate 0.750%
than or equal to
2.50:1.00
when the Leverage Alternate Base Rate 0.0%
Ratio is equal to Eurodollar Rate 0.625%
or greater than
2.00:1.00 but less
than 2.50:1.00
when the Leverage Alternate Base Rate 0.0%
Ratio is equal to Eurodollar Rate 0.500%
or greater than
1.50:1.00 but less
than 2.00:1.00
when the Leverage Alternate Base Rate 0.0%
Ratio is less than Eurodollar Rate 0.375%
1.50:1.00
</TABLE>
Changes in the Applicable Margin resulting from a change in the Leverage
Ratio, as set forth in a Compliance Certificate delivered pursuant to Section
7.1(c) evidencing such a change, shall become effective upon the third day
following the delivery by the Borrower to the Agent of a new Compliance
Certificate pursuant to Section 7.1(c) evidencing a change in the Leverage
Ratio. If the Borrower shall fail to deliver a Compliance Certificate within 55
days after the end of each of the first three fiscal quarters (or 100 days after
the end of the last fiscal quarter) as required by Section 7.1(c), the
Applicable Margin from and including the 56th day (the 101st day in the case of
the last quarter) after the end of such fiscal quarter to the third day
following the delivery by the Borrower to the Agent of a Compliance Certificate
shall be 0.0% with respect to ABR Advances and 0.750% with respect to Eurodollar
Advances, in each case subject to Section 2.7(b).
"Approved Bank": any bank whose short-term commercial paper rating
-------------
from (i) S&P is at least A-1 or the equivalent thereof or (ii) Moody's is at
least P-1 or the equivalent thereof.
"Assignment and Acceptance Agreement": an assignment and acceptance
-----------------------------------
agreement executed by an assignor and an assignee pursuant to which the assignor
assigns
-2-
<PAGE>
to the assignee all or any portion of such assignor's Note and Commitment,
substantially in the form of Exhibit E.
"Assignment Fee": as defined in Section 11.7(b).
--------------
"Authorized Signatory": as to (i) any Person which is a corporation,
--------------------
the chairman of the board, the president, any vice president, the chief
financial officer or any other duly authorized officer (acceptable to the Agent)
of such Person and (ii) any Person which is not a corporation, the general
partner or other managing Person thereof.
"Benefited Lender": as defined in Section 11.9.
----------------
"BNY": The Bank of New York.
---
"BNY Rate": a rate of interest per annum equal to the rate of
--------
interest publicly announced in New York City by BNY from time to time as its
prime commercial lending rate, such rate to be adjusted automatically (without
notice) on the effective date of any change in such publicly announced rate.
"Borrowing Date": any Business Day specified in (i) a Borrowing
--------------
Request as a date on which the Borrower requests the Lenders to make Loans.
"Borrowing Request": a request for Loans in the
-----------------
form of Exhibit C.
"Business Day": any day other than a Saturday, a Sunday or a day on
------------
which commercial banks located in New York City are authorized or required by
law or other governmental action to close.
"Capital Lease Obligations": with respect to any Person, obligations
-------------------------
of such Person with respect to leases which, in accordance with GAAP, are
required to be capitalized on the financial statements of such Person.
"Cash Equivalents": (i) securities issued or directly and fully
----------------
guaranteed or insured by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than six months from the date
of acquisition, (ii) Dollar denominated time deposits, certificates of deposit
and bankers acceptances of (x) any Lender or (y) any Approved Bank, in each case
with maturities of not more than six months from the date of acquisition, (iii)
commercial paper issued by any Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial or financial company with a long term
unsecured debt rating of at least A or A-2, or the equivalent of each thereof,
by S&P or Moody's, as the case may be, and in each case maturing within six
months after the date of acquisition, (iv) marketable direct obligations issued
by any state of the United States or any political subdivision of any such state
or any public instrumentality thereof maturing within six months from the date
of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's and (v) investments in
-3-
<PAGE>
money market funds substantially all the assets of which are comprised of
securities of the types described in clauses (i) through (iv) above.
"Change of Control": (i) any person or group as such terms are
-----------------
defined in the Securities Exchange Act of 1934 as amended (other than Robert L.
Johnson or Tele-Communications, Inc.) shall become the beneficial owner,
directly or indirectly, of 25% or more on a fully diluted basis, of the voting
or economic interests of the Guarantor, (ii) a majority of the members of the
board of directors of the Guarantor shall not consist of members of the board of
directors of the Guarantor as of the Effective Date and any additions thereto
and replacements thereof who have been nominated by a majority of the then
existing board of directors, or (iii) the Guarantor ceases to own 100% of the
Borrower.
"Code": the Internal Revenue Code of 1986, as the same may be amended
----
from time to time, or any successor thereto, and the rules and regulations
issued thereunder, as from time to time in effect.
"Commitment": in respect of any Lender, such Lender's under taking
----------
during the Commitment Period to make Loans, subject to the terms and conditions
hereof, in an aggregate outstanding principal amount not exceeding the amount
set forth next to the name of such Lender in Exhibit A under the heading
"Commitments", as the same may be reduced pursuant to Section 2.4.
"Commitment Fee": as defined in Section 3.1.
--------------
"Commitment Period": the period from the Effective Date until the
-----------------
Maturity Date.
"Commitment Percentage": as to any Lender, the percentage set forth
---------------------
opposite the name of such Lender in Exhibit A under the heading "Commitment
Percentage", as such percentage may be adjusted pursuant to Section 11.7(b).
"Communications Act": the Communications Act of 1934, as amended,
------------------
and the rules and regulations issued thereunder, as from time to time in effect.
"Compensatory Interest Payment": as defined in Section 2.7(c).
-----------------------------
"Compliance Certificate": a certificate substantially in the form of
----------------------
Exhibit D.
"Consolidated": the Guarantor and its Subsidiaries which are
------------
consolidated for financial reporting purposes.
"Consolidating": the Guarantor and each of its Subsidiaries taken
-------------
separately.
"Contingent Obligation": as to any Person (the "secondary obligor"),
--------------------- -----------------
any obligation of such secondary obligor (i) guaranteeing or in effect
guaranteeing any return on any investment made by another Person, or (ii)
guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend or
other obligation ("primary obligation") of any other Person (the "primary
------------------ -------
obligor") in any manner, whether directly or indirectly, including,
- -------
-4-
<PAGE>
without limitation, any obligation of such secondary obligor, whether
contingent, (A) to purchase any such primary obligation or any Property
constituting direct or indirect security therefor, (B) to advance or supply
funds (x) for the purchase or payment of any such primary obligation or (y) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (C) to purchase
Property, securities or services primarily for the purpose of assuring the
beneficiary of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, (D) otherwise to assure or hold
harmless the beneficiary of such primary obligation against loss in respect
thereof, and (E) in respect of the liabilities of any partnership in which such
secondary obligor is a general partner, except to the extent that such
liabilities of such partnership are nonrecourse to such secondary obligor and
its separate Property, provided, however, that the term "Contingent Obligation"
shall not include the indorsement of instruments for deposit or collection in
the ordinary course of business. The amount of any Contingent Obligation of a
Person shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"Control Person": as defined in Section 2.15.
--------------
"Conversion/Continuation Date": the date on which (i) a Eurodollar
----------------------------
Advance is converted to an ABR Advance, (ii) the date on which an ABR Advance is
converted to a Eurodollar Advance or (iii) the date on which a Eurodollar
Advance is continued as a new Eurodollar Advance.
"Copyright Act": Title 17 of the United States Code, as amended, and
-------------
the rules and regulations issued thereunder, as from time to time in effect.
"Credit Party": each of the Borrower and the Guarantor
------------
"Default": any event or condition which, with the giving of notice,
-------
the lapse of time, or both, would, unless cured or waived, become an Event of
Default.
"Dollars" and "$": lawful currency of the United States of America.
------- -
"Domestic Lending Office": in respect of any Lender, initially, the
-----------------------
office or offices of such Lender designated as such on Schedule 1.1; thereafter,
such other office of such Lender through which it shall be making or maintaining
ABR Advances, as reported by such Lender to the Agent and the Borrower.
"EBITDA": at any time, the income (or loss) from operations of the
------
Guarantor and its Subsidiaries on a Consolidated basis, determined in accordance
with GAAP and in a manner consistent with the audited annual Consolidated
Statement of Income as of July, 31, 1995 constituting a part of the Financial
Statements, for the immediately preceding four fiscal quarters plus
----
depreciation and amortization of intangibles (but excluding amortization of
programming rights) for such four fiscal quarters. EBITDA shall be adjusted on
a consistent basis to reflect the acquisition, sale, exchange and disposition of
Property. Notwithstanding the foregoing, if at any time EBITDA (Wholly-Owned)
constitutes less than 95% of EBITDA at such time, then EBITDA shall be reduced
by an
-5-
<PAGE>
amount, with respect to each Subsidiary of the Guarantor which is not, directly
or indirectly, wholly-owned by the Guarantor, equal to the amount of EBITDA
attributable to such non-wholly owned Subsidiary multiplied by the percentage
ownership interest in such non-wholly owned Subsidiary not owned, directly or
indirectly, by the Guarantor.
"EBITDA (Wholly-Owned)": at any time, the income (or loss) from
----------------------
operations of the Guarantor and its wholly-owned Subsidiaries on a consolidated
basis, determined in accordance with GAAP and in a manner consistent with the
audited annual Consolidated Statement of Income as of July 31, 1995 constituting
a part of the Financial Statements, for the immediately preceding four fiscal
quarters plus depreciation and amortization of intangibles (but excluding
----
amortization of programming rights) for such four fiscal quarters. EBITDA
(Wholly-Owned) shall be adjusted on a consistent basis to reflect the
acquisition, sale, exchange and disposition of Property.
"Effective Date": December 13, 1995.
--------------
"Employee Benefit Plan": an employee benefit plan within the meaning
---------------------
of Section 3(3) of ERISA maintained, sponsored or contributed to by the
Guarantor, any of its Subsidiaries or any ERISA Affiliate.
"Environmental Laws": any and all federal, state and local laws
------------------
relating to the environment, the use, storage, transporting, manufacturing,
handling, discharge, disposal or recycling of hazardous substances, materials or
pollutants or industrial hygiene, and including, without limitation, (i) the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 USCA (S)9601 et seq.; (ii) the Resource Conservation and Recovery
-- ---
Act of 1976, as amended, 42 USCA (S)6901 et seq.; (iii) the Toxic Substance
-- ---
Control Act, as amended, 15 USCA (S)2601 et seq.; (iv) the Water Pollution
-- ---
Control Act, as amended, 33 USCA (S)1251 et seq.; (v) the Clean Air Act, as
-- ---
amended, 42 USCA (S)7401 et seq.; (vi) the Hazardous Materials Transportation
------
Authorization Act of 1994, as amended, 49 USCA (S)5101 et seq. and (viii) all
-- ---
rules and regulations thereunder and any analogous state law.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the rules and regulations issued thereunder, as
from time to time in effect.
"ERISA Affiliate": when used with respect to an Employee Benefit
---------------
Plan, ERISA, the PBGC or a provision of the Code pertaining to employee benefit
plans, any Person that is a member of any group of organizations within the
meaning of Sections 414(b), (c), (m) or (o) of the Code of which a Credit Party
or any of its Subsidiaries is a member.
"Eurodollar Advances": collectively, the Loans (or any portions
-------------------
thereof) at such time as they (or such portions) are made and/or being
maintained at a rate of interest based upon the Eurodollar Rate.
"Eurodollar Lending Office": in respect of any Lender, in itially,
-------------------------
the office, branch or affiliate of such Lender designated as such on Schedule
1.1 (or, if no such office branch or affiliate is specified, its Domestic
Lending Office); thereafter, such other
-6-
<PAGE>
office, branch or affiliate of such Lender through which it shall be making or
maintaining Eurodollar Advances, as reported by such Lender to the Agent and
the Borrower.
"Eurodollar Rate": with respect to the Interest Period applicable to
---------------
any Eurodollar Advance, a rate of interest per annum, as determined by the
Agent, obtained by dividing (and then rounding to the nearest 1/16 of 1% or, if
there is no nearest 1/16 of 1%, then to the next higher 1/16 of 1%):
(a) the rate, as reported by BNY to the Agent, quoted by BNY
to leading banks in the interbank eurodollar market as the rate at which BNY is
offering Dollar deposits in an amount equal approximately to the Eurodollar
Advance of BNY to which such Interest Period shall apply for a period equal to
such Interest Period, as quoted at approximately 11:00 A.M. two Business Days
prior to the first day of such Interest Period, by
(b) a number equal to 1.00 minus the aggregate of the then
stated maximum rates during such Interest Period of all reserve requirements
(including, without limitation, marginal, emergency, supplemental and special
reserves), expressed as a decimal, established by the Board of Governors of the
Federal Reserve System and any other banking authority to which BNY and other
major United States money center banks are subject, in respect of eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation D of
the Board of Governors of the Federal Reserve System) or in respect of any other
category of liabilities including deposits by reference to which the interest
rate on Eurodollar Advances is determined or any category of extensions of
credit or other assets which includes loans by non-domestic offices of any
Lender to United States residents. Eurodollar Advances shall be deemed to
constitute Eurocurrency li abilities and as such shall be deemed to be subject
to such reserve requirements without benefit of credits for proration,
exceptions or off sets which may be available from time to time to any Lender
under such Regulation D. The Eurodollar Rate shall be adjusted automatically on
and as of the effective date of any change in any such reserve requirement.
"Event of Default": any of the events specified in Section 9.1,
----------------
provided that any requirement for the giving of notice, the lapse of time, or
any other condition has been satisfied.
"Existing Pension Plans": as defined in Section 4.12.
----------------------
"FCC": the Federal Communications Commission, or any Governmental
---
Authority succeeding to the functions thereof.
"Federal Funds Rate": for any day, a rate per annum (expressed as a
------------------
decimal, rounded upwards, if necessary, to the next higher 1/100 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 New York on the Business
Day next succeeding such day, provided that (i) if the day for which such rate
is to be determined 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 (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the
-7-
<PAGE>
average of the quotations for such day on such transactions received by BNY as
deter mined by BNY and reported to the Agent.
"Financial Statements": as defined in Section 4.13.
--------------------
"Funded Current Liability Percentage": as defined in Section
-----------------------------------
401(a)(29) of the Code.
"Funded Debt": at any time of determination, all Indebtedness of the
-----------
Guarantor and its Subsidiaries (determined on a Consolidated basis) at such
time. Notwithstanding the foregoing, solely for purposes of calculating the
Leverage Ratio, Funded Debt shall be reduced by an amount equal to the aggregate
amount of cash and Cash Equivalents of the Guarantor and its Subsidiaries
(determined on a Consolidated basis) in excess of $1,000,000 at the time of
determination.
"GAAP": generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and in the statements and
pronouncements of the Financial Accounting Standards Board or in such other
statement by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination, consistently applied. If at any time any change in GAAP
would affect the computation of any financial ratio or requirement set forth in
this Agreement, the Agent, the Lenders, the Guarantor and the Borrower shall
negotiate in good faith to amend such ratio or requirement to reflect such
change in GAAP (subject to the approval of the Required Lenders), provided that,
until so amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Guarantor and the
Borrower shall provide to the Agent and the Lenders financial statements and
other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.
"Governmental Authority": any nation or government, any state or
----------------------
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator.
"Guaranteed Obligations": as defined in Section 12.1.
----------------------
"Guaranty": the guaranty of the Guarantor as provided in Section 12
--------
hereof.
"Hazardous Substance": any hazardous or toxic substance, material or
-------------------
waste, including, but not limited to, (i) those substances, materials, and
wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 CFR 172.101) or by the Environmental Protection Agency as
hazardous substances (40 CFR Part 302) and amendments thereto and replacements
therefor and (ii) any substance, pollutant or material defined as, or designated
in, any Environmental Law as a "hazardous substance," "toxic substance,"
"hazardous material," "hazardous waste," "restricted hazardous waste,"
"pollutant," "toxic pollutant" or words of similar import.
-8-
<PAGE>
"Highest Lawful Rate": as to any Lender, the maximum rate of
-------------------
interest, if any, that at any time or from time to time may be contracted for,
taken, charged or received by such Lender on the Note held thereby, as the case
may be, or which may be owing to such Lender pursuant to this Agreement and the
other Loan Documents under the laws applicable to such Lender and this
transaction.
"Indebtedness": as to any Person, at a particular time, all items
------------
which constitute, without duplication, (i) indebtedness for borrowed money or
the deferred purchase price of Property (other than trade payables (including,
without limitation, programming liabilities) incurred in the ordinary course of
business), (ii) indebtedness evidenced by notes, bonds, debentures or similar
instruments, (iii) obligations with respect to any conditional sale or title
retention agreement, (iv) indebtedness arising under acceptance facilities and
the amount available to be drawn under all letters of credit issued for the
account of such Person and, without duplication, all drafts drawn thereunder to
the extent such Person shall not have reimbursed the issuer in respect of the
issuer's payment of such drafts, (v) all liabilities secured by any Lien on any
Property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof (other than carriers',
warehousemen's, mechanics', repairmen's or other like non-consensual statutory
Liens arising in the ordinary course of business), (vi) Capital Lease
Obligations and (vii) Contingent Obligations.
"Indemnified Person": as defined in Section 11.11.
------------------
"Intellectual Property": all copyrights, trademarks, servicemarks,
---------------------
patents, trade names and service names.
"Interest Expense": the sum of all interest (adjusted to give effect
----------------
to all Interest Rate Protection Agreements and fees and expenses paid in
connection with same, all as determined in accordance with GAAP) on Funded Debt
for the immediately preceding four fiscal quarters of the Guarantor.
"Interest Payment Date": (i) as to any ABR Advance, the last day of
---------------------
each March, June, September and December commencing on the first of such days to
occur after such ABR Advance is made or any Eurodollar Advance is converted to
an ABR Advance, (ii) as to any Eurodollar Advance in respect of which the
Borrower has selected an Interest Period of one, two or three months, the last
day of such Interest Period, and (iii) as to any Eurodollar Advance in respect
of which the Borrower has selected an Interest Period of six months, the day
which is three months after the first day of such Interest Period and the last
day of such Interest Period.
"Interest Period": with respect to any Eurodollar Advance requested
---------------
by the Borrower, the period commencing on, as the case may be, the Borrowing
Date or Conversion/Continuation Date with respect to such Eurodollar Advance and
ending one, two, three or six months thereafter, as selected by the Borrower in
its irrevocable Borrowing Request or its irrevocable Notice of
Conversion/Continuation, provided, however, that (i) if any Interest Period
would otherwise end on a day which is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately preceding Business
Day, (ii) any Interest Period that begins on the last Business Day of a calendar
month
-9-
<PAGE>
(or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month and (iii) the Borrower shall select Interest
Periods so as not to have more than five different Interest Periods outstanding
at any one time for all Loans.
"Interest Rate Protection Agreements": collectively, all interest
-----------------------------------
rate swap, cap, ceiling, hedge or other interest rate protection agreements
designed to hedge against fluctuations in interest rates entered into by the
Borrower or the Guarantor with any financial institution.
"Investments": as defined in Section 8.5.
-----------
"Leverage Ratio": the ratio of Funded Debt to EBITDA.
--------------
"Lien": any mortgage, pledge, hypothecation, assignment, deposit or
----
preferential arrangement, encumbrance, lien (statutory or other), or other
security agreement or security interest of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement and any capital or financing lease having substantially the same
economic effect as any of the foregoing.
"Loan Documents": collectively, this Agreement and the Notes.
--------------
"Loan" and "Loans": as defined in Section 2.1.
---- -----
"Margin Stock": any "margin stock", as defined in Regulation U of
------------
the Board of Governors of the Federal Reserve System, as the same may be amended
or supplemented from time to time.
"Material Adverse Change": a material adverse change in (i) the
-----------------------
financial condition, operations, business, prospects or Property of (A) the
Guarantor, (B) the Borrower and its Subsidiaries taken as a whole or (C) any
Material Subsidiary, or (ii) the ability of the Guarantor or the Borrower to
perform its obligations under the Loan Documents to which it is a party or
(iii) the ability of the Agent and the Lenders to enforce any of the Loan
Documents.
"Material Adverse Effect": a material adverse effect on (i) the
-----------------------
financial condition, operations, business, prospects or Property of (A) the
Guarantor, (B) the Borrower and its Subsidiaries taken as a whole or (C) or any
Material Subsidiary, or (ii) the ability of the Borrower or the Guarantor to
perform its obligations under the Loan Documents to which it is a party or
(iii) the ability of the Agent and the Lenders to enforce any of the Loan
Documents.
"Material Subsidiary": the Borrower, BET Satellite Services, Inc., a
-------------------
Delaware corporation, BET Acquisitions Corporation, a Delaware corporation, and
any other wholly-owned Subsidiary of the Guarantor which represents greater than
5% of EBITDA.
"Maturity Date": December 31, 2000, or such earlier date on which
-------------
the Notes shall become due and payable, whether by acceleration or otherwise.
-10-
<PAGE>
"Moody's": Moody's Investors Service, Inc., or any successor
-------
thereto.
"Multiemployer Plan": a Pension Plan which is a multiemployer plan
------------------
as defined in Section 4001(a)(3) of ERISA.
"Noncompetition Agreement": the Noncompetition Agreement, dated
------------------------
November 1, 1995, between the Guarantor and Time Warner Inc., as the same may be
amended or otherwise modified from time to time in accordance with Section 8.12.
"Note" and "Notes": as defined in Section 2.2.
---- -----
"Note Agreement": the Note Agreement, dated January 30, 1990,
--------------
between the Borrower and the purchasers named therein, as amended by Guaranty,
Consent and Amendment, dated September 5, 1991, and as the same may be further
amended or otherwise modified from time to time in accordance with Section 8.12.
"Notice of Conversion/Continuation": a notice substantially in the
---------------------------------
form of Exhibit H.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any Governmental Authority
succeeding to the functions thereof.
"Pension Plan": at any date of determination, any Employee Benefit
------------
Plan (including a Multiemployer Plan), the funding requirements of which (under
Section 302 of ERISA or Section 412 of the Code) are, or at any time within the
six years immediately preceding such date, were in whole or in part, the
responsibility of a Credit Party, any of its Subsidiaries or any ERISA
Affiliate.
"Permitted Liens": Liens permitted to exist under Section 8.2.
---------------
"Person": any individual, firm, partnership, joint venture,
------
corporation, association, business enterprise, limited liability company, joint
stock company, unincorporated association, trust, Governmental Authority or any
other entity, whether acting in an individual, fiduciary, or other capacity,
and for the purpose of the definition of "ERISA Affiliate", a trade or business.
"Pro-Forma Debt Service": the sum of all scheduled payments of
----------------------
principal and interest (adjusted to give effect to all Interest Rate Protection
Agreements and fees and expenses paid in connection with same, all as determined
in accordance with GAAP) on Funded Debt, required to be made during the four
fiscal quarters of the Guarantor immediately succeeding any determination
thereof. Where any item of interest on Funded Debt varies or depends upon a
variable rate of interest (or other rate of interest which is not fixed for such
entire four fiscal quarters), such rate, for purposes of calculating Pro-Forma
Debt Service, shall be assumed to equal the applicable interest rate on such
Funded Debt in effect on the date of such calculation. Also, for purposes of
calculating Pro-Forma Debt Service, the principal amount outstanding under any
revolving or line of credit facility on the date of any calculation of Pro-Forma
Debt Service shall be assumed to be outstanding during the entire four fiscal
quarters immediately succeeding such date, subject to any mandatory payments of
principal required to be made during such period.
-11-
<PAGE>
"Prohibited Transaction": a transaction that is prohibited under
----------------------
Section 4975 of the Code of Section 406 of ERISA and not exempt under Section
4975 of the Code or Section 408 of ERISA.
"Property": all types of real, personal, tangible, intangible or
--------
mixed property.
"Real Property": all real property owned or leased by a Credit Party
-------------
or any of its Subsidiaries.
"Reportable Event": with respect to any Pension Plan, (i) any event
----------------
set forth in Sections 4043(b) (other than a Reportable Event as to which the 30
day notice requirement is waived by the PBGC under applicable regulations),
4062(c) or 4063(a) or ERISA or the regulations thereunder, (ii) an event
requiring a Credit Party, any of its Subsidiaries or any ERISA Affiliate to
provide security to a Pension Plan under Section 401(a)(29) of the Code, or
(iii) any failure to make any payment required by Section 412(m) of the Code.
"Required Lenders": at any time when no Loans are outstanding,
----------------
Lenders having Commitments (or if no Commitments then exist, Lenders having
Commitments on the last day on which Commitments did exist) equal to at least
51% of the aggregate Commitments of all the Lenders, and at any time when Loans
are outstanding, Lenders holding Notes having an unpaid principal balance equal
to at least 51% of the aggregate Loans outstanding.
"Responsible Party": as to any Credit Party, the chairman of the
-----------------
board or any officer of such Credit Party.
"Restricted Payment": as to any Person (i) any dividend or other
------------------
distribution, direct or indirect, on account of any shares of any class of Stock
or other equity interest in such Person now or hereafter outstanding (other than
a dividend payable solely in shares of such Stock to the holders of such shares)
and (ii) any redemption, retirement, sinking fund or similar payment, purchase
or other acquisition, direct or indirect, of any shares of any class of Stock or
other equity interest in such Person now or hereafter outstanding.
"S&P": Standard & Poor's Ratings Group, a division of McGraw-Hill,
---
Inc., or any successor thereto.
"SEC": the Securities and Exchange Commission or any Governmental
---
Authority succeeding to the functions thereof.
"Solvent": with respect to any Person on a particular date, the
-------
condition that on such date, (i) the fair value of the Property of such Person
is greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (ii) the present fair salable value of
the assets of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured, (iii) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature, and (iv) such Person is not engaged in business or
a transaction, and is
-12-
<PAGE>
not about to engage in business or a transaction, for which such Person's
Property would constitute an unreasonably small amount of capital.
"Special Counsel": Emmet, Marvin & Martin, LLP, special counsel to
---------------
the Agent.
"Stock": any and all shares, rights, interests, participations,
-----
warrants or other equivalents (however designated) of corporate stock.
"Stock Purchase Agreement": the Stock Purchase Agreement, dated
------------------------
November 1, 1995, between the Guarantor and Time Warner Entertainment Company,
L.P., as the same may be amended or otherwise modified from time to time in
accordance with Section 8.12.
"Subsidiary": as to any Person, any corporation, association,
----------
partnership, limited liability company, joint venture or other business entity
of which such Person or any Subsidiary of such Person, directly or indirectly,
either (i) in respect of a corporation, owns or controls more than 50% of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors or similar managing body, irrespective of whether a class or
classes shall or might have voting power by reason of the happening of any
contingency, or (ii) in respect of an association, partnership, joint venture or
other business entity, is entitled to share in more than 50% of the profits and
losses, however determined.
"Tax": any present or future tax, levy, impost, duty, charge, fee,
---
deduction or withholding of any nature and whatever called, by a Governmental
Authority, on whomsoever and wherever imposed, levied, collected, withheld or
assessed.
"Tax on the Overall Net Income": as to any Person, a Tax imposed by
-----------------------------
the jurisdiction in which that Person's principal office (and/or, in the case of
a Lender, its Domestic Lending Office) is located or by any political
subdivision or taxing authority thereof or in which that Person is deemed to be
doing business on all or part of the net income, profits or gains of that Person
(whether worldwide, or only insofar as such income, profits or gains are
considered to arise in or to relate to a particular jurisdiction, or otherwise).
"Termination Event": with respect to any Pension Plan, (i) a
-----------------
Reportable Event, (ii) the termination of a Pension Plan, the filing of a notice
of intent to terminate a Pension Plan, or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA, (iii) the institution of
proceedings to terminate a Pension Plan under Section 4042 of ERISA, or (iv) the
appointment of a trustee to administer any Pension Plan under Section 4042 of
ERISA.
"Unfunded Pension Liabilities": with respect to any Pension Plan, at
----------------------------
any date of determination, the amount determined by taking the accumulated
benefit obligation, as disclosed in accordance with Statement of Accounting
Standards No. 87, "Employers' Accounting for Pensions", over the fair market
value of Pension Plan assets.
"United States": the United States of America (including the States
-------------
thereof and the District of Columbia).
-13-
<PAGE>
"Unqualified Amount": as defined in Section 2.7(c).
------------------
"Unrecognized Retiree Welfare Liability": with respect to any
--------------------------------------
Employee Benefit Plan that provides postretirement benefits other than pension
benefits, the amount of the transition obligation, as determined in accordance
with Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," as of the most recent
valuation date, that has not been recognized as an expense in an income
statement of the Guarantor and its Subsidiaries, provided that (i) prior to the
date such Statement is applicable to the Guarantor, such amount shall be based
on an estimate made in good faith of such transition obligation, and (ii) for
purposes of determining the aggregate amount of the Unrecognized Retiree Welfare
Liability, Plans maintained by a Subsidiary that is not otherwise an ERISA
Affiliate shall be included.
1.2. Principles of Construction
--------------------------
(a) All terms defined in a Loan Document shall have the meanings
given such terms therein when used in the other Loan Documents or any
certificate, opinion or other document made or delivered pursuant thereto,
unless otherwise defined therein.
(b) As used in the Loan Documents and in any certificate,
opinion or other document made or delivered pursuant thereto, accounting terms
not defined in Section 1.1, and accounting terms partly defined in Section 1.1,
to the extent not defined, shall have the respective meanings given to them
under GAAP.
(c) The words "hereof", "herein", "hereto" and "hereunder" and
similar words when used in a Loan Document shall refer to such Loan Document as
a whole and not to any particular provision thereof, and Section, schedule and
exhibit references contained therein shall refer to Sections thereof or
schedules or exhibits thereto unless otherwise expressly provided therein.
(d) The phrase "may not" is prohibitive and not permissive.
(e) Unless the context otherwise requires, words in the singular
number include the plural, and words in the plural include the singular.
(f) Unless specifically provided in a Loan Document to the
contrary, references to a time shall refer to New York City time.
(g) Unless specifically provided in a Loan Document to the
contrary, in the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each means "to but excluding".
(h) References in any Loan Document to a fiscal period shall
refer to that fiscal period of the Guarantor.
-14-
<PAGE>
2. AMOUNT AND TERMS OF LOANS
-------------------------
2.1. Loans
-----
Subject to the terms and conditions hereof, each Lender severally
agrees to make revolving credit loans (each a "Loan" and, as the context may
----
require, collectively with all other Loans of such Lender and with the Loans of
all other Lenders, the "Loans") to the Borrower from time to time during the
-----
Commitment Period, provided, however, that immediately after giving effect
thereto (i) the outstanding principal balance of such Lender's Loans would not
exceed such Lender's Commitment, and (ii) the outstanding principal balance of
all Lenders' Loans would not exceed the Aggregate Commitments. During the
Commitment Period, the Borrower may borrow, prepay in whole or in part and
reborrow under the Aggregate Commitments, all in accordance with the terms and
conditions of this Agreement. Neither the Agent nor any Lender shall be
responsible for the obligations or Commitment of any other Lender hereunder.
2.2. Notes
-----
The Loans made by a Lender shall be evidenced by a promissory note of
the Borrower, substantially in the form of Exhibit B, with appropriate
insertions therein as to date and principal amount (each, as indorsed or
modified from time to time, a "Note" and, collectively with the Notes of all
----
other Lenders, the "Notes"), payable to the order of such Lender for the account
-----
of its Applicable Lending Office and representing the obligation of the
Borrower to pay the lesser of (i) the original amount of the Commitment of such
Lender and (ii) the aggregate unpaid principal balance of all Loans made by such
Lender, with interest thereon as prescribed in Section 2.7. Each Note shall
(iii) be dated the first Borrowing Date, (iv) be stated to mature on the
Maturity Date and (v) bear interest from the date thereof on the unpaid
principal balance thereof at the applicable interest rate or rates per annum
determined as provided in Section 2.7. Interest on each Note shall be payable as
specified in Section 2.7.
2.3. Procedure for Borrowing
-----------------------
(a) The Borrower may borrow under the Aggregate Commitments on any
Business Day during the Commitment Period, provided, however, that the Borrower
shall notify the Agent (by telephone or fax) no later than: 11:00 A.M., three
Business Days prior to the requested Borrowing Date, in the case of Eurodollar
Advances and no later than 11:00 A.M. on the requested Borrowing Date, in the
case of ABR Advances, specifying (i) the aggregate principal amount to be
borrowed under the Aggregate Commitments, (ii) the requested Borrowing Date,
(iii) whether such borrowing is to consist of one or more Eurodollar Advances,
ABR Advances, or a combination thereof and (iv) if the borrowing is to consist
of one or more Eurodollar Advances, the length of the Interest Period for each
such Eurodollar Advance, provided, however, that no Interest Period selected in
respect of any Loan shall end after the Maturity Date. If the Borrower fails to
give timely notice in connection with a request for a Eurodollar Advance, the
Borrower shall be deemed to have elected that such Advance shall be made as an
ABR Advance. Each such notice shall be irrevocable and confirmed immediately
by delivery to the Agent of a Borrowing Request. Each ABR Advance shall be in
an aggregate principal amount equal to $500,000 or such amount plus a whole
multiple of $100,000 in excess thereof,
-15-
<PAGE>
or, if less, the unused amount of the Aggregate Commitments and each Eurodollar
Advance shall be in an aggregate principal amount equal to $2,000,000 or such
amount plus a whole multiple of $500,000 in excess thereof.
(b) Upon receipt of each notice of borrowing from the Borrower, the
Agent shall promptly notify each Lender thereof. Subject to its receipt of the
notice referred to in the preceding sentence, each Lender will make the amount
of its Commitment Percentage of each borrowing available to the Agent for the
account of the Borrower at the office of the Agent set forth in Section 11.2
not later than 12:00 Noon (2:00 P.M. with respect to ABR Loans for which the
Borrower gave notice to borrow on the requested Borrowing Date) on the relevant
Borrowing Date requested by the Borrower, in funds immediately available to the
Agent at such office. The amounts so made available to the Agent on such
Borrowing Date will then, subject to the satisfaction of the terms and
conditions of this Agreement, as determined by the Agent, be made available on
such date to the Borrower by the Agent at the office of the Agent specified in
Section 11.2 by crediting the account of the Borrower on the books of such
office with the aggregate of said amounts received by the Agent.
(c) Unless the Agent shall have received prior notice from a Lender
(by telephone or otherwise, such notice to be promptly confirmed by fax or other
writing) that such Lender will not make available to the Agent such Lender's
Commitment Percentage of the Loans requested by the Borrower, the Agent may
assume that such Lender has made such share available to the Agent on the
Borrowing Date in accordance with this Section, provided that such Lender
received notice of the proposed borrowing from the Agent, and the Agent may, in
reliance upon such assumption, make available to the Borrower on the Borrowing
Date a corresponding amount. If and to the extent such Lender shall not have so
made its Commitment Percentage of such Loans available to the Agent, such Lender
and the Borrower severally agree to pay to the Agent forthwith on demand such
corresponding amount (to the extent not previously paid by the other), together
with interest thereon for each day from the date such amount is made available
to the Borrower to the date such amount is paid to the Agent, at a rate per
annum equal to, in the case of the Borrower, the applicable interest rate set
forth in Section 2.7 for ABR Advances, and, in the case of such Lender, the
Federal Funds Rate in effect on each such day (as determined by the Agent). If
such Lender shall pay to the Agent such corresponding amount, such amount so
paid shall constitute such Lender's Loan as part of the Loans for purposes of
this Agreement, which Loan shall be deemed to have been made by such Lender on
the Borrowing Date applicable to such Loans. Notwithstanding any of the
foregoing, nothing in this Section shall be deemed to relieve any Lender from
its obligation to fulfill its commitments hereunder or prejudice any rights
which the Borrower may have against any Lender as a result of any default by
such Lender hereunder.
(d) If a Lender makes a new Loan on a Borrowing Date on which the
Borrower is to repay a Loan from such Lender, such Lender shall apply the
proceeds of such new Loan to make such repayment, and only the excess of the
proceeds of such new Loan over the Loan being repaid need be made available to
the Agent.
(e) Notwithstanding the provisions of Section 2.3(a), the Agent may
act without liability upon the basis of telephonic notice of borrowing believed
by the Agent in good faith to be from an authorized officer of the Borrower
prior to receipt of written notice and confirmation by facsimile or otherwise.
In each such case, the Agent's record
-16-
<PAGE>
of the terms of such telephone notice of such borrowing shall be conclusive,
absent manifest error.
2.4. Termination or Reduction of Aggregate Commitments
-------------------------------------------------
(a) Voluntary Reductions. The Borrower shall have the right, upon at
--------------------
least three Business Days' prior written notice to the Agent, at any time to
terminate the Aggregate Commitments or from time to time to permanently reduce
the Aggregate Commitments, provided, however, that any such reduction shall be
in the amount of $5,000,000 or such amount plus a whole multiple of $1,000,000
in excess thereof.
(b) In General. Reductions of the Aggregate Commitments shall be
----------
applied pro rata according to the Commitment of each Lender. Simultaneously
with each reduction of the Aggregate Commitments under this Section, the
Borrower shall pay the Commitment Fee accrued on the amount by which the
Aggregate Commitments have been reduced and prepay the Loans as required by
Section 2.5(b).
2.5. Prepayments of the Loans
------------------------
(a) Voluntary Prepayments. The Borrower may, at its option, prepay
---------------------
the Loans without premium or penalty, in full at any time or in part from time
to time by notifying the Agent in writing at least one Business Day prior to the
proposed prepayment date, in the case of Loans consisting of ABR Advances and at
least three Business Days prior to the proposed prepayment date, in the case of
Loans consisting of Eurodollar Advances, specifying whether the Loans to be
prepaid consist of ABR Advances, Eurodollar Advances, or a combination thereof,
the amount to be prepaid and the date of prepayment. Such notice shall be
irrevocable and the amount specified in such notice shall be due and payable on
the date specified, together with accrued interest to the date of such payment
on the amount prepaid. Upon receipt of such notice, the Agent shall promptly
notify each Lender thereof. Each partial prepayment of the Loans pursuant to
this subsection shall be in an aggregate principal amount of $500,000 or such
amount plus a whole multiple of $500,000 in excess thereof, or, if less, the
outstanding principal balance of the Loans. After giving effect to any partial
prepayment with respect to Eurodollar Advances which were made (whether as the
result of a borrowing or a conversion) on the same date and which had the same
Interest Period, the outstanding principal amount of such Eurodollar Advances
shall exceed (subject to Section 2.6) $2,000,000 or such amount plus a whole
multiple of $500,000 in excess thereof.
(b) Mandatory Prepayments of Loans Relating to Reductions of the
------------------------------------------------------------
Aggregate Commitments. Simultaneously with each reduction of the Aggregate
- ---------------------
Commitments under Section 2.4, the Borrower shall prepay the Loans by the
amount, if any, by which the aggregate unpaid principal balance of the Loans
exceeds the amount of the Aggregate Commitments as so reduced.
(c) In General. If any prepayment is made in respect of any Eurodollar
----------
Advance, in whole or in part, prior to the last day of the applicable Interest
Period, the Borrower agrees to indemnify the Lenders in accordance with Section
2.12.
-17-
<PAGE>
2.6. Conversions and Continuations
-----------------------------
(a) The Borrower may elect from time to time to convert Eurodollar
Advances to ABR Advances by giving the Agent at least one Business Day's prior
irrevocable notice of such election (confirmed by the delivery of a Notice of
Conversion/Continuation), specifying the amount to be so converted, provided,
that any such conversion of Eurodollar Advances shall only be made on the last
day of the Interest Period applicable thereto. In addition, the Borrower may
elect from time to time to (i) convert ABR Advances to Eurodollar Advances and
(ii) to continue Eurodollar Advances by selecting a new Interest Period
therefor, in each case by giving the Agent at least three Business Days' prior
irrevocable notice of such election (confirmed by the delivery of a Notice of
Conversion/Continuation), in the case of a conversion to, or continuation of,
Eurodollar Advances, specifying the amount to be so converted and the initial
Interest Period relating thereto, provided that any such conversion of ABR
Advances to Eurodollar Advances shall only be made on a Business Day and any
such continuation of Eurodollar Advances shall only be made on the last day of
the Interest Period applicable to the Eurodollar Advances which are to be
continued as such new Eurodollar Advances. The Agent shall promptly provide the
Lenders with a copy of each such Notice of Conversion/Continuation. ABR Advances
and Eurodollar Advances may be converted or continued pursuant to this Section
in whole or in part, provided that conversions of ABR Advances to Eurodollar
Advances, or continuations of Eurodollar Advances shall be in an aggregate
principal amount of $2,000,000 or such amount plus a whole multiple of $500,000
in excess thereof.
(b) Notwithstanding anything in this Section to the contrary, no ABR
Advance may be converted to a Eurodollar Advance and no Eurodollar Advance may
continued, if a Responsible Party of the Borrower or the Agent has knowledge
that a Default or Event of Default has occurred and is continuing either (i) at
the time the Borrower shall notify the Agent of its election to convert or
continue or (ii) on the requested Conversion/Continuation Date. In such event,
such ABR Advance shall be automatically continued as an ABR Advance, or such
Eurodollar Advance shall be automatically converted to an ABR Advance on the
last day of the Interest Period applicable to such Eurodollar Advance. If an
Event of Default shall have occurred and be continuing, the Agent shall, at the
request of the Required Lenders, notify the Borrower (by telephone or
otherwise) that all, or such lesser amount as the Required Lenders shall
designate, of the outstanding Eurodollar Advances shall be automatically
converted to ABR Advances, in which event such Eurodollar Advances shall be
automatically converted to ABR Advances on the date such notice is given.
(c) No Interest Period selected in respect of conversion or
continuation of any Eurodollar Advance shall end after the Maturity Date.
(d) Each conversion or continuation shall be effected by each Lender
by applying the proceeds of its new ABR Advance or Eurodollar Advance, as the
case may be, to its Advances (or portion thereof) being converted (it being
understood that such conversion shall not constitute a borrowing for purposes of
Sections 4, 5 or 6).
(e) Notwithstanding the provisions of Section 2.6(a), the Agent may
act without liability upon the basis of telephonic notice of such conversion or
continuation believed by the Agent in good faith to be from an authorized
officer of the Borrower prior to
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<PAGE>
receipt of written notice and confirmation, by facsimile or otherwise. In each
such case, the Agent's record of the terms of such telephone notice of such
conversion or continuation shall be conclusive, absent manifest error.
2.7. Interest Rate and Payment Dates
-------------------------------
(a) Prior to Maturity. Except as otherwise provided in Section 2.7(b),
-----------------
prior to the Maturity Date, the Loans shall bear interest on the outstanding
principal balance thereof at the applicable interest rate or rates per annum set
forth below:
ADVANCES RATE
-------- ----
Each ABR Advance Alternate Base Rate plus the Ap plicable
Margin applicable to ABR Advances.
Each Eurodollar Advance Eurodollar Rate for the applicable Interest
Period plus the Applicable Margin
applicable to Eurodollar Advances.
(b) Event of Default. After the occurrence and during the continuance
----------------
of an Event of Default under Section 9.1(a) or (b), the outstanding principal
balance of the Loans and, to the extent permitted by applicable law, overdue
interest thereon, shall bear interest at a rate per annum equal to 2% plus the
rate which would otherwise be applicable under Section 2.7(a), and any other
amount payable under the Loan Documents shall bear interest at a rate per annum
equal to the Alternate Base Rate plus the Applicable Margin plus 2%. All such
interest shall be payable on demand.
(c) In General. Interest on (i) ABR Advances to the extent based on
----------
the BNY Rate shall be calculated on the basis of a 365 or 366-day year (as the
case may be), and (ii) ABR Advances to the extent based on the Federal Funds
Rate and on Eurodollar Advances shall be calculated on the basis of a 360-day
year, in each case, for the actual number of days elapsed, including the first
day but excluding the last. Except as otherwise provided in Section 2.7(b),
interest shall be payable in arrears on each Interest Payment Date and upon each
payment (including prepayment) of the Loans. Any change in the interest rate on
the Loans resulting from a change in the Alternate Base Rate or reserve
requirements shall become effective as of the opening of business on the day on
which such change shall become effective. The Agent shall, as soon as
practicable, notify the Borrower and the Lenders of the effective date and the
amount of each such change in the BNY Rate, but any failure to so notify shall
not in any manner affect the obligation of the Borrower to pay interest on the
Loans in the amounts and on the dates required. Each determination of the
Alternate Base Rate or a Eurodollar Rate by the Agent pursuant to this Agreement
shall be conclusive and binding on all parties hereto absent manifest error. At
no time shall the interest rate payable on the Loans, together with the
Commitment Fee and all other amounts payable under the Loan Documents, to the
extent the same are construed to constitute interest, exceed the Highest Lawful
Rate. If in respect of any period during the term of this Agreement, any amount
paid hereunder, to the extent the same shall (but for the provisions of this
Section) constitute or be deemed to constitute interest, would exceed the
maximum amount of interest permitted by the Highest Lawful Rate during such
period (such amount being hereinafter referred to as an "Unqualified Amount"),
------------------
then (i) such Unqualified Amount shall be applied or shall be deemed to have
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<PAGE>
been applied as a prepayment of the Loans, and (ii) if in any subsequent period
during the term of this Agreement, all amounts payable hereunder in respect of
such period which constitute or shall be deemed to constitute interest shall be
less than the maximum amount of interest permitted by the Highest Lawful Rate
during such period, then the Borrower shall pay to the Lender in respect of such
period an amount (each a "Compensatory Interest Payment") equal to the lesser of
-----------------------------
(x) a sum which, when added to all such amounts, would equal the maximum amount
of interest permitted by the Highest Lawful Rate during such period, and (y) an
amount equal to the Unqualified Amount less all other Compen satory Interest
Payments made in respect thereof. The Borrower acknowledges that to the extent
interest payable on ABR Advances is based on the BNY Rate, such Rate is only one
of the bases for computing interest on loans made by the Lenders, and by basing
interest payable on ABR Advances on the BNY Rate, the Lenders have not committed
to charge, and the Borrower has not in any way bargained for, interest based on
a lower or the lowest rate at which the Lenders may now or in the future make
loans to other borrowers.
2.8. Substituted Interest Rate
-------------------------
(a) In the event that (i) the Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that by reason
of circumstances affecting the interbank eurodollar market either adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate applicable
pursuant to Section 2.7 or (ii) the Required Lenders shall have notified the
Agent that they have determined (which determination shall be conclusive and
binding on the Borrower) that the applicable Eurodollar Rate will not adequately
and fairly reflect the cost to such Lenders of maintaining or funding loans
bearing interest based on such Eurodollar Rate, with respect to any portion of
the Loans that the Borrower has requested be made as Eurodollar Advances or
Eurodollar Advances that will result from the requested conversion or
continuation of any portion of the Advances into or of Eurodollar Advances
(each, an "Affected Advance"), the Agent shall promptly notify the Borrower and
----------------
the Lenders (by telephone or otherwise, to be promptly confirmed in writing) of
such determination, on or, to the extent practicable, prior to the requested
Borrowing Date or Conversion/Continuation Date for such Affected Advances. If
the Agent shall give such notice, subject to Section 2.8(b), (a) any Affected
Advances shall be made as ABR Advances, (b) the Advances (or any portion
thereof) that were to have been converted to or continued as Affected Advances
shall be converted to or continued as ABR Advances and (c) any outstanding
Affected Advances shall be converted, on the last day of the then current
Interest Period with respect thereto, to ABR Advances. Until any notice under
clauses (a)(i) or (a)(ii), as the case may be, of this Section has been
withdrawn by the Agent (by notice to the Borrower promptly upon either (x) the
Agent having determined that such circumstances affecting the interbank
eurodollar market no longer exist and that adequate and reasonable means do
exist for determining the Eurodollar Rate pursuant to Section 2.7 or (y) the
Agent having been notified by such Required Lenders that circumstances no longer
render the Advances (or any portion thereof) Affected Advances, subject to
Section 2.8(b), no further Eurodollar Advances shall be required to be made by
the Lenders, nor shall the Borrower have the right to convert or continue all or
any portion of the Loans to Eurodollar Advances.
(b) In the case of any notice to the Borrower with respect to Affected
Advances under Section 2.8(a)(ii), the Borrower may, at its option, request the
Lenders to continue to make Eurodollar Advances to the Borrower, provided that
the Borrower shall pay to such Lenders, upon such Lenders' delivery of a written
demand therefor to the
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<PAGE>
Borrower (with a copy to the Agent), such additional amounts (in the form of an
increased rate of interest, or a different method of calculating interest, or
otherwise, as such Lenders shall reasonably determine) as shall be required to
compensate such Lenders for such increased costs or reduction in amounts
received or receivable hereunder. A statement setting forth the calculations of
any additional amounts payable pursuant to this subsection (b) submitted by a
Lender to the Borrower shall be conclusive absent manifest error.
2.9. Taxes
-----
(a) Payments to Be Free and Clear. Provided that all documentation,
-----------------------------
if any, then required to be delivered by any Lender or the Agent pursuant to
subsection (c) has been delivered, all sums payable by the Borrower under the
Loan Documents shall be paid free and clear of and (except to the extent
required by law) without any deduction or withholding on account of any Tax
(other than a Tax on the Overall Net Income of any Lender (for which payment
need not be free and clear but no deduction or withholding shall be made unless
then required by applicable law)) imposed, levied, collected, withheld or
assessed by or within the United States or any political subdivision in or of
the United States or any other jurisdiction from or to which a payment is made
by or on be half of the Borrower or by any federation or organization of which
the United States or any such jurisdiction is a member at the time of payment.
(b) Grossing-up of Payments. If the Borrower or any other Person is
-----------------------
required by law to make any deduction or withholding on account of any such Tax
from any sum paid or payable by the Borrower to the Agent or any Lender under
any of the Loan Documents:
(i) the Borrower shall notify the Agent and such Lender of any
such requirement or any change in any such requirement as soon as the Borrower
becomes aware of it;
(ii) the Borrower shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to pay is
imposed on the Borrower) for its own account or (if that liability is imposed on
the Agent or such Lender, as the case may be) on behalf of and in the name of
the Agent or such Lender;
(iii) the sum payable by the Borrower to the Agent or a Lender in
respect of which the relevant deduction, withholding or payment is required
shall be increased to the extent necessary to ensure that, after the making of
that deduction, withholding or payment, the Agent or such Lender, as the case
may be, receives on the due date therefor a net sum equal to what it would have
received had no such deduction, withholding or payment been required or made;
and
(iv) within 30 days after paying any sum from which it is required
by law to make any deduction or withholding, and within 30 days after the due
date of payment of any Tax which it is required by clause (b) above to pay, the
Borrower shall deliver to the Agent and the applicable Lender evidence
satisfactory to the other affected parties of such deduction, withholding or
payment and of the remittance thereof to the relevant Governmental Authority;
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<PAGE>
provided that no such additional amount shall be required to be paid to any
Lender under clause (iii) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages hereof) or
after the date of the Assignment and Acceptance Agreement pursuant to which such
Lender became a Lender (in the case of each other Lender) in any such
requirement for a deduction, withholding or payment as is mentioned therein
shall result in an increase in the rate of such deduction, withholding or
payment from that in effect at the date of this Agreement or at the date of such
Assignment and Acceptance, as the case may be, in respect of payments to such
Lender.
(c) U.S. Tax Certificates. Each Lender that is organized under the
---------------------
laws of any jurisdiction other than the United States shall deliver to the Agent
for transmission to the Borrower, on or prior to the Effective Date (in the case
of each Lender listed on the signature pages hereof) or on the effective date of
the Assignment and Acceptance Agreement pursuant to which it becomes a Lender
(in the case of each other Lender), and at such other times as may be necessary
in the determination of the Borrower or the Agent (each in the reasonable
exercise of its discretion), such certificates, documents or other evidence,
properly completed and duly executed by such Lender (including, without
limitation, Internal Revenue Service Form 1001 or Form 4224 or any other
certificate or statement of exemption required by Treasury Regulations Section
1.1441-4(a) or Section 1.1441-6(c) or any successor thereto) to establish that
such Lender is not subject to de duction or withholding of United States federal
income tax under Section 1441 or 1442 of the Code or otherwise (or under any
comparable provisions of any successor statute) with respect to any payments to
such Lender of principal, interest, fees or other amounts payable under any of
the Loan Documents. The Borrower shall not be required to pay any additional
amount to any such Lender under subsection (b)(iii) above if such Lender shall
have failed to satisfy the requirements of the immediately preceding sentence;
provided that if such Lender shall have satisfied such requirements on the
Effective Date (in the case of each Lender listed on the signature pages hereof)
or on the effective date of the Assignment and Acceptance Agreement pursuant to
which it became a Lender (in the case of each other Lender), nothing in this
subsection shall relieve the Borrower of its obligation to pay any additional
amounts pursuant to subsection (b)(iii) in the event that, as a result of any
change in applicable law, such Lender is no longer properly entitled to deliver
certificates, documents or other evidence at a subsequent date establishing the
fact that such Lender is not subject to withholding as described in the
immediately preceding sentence.
2.10. Illegality
----------
Notwithstanding any other provisions herein, if any law, regulation,
treaty or directive, or any change therein or in the interpretation or
application thereof, shall make it unlawful for any Lender to make or maintain
its Eurodollar Advances as contemplated by this Agreement, (i) the commitment of
such Lender hereunder to make Eurodollar Advances or convert ABR Advances to
Eurodollar Advances shall forthwith be suspended and (ii) such Lender's Loans
then out standing as Eurodollar Advances affected hereby, if any, shall be con-
verted automatically to ABR Advances on the last day of the then current
Interest Period applicable thereto or within such earlier period as required by
law. If the commitment of any Lender with respect to Eurodollar Advances is
suspended pursuant to this Section and such Lender shall notify the Agent and
the Borrower that it is once again legal for such Lender to make or maintain
Eurodollar Advances, such Lender's commitment to make or maintain Eurodollar
Advances shall be reinstated.
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<PAGE>
2.11. Increased Costs
---------------
In the event that any law, regulation, treaty or directive hereafter
enacted, promulgated, approved or issued or any change in any presently existing
law, regulation, treaty or directive therein or in the interpretation or
application thereof by any Governmental Authority charged with the
administration thereof or compliance by any Lender (or any corporation directly
or indirectly owning or controlling such Lender) with any request or directive
from any Governmental Authority:
(a) does or shall subject any Lender to any Taxes of any kind
whatsoever with respect to any Eurodollar Advances or its obligations under this
Agreement to make Eurodollar Advances, or change the basis of taxation of
payments to any Lender of principal, interest or any other amount payable
hereunder in respect of its Eurodollar Advances, including any Taxes required to
be withheld from any amounts payable under the Loan Documents (except for
imposition of, or change in the rate of, Tax on the Overall Net Income of such
Lender or its Applicable Lending Office for any of such Advances by the
jurisdiction in which such Lender is incorporated or has its principal office or
such Applicable Lending Office, including, in the case of Lenders incorporated
in any State of the United States, such tax imposed by the United States); or
(b) does or shall impose, modify or make applicable any reserve,
special deposit, compulsory loan, assessment, increased cost or similar
requirement against assets held by, or deposits of, or advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
such Lender in respect of its Eurodollar Advances which is not otherwise
included in the determination of a Eurodollar Rate;
and the result of any of the foregoing is to increase the cost to such Lender of
making, renewing, converting, continuing or maintaining its Eurodollar Advances
or its commitment to make such Eurodollar Advances, or to reduce any amount
receivable hereunder in respect of its Eurodollar Advances, then, in any such
case, the Borrower shall pay such Lender, upon written demand therefor to the
Borrower (with a copy to the Agent), any additional amounts necessary to
compensate such Lender for such additional cost or reduction in such amount
receivable which such Lender deems to be material as determined by such Lender;
provided, however, that nothing in this Section shall require the Borrower to
indemnify the Lenders with respect to withholding Taxes for which the Borrower
has no obligation under Section 2.9. No failure by any Lender to demand
compensation for any increased cost during any Interest Period shall constitute
a waiver of such Lender's right to demand such compensation at any time. A
statement setting forth the calculations of any additional amounts payable
pursuant to the foregoing sentence submitted by a Lender to the Borrower shall
be conclusive absent manifest error.
2.12. Indemnification for Loss
------------------------
Notwithstanding anything contained herein to the contrary, if the
Borrower shall fail for any reason to borrow, convert or continue an Advance
after it shall have given notice to do so in which it shall have requested a
Eurodollar Advance, or if a Eurodollar Advance shall be terminated for any
reason prior to the last day of the Interest Period applicable thereto, or if
any repayment or prepayment of the principal amount of a Eurodollar Advance is
made by the Borrower for any reason on a date which is prior to the last day of
the Interest Period applicable thereto, the Borrower agrees to indemnify
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<PAGE>
each Lender against, and to pay on demand directly to such Lender the amount
equal to any loss (excluding loss of anticipated profits) or expense suffered
by such Lender as a result of such failure to borrow, convert or continue, or
such termination, repayment or prepayment, including any loss (excluding loss of
anticipated profits), cost or expense suffered by such Lender in liquidating or
employing deposits acquired to fund or maintain the funding of such Eurodollar
Advance, or redeploying funds prepaid or repaid, in amounts which correspond to
such Eurodollar Advance, and any internal processing charge customarily charged
by such Lender in connection therewith. Each determination by the Agent or a
Lender pursuant to this Section shall be conclusive and binding on the Borrower
absent manifest error. Each Lender has indicated that, if the Borrower elects
to borrow or convert to or continue Eurodollar Advances, such Lender may wish
to purchase one or more deposits in order to fund or maintain its funding of its
Eurodollar Advances during the Interest Period in question; it being understood
that the provisions of this Agreement relating to such funding are included only
for the purpose of determining the rate of interest to be paid on such
Eurodollar Advances and for purposes of determining amounts owing under Sections
2.11, 2.12 and 2.15. Each Lender shall be entitled to fund and maintain its
funding of all or any part of each Eurodollar Advance made by it in any manner
it sees fit, but all such determinations shall be made as if such Lender had
actually funded and maintained its funding of such Eurodollar Advance during the
applicable Interest Period through the purchase of deposits in an amount equal
to such Eurodollar Advance and having a maturity corresponding to such Interest
Period. Calculations of all amounts payable under this Section shall be made on
the assumption that each Lender has funded each of its relevant Eurodollar
Advances through the purchase of deposits bearing interest at the applicable
Eurodollar Rate and in an amount equal to the amount of such Eurodollar Advances
and with a maturity equivalent to the Interest Periods applicable to such
Eurodollar Advances.
2.13. Survival of Certain Obligations
-------------------------------
The obligations of the Borrower under Sections 2.8, 2.9, 2.10, 2.11,
2.12 and 2.15 shall survive the termination of the Aggregate Commitments, the
payment of the Loans, and all other amounts payable under the Loan Documents.
2.14. Use of Proceeds
---------------
(a) The Loans on the First Borrowing Date. The proceeds of the Loans
-------------------------------------
made on the first Borrowing Date shall be used solely, directly or indirectly,
to (i) pay a dividend to the Guarantor to enable the Guarantor to purchase
1,518,300 shares of its class A common stock and 1,518,300 shares of its class B
common stock for an aggregate purchase price of $59,000,000 pursuant to the
Stock Purchase Agreement, (ii) pay all of the fees due hereunder, (iii) pay the
reasonable out-of-pocket fees and expenses incurred by the Borrower in
connection with the Loan Documents and (iv) as permitted under subsection (b)
below.
(b) Subsequent Loans. Except as provided in subsection (a), the
----------------
proceeds of all Loans shall be used solely for the Borrower's general corporate
purposes not inconsistent with the provisions hereof.
(c) All Loans. Notwithstanding anything to the contrary contained in
---------
any Loan Document, the Borrower agrees that no part of the proceeds of any Loan
will be
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<PAGE>
used, directly or indirectly, for a purpose which violates any law, including,
without limitation, the provisions of Regulations G, U or X of the Board of
Governors of the Federal Reserve System, as amended.
2.15. Capital Adequacy
----------------
If the amount of capital required or expected to be maintained by
any Lender or any Person directly or indirectly owning or controlling such
Lender (each a "Control Person") as a consequence of the Loan Documents or such
--------------
Lender's commitments or obligations hereunder, shall be affected by (i) the
introduction or phasing in of any law, rule or regulation after the Effective
Date, (ii) any change after the Effective Date in the interpretation of any
existing law, rule or regulation by any Governmental Authority charged with the
administration thereof, or (iii) compliance by such Lender or such Control
Person with any directive, guideline or request from any Governmental Authority
(whether or not having the force of law) promulgated or made after the Effective
Date, and such Lender shall have determined that such introduction, phasing in,
change or compliance shall have had or will thereafter have the effect of
reducing (A) the rate of return on such Lender's or such Control Person's
capital, or (B) the asset value to such Lender or such Control Person of the
Loans made or maintained by such Lender, in either case to a level below that
which such Lender or such Control Person could have achieved or would thereafter
be able to achieve but for such introduction, phasing in, change or compliance
(after taking into account such Lender's or such Control Person's policies
regarding capital adequacy) by an amount deemed by such Lender to be material to
such Lender or Control Person, then, within ten days after written demand by
such Lender to the Borrower (with a copy to the Agent), the Borrower shall pay
to such Lender or such Control Person such additional amount or amounts as shall
be sufficient to compensate such Lender or such Control Person, as the case may
be, for such reduction.
2.16. Agent's Records
---------------
The Agent's records regarding the amount of each Loan, each payment
by the Borrower of principal and interest on the Loans and other information
relating to the Loans shall be presumptively correct absent manifest error.
3. FEES; PAYMENTS
--------------
3.1. Commitment Fee
--------------
The Borrower agrees to pay to the Agent, for the account of the
Lenders in accordance with each Lender's Commitment Percentage, a fee (the
"Commitment Fee"), during the Commitment Period, equal to (i) 0.30% per annum at
--------------
all times when the Leverage Ratio is equal to or greater than 2.00:1.00 and (ii)
0.1875% per annum at all times when the Leverage Ratio is less than 2.00:1.00,
in each case on the excess of the Aggregate Commitments over the average daily
sum of the outstanding principal balance of the Loans. The Commitment Fee shall
be payable quarterly in arrears on the last day of each March, June, September
and December of each year, commencing on the first such day following the
Effective Date, and ending on the date that the Aggregate Commitments shall
expire or otherwise terminate. The Commitment Fee shall be calculated on the
basis of a 360-day year for the actual number of days elapsed.
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<PAGE>
3.2. Agent's Fees
------------
The Borrower agrees to pay to the Agent, for its own account, such
fees as have been agreed to in writing by the Borrower and the Agent.
3.3. Pro Rata Treatment and Application of Principal Payments
--------------------------------------------------------
Each payment, including each prepayment, of principal and interest on
the Loans and of the Commitment Fee shall be made by the Borrower to the Agent
at its office set forth in Section 11.2 in funds immediately available to the
Agent at such office by 12:00 Noon on the due date for such payment, and,
promptly upon receipt thereof by the Agent, shall be remitted by the Agent in
like funds as received, to the Lenders according to the Commitment Percentage of
each Lender, in the case of the Commitment Fee, and pro rata according to the
aggregate outstanding principal balance of the Loans, in the case of principal
and interest due thereon. The failure of the Borrower to make any such payment
by such time shall not constitute a default hereunder, provided that such
payment is made on such due date, but any such payment made after 12:00 Noon on
such due date shall be deemed to have been made on the next Business Day for the
purpose of calculating interest on amounts outstanding on the Loans. If any
payment hereunder or under the Notes shall be due and payable on a day which is
not a Business Day, the due date thereof (except as otherwise provided in the
definition of Interest Period) shall be extended to the next Business Day and
(except with respect to payments in respect of the Commitment Fee) interest
shall be payable at the applicable rate specified herein during such extension.
If any payment is made with respect to any Eurodollar Advance prior to the last
day of the applicable Interest Period, the Borrower shall indemnify each Lender
in accordance with Section 2.12.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Agent and the Lenders to enter into this Agreement
and to make the Loans, each of the Borrower and the Guarantor (in each case,
with respect to itself and its Subsidiaries) makes the following representations
and warranties to the Agent and each Lender:
4.1. Subsidiaries; Capitalization
----------------------------
The Guarantor has only the Subsidiaries set forth on Schedule 4.1.
The shares of each corporate Subsidiary are duly authorized, validly issued,
fully paid and nonassessable and are owned free and clear of any Liens, except
for Permitted Liens. The interest of the Guarantor in each non-corporate
Subsidiary is owned free and clear of any Liens. The outstanding capital Stock
of each corporate Subsidiary and the ownership interest in each non-corporate
Subsidiary are as set forth on Schedule 4.1. The owner of each issue of capital
Stock listed on Schedule 4.1 is the registered and beneficial owner thereof. No
Subsidiary has issued any securities convertible into Stock (or other equity
interest) of such Subsidiary and there are no outstanding options or warrants to
purchase Stock of such Subsidiary of any class or kind, and there are no
agreements, voting trusts or understandings with respect thereto or affecting in
any manner the sale, pledge, assignment or other disposition thereof, including,
without limitation, any right of first refusal,
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<PAGE>
option, redemption, call or other rights with respect thereto, whether similar
or dissimilar to any of the foregoing.
4.2. Existence and Power
-------------------
Each Credit Party and its Subsidiaries is duly organized or formed
and validly existing in good standing under the laws of the jurisdiction of its
incorporation or formation, has all requisite power and authority to own its
Property and to carry on its business as now conducted, and is in good standing
and authorized to do business as a foreign corporation in each jurisdiction in
which the nature of the business conducted therein or the Property owned therein
makes such qualification necessary, except where such failure to qualify could
not reasonably be expected to have a Material Adverse Effect.
4.3. Authority
---------
Each Credit Party has full legal power and authority to enter into,
execute, deliver and perform the terms of the Loan Documents to which it is a
party, and in the case of the Borrower, to make the borrowings contemplated
hereby and by the Notes, to execute, deliver and carry out the terms of the
Notes and to incur the obligations provided for herein and therein, all of which
have been duly authorized by all proper and necessary corporate or other
applicable action and are in full compliance with its Certificate of
Incorporation or By-Laws or its other organization documents.
4.4. Binding Agreement
-----------------
The Loan Documents (other than the Notes) constitute, and the Notes,
when issued and delivered pursuant hereto for value received, will constitute,
the valid and legally binding obligations of the Credit Parties in each case, to
the extent it is a party thereto, enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally.
4.5. Litigation
----------
Except as set forth on Schedule 4.5, there are no actions, suits or
proceedings at law or in equity or by or before any Governmental Authority
(whether purportedly on behalf of a Credit Party or any of its Subsidiaries)
pending or, to the knowledge of a Credit Party, threatened against a Credit
Party or any of its Subsidiaries or any of their respective Properties or
rights, which (i) if adversely determined, could reasonably be expected to have
a Material Adverse Effect, (ii) call into question the validity or
enforceability of any of the Loan Documents, or (iii) could reasonably be
expected to result in the rescission, termination or cancellation of any
material franchise, right, license, permit or similar authorization held by a
Credit Party or any of its Subsidiaries.
4.6. Required Consents
-----------------
No consent, authorization or approval of, filing with, notice to, or
exemption by, stockholders, any Governmental Authority or any other Person is
required to authorize, or is required in connection with the execution, delivery
and performance of the
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<PAGE>
Loan Documents to which a Credit Party is a party or is required as a condition
to the validity or enforceability of the Loan Documents to which a Credit Party
is a party.
4.7. No Conflicting Agreements
-------------------------
Neither Credit Party nor any of its Subsidiaries is in default
under any mortgage, indenture, contract or agreement to which it is a party or
by which it or any of its Property is bound, the effect of which default could
reasonably be expected to have a Material Adverse Effect. The execution,
delivery or carrying out of the terms of the Loan Documents will not constitute
a default under, or result in the creation or imposition of, or obligation to
create, any Lien upon any Property of a Credit Party or any of its Subsidiaries
or result in a breach of or require the mandatory repayment of or other
acceleration of payment under or pursuant to the terms of any such mortgage,
indenture, contract or agreement.
4.8. Compliance with Applicable Laws
-------------------------------
Neither Credit Party nor any of its Subsidiaries is in default with
respect to any judgment, order, writ, injunction, decree or decision of any
Governmental Authority which default could reasonably be expected to have a
Material Adverse Effect. Each Credit Party and each of its Subsidiaries is
complying in all material respects with all statutes, regulations, rules and
orders applicable to it of all Governmental Authorities, including, without
limitation, Environmental Laws and ERISA, a violation of which could reasonably
be expected to have a Material Adverse Effect.
4.9. Taxes
-----
Each Credit Party and its Subsidiaries has filed or caused to be
filed all tax returns required to be filed and has paid, or has made adequate
provision for the payment of, all taxes shown to be due and payable on said
returns or in any assessments made against it (other than those being contested
as required under Section 7.4) which would be material to it and no tax Liens
have been filed with respect thereto. The charges, accruals and reserves on the
books of each Credit Party and its Subsidiaries with respect to all federal,
state, local and other taxes are, to the best knowledge of each Credit Party,
adequate for the payment of all such taxes, and each Credit Party knows of no
unpaid as sessment which is due and payable against it or any of its
Subsidiaries or any claims being asserted which could reasonably be expected to
have a Material Adverse Effect, except such thereof as are being contested as
required under Section 7.4, and for which adequate reserves have been set aside
in accordance with GAAP. The Federal income tax returns of each Credit Party and
each of its Subsidiaries consolidated in such returns have been examined by and
settled with the Internal Revenue Service, or, the statute of limitations with
respect thereto have run, for all years through April 15, 1995.
4.10. Governmental Regulations
------------------------
Neither Credit Party nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, as amended, the
Federal Power Act or the Investment Company Act of 1940, as amended, and neither
Credit Party nor any of its Subsidiaries is subject to any statute or regulation
which prohibits or restricts the incurrence of Indebtedness under the Loan
Documents, including, without limitation,
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statutes or regulations relative to common or contract carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
4.11. Federal Reserve Regulations; Use of Loan Proceeds
-------------------------------------------------
Neither Credit Party nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of the Loans will be used, directly or indirectly, for a purpose
which violates any law, rule or regulation of any Governmental Authority,
including, without limitation, the provisions of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System, as amended.
4.12. Plans
-----
The only Pension Plans in effect as of the Effective Date (the
"Existing Pension Plans") are listed on Schedule 4.12. Each Employee Benefit
- -----------------------
Plan is in compliance with ERISA and the Code, where applicable, in all material
respects. Each Credit Party and each of its Subsidiaries and ERISA Affiliates
has complied with the requirements of Section 515 of ERISA with respect to each
Pension Plan which is a Multiemployer Plan. As of the Effective Date (i) the
amount of all Unfunded Pension Liabilities under the Pension Plans, excluding
any plan which is a Multiemployer Plan, (ii) the amount of the aggregate
Unrecognized Retiree Welfare Liability under all applicable Employee Benefit
Plans, and (iii) the aggregate potential annual withdrawal liability payments,
as determined in accordance with Title IV of ERISA, of the Guarantor and its
Subsidiaries and ERISA Affiliates with respect to all Pension Plans which are
Multiemployer Plans does not exceed $500,000 in the aggregate. Each Credit
Party and its Subsidiaries and/or ERISA Affiliates has, as of the Effective
Date, made all contributions or payments to or under each such Pension Plan
required by law or the terms of such Pension Plan or any contract or agreement
with respect thereto. No material liability to the PBGC has been, or is
expected by any Credit Party or any of its Subsidiaries or ERISA Affiliates to
be, incurred by it. Liability, as referred to in this Section includes any
joint and several liability. Each Employee Benefit Plan which is a group health
plan within the meaning of Section 5000(b)(1) of the Code is in material
compliance with the continuation of health care coverage requirements of Section
4980B of the Code.
4.13. Financial Statements
--------------------
The Guarantor has heretofore delivered to the Agent and the Lenders
copies of the Guarantor's Form 10-K for the fiscal year ending July 31, 1995,
containing the audited Consolidated Balance Sheets of the Guarantor and its
Subsidiaries as of July 31, 1995 and the related Consolidated Statements of
Income, Stockholder's Equity and Cash Flows for the periods then ended (with the
applicable related notes and schedules, collectively the "Financial
Statements"). The Financial Statements fairly present the Consolidated
financial condition and results of the operations of the Guarantor and its
Subsidiaries as of the dates and for the periods indicated therein and have been
prepared in conformity with GAAP. Except as reflected in the Financial
Statements or in the footnotes thereto, neither the Guarantor nor any of its
Subsidiaries has any obligation or liability of any kind (whether fixed,
accrued, contingent, unmatured or otherwise) which, in accordance with GAAP,
should have been shown in the Financial Statements and was not. Since July 31,
1995, the Guarantor and each of its Subsidiaries has conducted its business
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only in the ordinary course (except for the consummation of the transactions
contemplated by the Stock Purchase Agreement) and there has been no Material
Adverse Change.
4.14. Property
--------
Each Credit Party and each of its Subsidiaries has good and, except
with respect to FCC licenses which cannot be transferred without the written
consent of the applicable Governmental Authority, marketable title to all of its
material Property, subject to no Liens, except Permitted Liens. Each Credit
Party and each of its Subsidiaries is the registered holder of all licenses
(including, without limitation, all uplink and microwave facility licenses
issued by the FCC) necessary for the operation of the business of each Credit
Party and each of its Subsidiaries, and such licenses are validly issued and in
full force and effect, unimpaired by any act or omission by such Credit Party or
such Subsidiary. Except as set forth in Schedule 4.14, to the best of each
Credit Party's knowledge, neither Credit Party nor any of its Subsidiaries is a
party to any investigation, notice of violation, order or complaint issued by or
before the FCC. There are no proceedings by or before the FCC, which could in
any manner materially threaten or adversely affect the validity of any of such
licenses. Except as set forth in Schedule 4.14, neither Credit Party nor any of
its Subsidiaries has knowledge of a threat of any investigation, notice of
violation, order, complaint or proceeding before the FCC, and has no reason to
believe that any of such licenses will not be renewed in the ordinary course.
Each Credit Party and each of its Subsidiaries has filed or caused to be filed
with the FCC all reports, applications, documents, instruments and information
required to be filed pursuant to all FCC rules, regulations and requests the
failure to file of which could reasonably be expected to have a Material Adverse
Effect.
4.15. Franchises, Intellectual Property, Etc.
---------------------------------------
Each Credit Party and its Subsidiaries possesses or has the right to
use all franchises, Intellectual Property, licenses and other rights as are
material and necessary for the conduct of its business, and with respect to
which it is in compliance, with no known conflict with the valid rights of
others which could reasonably be expected to have a Material Adverse Effect. No
event has occurred which permits or, to the best knowledge of the Credit
Parties, after notice or the lapse of time or both, or any other condition,
could reasonably be expected to permit, the revocation or termination of any
such franchise, Intellectual Property, license or other right which revocation
or termination could reasonably be expected to have a Material Adverse Effect.
4.16. Environmental Matters
---------------------
(a) To the best of each Credit Party's knowledge, (i) no Hazardous
Substances have been generated or manufactured on, transported to or from,
treated at, stored at or discharged by any Credit Party or any of its
Subsidiaries from any Real Property in violation of any Environmental Laws;
(ii) no Hazardous Substances have been discharged into subsurface waters by any
Credit Party or any of its Subsidiaries under any Real Property in violation of
any Environmental Laws except for such discharge that could not reasonably be
expected to have a Material Adverse Effect; and (iii) no Hazardous Substances
have been discharged by any Credit Party or any of its Subsidiaries from any
Real Property on or into Property or waters (including subsurface waters)
adjacent to any Real
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<PAGE>
Property in violation of any Environmental Laws except for such discharge that
could not reasonably be expected to have a Material Adverse Effect.
(b) Neither Credit Party nor any of its Subsidiaries (i) has
received notice of any claim, demand, suit, action, proceeding, event,
condition, report, directive, Lien, violation, non-compliance or investigation
indicating or concerning any potential or actual liability (including, without
limitation, potential liability for enforcement, investigatory costs, cleanup
costs, government response costs, removal costs, remedial costs, natural
resources damages, Property damages, personal injuries or penalties) that could
reasonably be expected to have a Material Adverse Effect arising in connection
with: (x) any non-compliance with or violation of the requirements of any
applicable Environmental Laws, or (y) the presence of any Hazardous Substance on
any Real Property (or any Real Property previously owned by any Credit Party or
any of its Subsidiaries) or the release or threatened release of any Hazardous
Substance into the environment, (ii) has, to the best of its knowledge, any
threatened or actual liability that could reasonably be expected to have a
Material Adverse Effect in connection with the presence of any Hazardous
Substance on any Real Property (or any Real Property previously owned by any
Credit Party or any of its Subsidiaries) or the release or threatened release of
any Hazardous Substance into the environment, (iii) has received notice of any
federal or state investigation evaluating whether any remedial action is needed
to respond to the presence of any Hazardous Substance on any Real Property (or
any Real Property previously owned by any Credit Party or any of its
Subsidiaries) or a release or threatened release of any Hazardous Substance into
the environment for which any Credit Party or any of its Subsidiaries is or may
be liable, except for such remedial actions as could not reasonably be expected
to have a Material Adverse Effect, or (iv) has received notice that any Credit
Party or any of its Subsidiaries is or may be liable to any Person under any
Environmental Law, except for such liability as could not reasonably be expected
to have a Material Adverse Effect.
(c) No Real Property is located in an area identified by the
Secretary of Housing and Urban Development as an area having special flood
hazards.
4.17. Labor Relations
---------------
There are no material controversies pending between any Credit Party
or any of its Subsidiaries and any of their respective employees, which could
reasonably be expected to have a Material Adverse Effect.
4.18. Solvency
--------
Each Credit Party and each of its Subsidiaries is, and after giving
effect to the incurrence of all Indebtedness under the Loan Documents will be,
Solvent.
4.19. Absence of Certain Restrictions
-------------------------------
No indenture, certificate of designation for preferred Stock,
agreement or instrument to which any Credit Party or any of its Subsidiaries is
a party, prohibits or restrains, directly or indirectly, the payment of
dividends or other payments to the Borrower or any of its Subsidiaries.
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<PAGE>
4.20. Burdensome Obligations
----------------------
Neither Credit Party nor any of its Subsidiaries is a party to or
bound by any franchise, agreement, deed, lease or other instrument, or subject
to any restriction which, in the opinion of its management is so unusual or
burdensome, in the context of its business, as in the foreseeable future might
materially and adversely affect or impair its revenue or cash flow or its
ability to perform its obligations under the Loan Documents to which it is a
party. Each Credit Party does not presently anticipate that future expenditures
by it or any of its Subsidiaries needed to meet the provisions of federal or
state statutes, orders, rules or regulations will be so burdensome as to result
in a Material Adverse Effect or Material Adverse Change.
4.21. FCC and Copyright Matters.
-------------------------
Each Credit Party and each of its Subsidiaries (i) have duly and
timely filed all filings which are required to be filed by it under the
Communications Act, the failure to file of which could reasonably be expected to
have a Material Adverse Effect, and (ii) are in all material respects in
compliance with the Communications Act, including, without limitation, the rules
and regulations of the FCC. Each Credit Party and each of its Subsidiaries has
recorded or deposited with and paid to the United States Copyright Office, the
Register of Copyrights and the Copyright Royalty Tribunal all notices,
statements of account, royalty fees and other documents and instruments required
under the Copyright Act, and, to the best knowledge of the Credit Parties,
neither Credit Party nor any of its Subsidiaries is liable to any Person for
copyright infringement under the Copyright Act as a result of its business
operations which could reasonably be expected to have a Material Adverse
Effect.
5. CONDITIONS TO FIRST LOANS
-------------------------
In addition to the conditions precedent set forth in Section 6, the
obligation of each Lender to make its first Loan shall be subject to the
fulfillment of the following conditions precedent:
5.1. Evidence of Action
------------------
(a) The Borrower. The Agent shall have received a certificate,
------------
dated the first Borrowing Date, of the Secretary or Assistant Secretary of the
Borrower (i) attaching a true and complete copy of the resolutions of its Board
of Directors and of all documents evidencing other necessary corporate action
(in form and substance reasonably satisfactory to the Agent) taken by it to
authorize the Loan Documents to which it is a party and the transactions
contemplated thereby, (ii) attaching a true and complete copy of its Certificate
of Incorporation and By-Laws, (iii) setting forth the incumbency of its officer
or officers who may sign such Loan Documents, including therein a signature
specimen of such officer or officers and (iv) attaching a certificate of good
standing of the Secretary of State of the jurisdiction of its incorporation and
of each other jurisdiction in which it is qualified to do business.
(b) The Guarantor. The Agent shall have received a certificate,
-------------
dated the first Borrowing Date, of the Secretary or Assistant Secretary of the
Guarantor (i)
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<PAGE>
attaching a true and complete copy of the resolutions of its Board of Directors
and of all documents evidencing other necessary corporate action (in form and
substance reasonably satisfactory to the Agent) taken by it to authorize the
Loan Documents to which it is a party and the transactions contemplated thereby,
(ii) attaching a true and complete copy of its Certificate of Incorporation and
By-Laws, (iii) setting forth the incumbency of its officer or officers who may
sign such Loan Documents, including therein a signature specimen of such officer
or officers and (iv) attaching a certificate of good standing of the Secretary
of State of the jurisdiction of its incorporation and of each other jurisdiction
in which it is qualified to do business.
5.2. This Agreement
--------------
The Agent shall have received counterparts of this Agreement signed
by each of the parties hereto (or receipt by the Agent from a party hereto of a
fax signature page signed by such party which shall have agreed to promptly
provide the Agent with originally executed counterparts hereof).
5.3. Notes
-----
The Agent shall have received the Notes, duly executed by an
Authorized Signatory of the Borrower.
5.4. Litigation
----------
There shall be no injunction, writ, preliminary restraining order or
other order of any nature issued by any Governmental Authority in any respect
affecting the transactions provided for herein and no action or proceeding by or
before any Governmental Authority shall have been commenced and be pending or,
to the knowledge of each Credit Party threatened, seeking to prevent or delay
the transactions contemplated by the Loan Documents or challenging any other
terms and provisions hereof or thereof or seeking any damages in connection
therewith, and the Agent shall have received a certificate of an Authorized
Signatory of each Credit Party to the foregoing effects.
5.5. Certain Documents
-----------------
The Agent shall have received a copy of the Stock Purchase
Agreement, the Noncompetition Agreement and the Note Agreement, in each case
certified to be a true and complete copy thereof by an Authorized Signatory of
each Credit Party.
5.6. Approvals
---------
The Agent shall have received a certificate of an Authorized
Signatory of each Credit Party to the effect that all approvals and consents
(including any consent required under the Note Agreement) of all Persons
required to be obtained in connection with the consummation of the transactions
contemplated by the Loan Documents have been duly obtained and are in full force
and effect, and that all required notices have been given and all required
waiting periods have expired.
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<PAGE>
5.7. Opinion of Counsel to the Borrower and the Guarantor
----------------------------------------------------
The Agent shall have received opinions of Skadden, Arps, Slate,
Meagher & Flom, counsel to the Borrower and the Guarantor, Debra L. Lee, General
Counsel to the Borrower and the Guarantor, and Weil, Gotshal & Manges, special
counsel to the Borrower and the Guarantor, addressed to the Agent and the
Lenders and dated the first Borrowing Date, substantially in the form of Exhibit
F, and covering such additional matters as the Required Lenders may reasonably
request. It is understood that such opinions are being delivered to the Agent
and the Lenders upon the direction of the Borrower and the Guarantor and that
the Agent and the Lenders may and will rely upon such opinions.
5.8. Opinion of Special Counsel
--------------------------
The Agent shall have received an opinion of Special Counsel,
addressed to the Agent and the Lenders and dated the first Borrowing Date
substantially in the form of Exhibit G.
5.9. Fees
----
All fees payable to the Agent and the Lenders on the first Borrowing
Date shall have been paid.
5.10. Fees and Expenses of Special Counsel
------------------------------------
The fees and expenses of Special Counsel in connection with the
preparation, negotiation and closing of the Loan Documents shall have been paid.
5.11. Cancellation of Stock of Guarantor
----------------------------------
Upon the acquisition by the Guarantor of any shares of its Stock
described in Section 2.14(a), the Guarantor shall immediately upon such
acquisition (i) by resolution of its board of directors, take such action under
(S)243 of the Delaware General Corporation Law as may be required to retire such
shares and (ii) make such adjustments in accordance with (S)244 of the Delaware
General Corporation Law to the stated capital of the Guarantor as may be
appropriate.
5.12. Compliance Certificate.
----------------------
The Agent shall have received a duly executed Compliance Certificate
prepared after giving effect to the making of the first Loans and the
application of the proceeds thereof in the manner contemplated by Section 2.14.
6. CONDITIONS TO LENDING - ALL LOANS
---------------------------------
The obligation of each Lender to make any Loan is subject to the
satisfaction of the following conditions precedent as of the date of such Loan:
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<PAGE>
6.1. Compliance
----------
On each Borrowing Date and after giving effect to the Loans to be
made thereon, (i) each Credit Party shall be in compliance with all of the
terms, covenants, including without limitation Section 7.15, if applicable, and
conditions hereof, (ii) there shall exist no Default or Event of Default, (iii)
the representations and warranties contained in the Loan Documents (other than
those representations and warranties which expressly speak only as of a
different date) shall be true and correct with the same effect as though such
representations and warranties had been made on such Borrowing Date and (iv) the
aggregate outstanding principal balance of the Loans will not exceed the
Aggregate Commitments. Each borrowing by the Borrower shall constitute a
certification by each Credit Party as of such Borrowing Date that each of the
foregoing matters is true and correct in all respects.
6.2. Borrowing Request
-----------------
The Agent shall have received a Borrowing Request duly executed by
an Authorized Signatory of the Borrower.
6.3. Federal Reserve Forms FR U-1
-----------------------------
If the proceeds of the Loans are to be used, directly or indirectly,
to purchase or carry any Margin Stock, the Agent and each Lender shall have
received Federal Reserve Forms FR U-1 , duly executed by an Authorized Signatory
of the Borrower and the Guarantor and in all respects reasonably satisfactory to
the Agent and each applicable Lender.
6.4. Legal Matters and Other Documents
---------------------------------
All legal matters in connection with the making of each Loan shall
be reasonably satisfactory to the Agent and the Agent shall have received such
other documents as the Agent or the Lenders shall reasonably request.
7. AFFIRMATIVE COVENANTS
---------------------
Each Credit Party agrees that, so long as this Agreement is in effect, any
Loan remains outstanding and unpaid, or any other amount is owing under any Loan
Document to any Lender or the Agent, each Credit Party shall:
7.1. Financial Statements
--------------------
Furnish or cause to be furnished to the Agent and each Lender:
(a) As soon as available, but in any event within 100 days after
the end of each fiscal year, a copy of the Consolidated and Consolidating
Balance Sheets of the Guarantor as at the end of such fiscal year, together with
the related Consolidated and Consolidating Statements of Income, Stockholders'
Equity and Cash Flows as of and through the end of such fiscal year, setting
forth in each case in comparative form the
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<PAGE>
figures for the preceding fiscal year. The Consolidated Balance Sheets and
Consolidated Statements of Income, Stockholders' Equity and Cash Flows shall be
audited and certified without qualification by the Accountants, which
certification shall (i) state that the examination by such Accountants in
connection with such Consolidated financial statements has been made in
accordance with generally accepted auditing standards and, accordingly, included
such tests of the accounting records and such other auditing procedures as were
considered necessary in the circumstances, and (ii) include the opinion of such
Accountants that such Consolidated financial statements have been prepared in
accordance with GAAP in a manner consistent with prior fiscal periods, except as
otherwise specified in such opinion. Notwithstanding the foregoing, the Credit
Parties may satisfy their obligation to furnish such Consolidated Balance Sheets
and Consolidated Statements of Income, Stockholders' Equity and Cash Flows by
furnishing copies of the Guarantor's annual report on Form 10-K in respect of
such fiscal year, together with the financial statements required to be attached
thereto, provided the Guarantor is required to file such annual report on Form
10-K with the SEC and such filing is actually made.
(b) As soon as available, but in any event within 55 days after
the end of each fiscal quarter, a copy of the Consolidated and Consolidating
Balance Sheets of the Guarantor as at the end of each such quarterly period,
together with the related Consolidated and Consolidating Statements of Income
for such period and for the elapsed portion of the fiscal year through such date
and the related Consolidated and Consolidating Statements of Cash Flows for the
elapsed portion of the fiscal year through such date, setting forth in each case
in comparative form the figures for the corresponding periods of the preceding
fiscal year, certified by the chief financial officer of the Guarantor (or such
other officer acceptable to the Agent), as presenting fairly the Consolidated
and Consolidating financial condition and the Consolidated and Consolidating
results of operations of the Guarantor. Notwithstanding the foregoing, the
Credit Parties may satisfy their obligation to furnish such quarterly
Consolidated Balance Sheets and Consolidated Statements of Income and Cash Flows
by furnishing copies of the Guarantor's quarterly report on Form 10-Q in
respect of such fiscal quarter, together with the financial statements required
to be attached thereto, provided the Guarantor is required to file such
quarterly report on Form 10-Q with the SEC and such filing is actually made.
(c) Within 55 days after the end of each of the first three
fiscal quarters (100 days after the end of the last fiscal quarter), a
Compliance Certificate, certified by the chief financial officer of the
Guarantor (or such other officer as shall be reasonably acceptable to the
Agent).
(d) Such other information as the Agent or any Lender may
reasonably request from time to time.
7.2. Certificates; Other Information
-------------------------------
Furnish to the Agent and each Lender:
(a) Prompt written notice if: (i) any Indebtedness, individually
or in the aggregate in excess of $500,000, of any Credit Party or any of its
Subsidiaries is declared or shall become due and payable prior to its stated
maturity, or is called and not paid when due, (ii) a default shall have occurred
under any notes (other than the Notes), individually or in the aggregate in
excess of $500,000, or the holder of any such note, or
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<PAGE>
other evidence of Indebtedness, individually or in the aggregate in excess of
$500,000, certificate or security evidencing any such Indebtedness or any
obligee with respect to any such Indebtedness of any Credit Party or any of its
Subsidiaries has the right to declare any such Indebtedness due and payable
prior to its stated maturity, or (iii) there shall occur and be continuing a
Default or an Event of Default;
(b) Prompt written notice of: (i) any citation, summons,
subpoena, order to show cause or other document naming any Credit Party or any
of its Subsidiaries a party to any proceeding before any Governmental Authority
which could reasonably be expected to have a Material Adverse Effect or which
calls into question the validity or enforceability of any of the Loan Documents,
and include with such notice a copy of such citation, summons, subpoena, order
to show cause or other document, (ii) any lapse or other termination of any
material Intellectual Property, license, permit, franchise or other
authorization issued to any Credit Party or any of its Subsidiaries by any
Person or Governmental Authority, and (iii) any refusal by any Person or
Governmental Authority to renew or extend any such material Intellectual
Property, license, permit, franchise or other authorization, which lapse,
termination, refusal or dispute could reasonably be expected to have a Material
Adverse Effect;
(c) Promptly upon becoming available, copies of all (i) regular,
periodic or special reports, schedules and other material which any Credit Party
or any of its Subsidiaries may now or hereafter be required to file with or
deliver to any securities exchange or the SEC, or any other Governmental
Authority succeeding to the functions thereof and (ii) material news releases
and annual reports relating to any Credit Party or any of its Subsidiaries;
(d) Prompt written notice in the event that any Credit Party,
any of its Subsidiaries or any ERISA Affiliate knows that (i) any Termination
Event with respect to a Pension Plan has occurred or will occur, (ii) any
condition exists with respect to a Pension Plan which presents a material risk
of termination of the Pension Plan, imposition of an excise tax, requirement to
provide security to the Pension Plan or other liability on any Credit Party, any
of its Subsidiaries or any ERISA Affiliate, (iii) any Credit Party, any of its
Subsidiaries or any ERISA Affiliate has applied for a waiver of the minimum
funding standard under Section 412 of the Code with respect to a Pension Plan,
(iv) the aggregate amount of the Unfunded Pension Liabilities under all Pension
Plans is in excess of $100,000, (v) the aggregate amount of Unrecognized Retiree
Welfare Liability under all applicable Employee Benefit Plans is in excess of
$100,000, (vi) any Credit Party, any of its Subsidiaries or any ERISA Affiliate
has engaged in a Prohibited Transaction with respect to an Employee Benefit
Plan, (vii) any tax has been imposed under Section 4980B(a) of the Code or
(viii) any civil penalty has been assessed under Section 502(c) of ERISA,
together with a certificate of an Authorized Signatory of the Guarantor setting
forth the details of such event and the action which the Guarantor, such
Subsidiary or such ERISA Affiliate proposes to take with respect thereto,
together with a copy of all notices and filings with respect thereto.
(e) Prompt written notice in the event that any Credit Party,
any of its Subsidiaries or any ERISA Affiliate shall receive a demand letter
from the PBGC notifying any Credit Party, such Subsidiary or such ERISA
Affiliate of any final decision finding liability and the date by which such
liability must be paid, together with a copy of such letter and a certificate of
an Authorized Signatory of the Guarantor setting forth the
-37-
<PAGE>
action which the Guarantor, such Subsidiary or such ERISA Affiliate proposes to
take with respect thereto.
(f) Promptly upon the same becoming available, and in any event
by the date such amendment is adopted, a copy of any Pension Plan amendment that
any Credit Party, any of its Subsidiaries or any ERISA Affiliate proposes to
adopt which would require the posting of security under Section 401(a)(29) of
the Code, together with a certificate of an Authorized Signatory of the
Guarantor setting forth the reasons for the adoption of such amendment and the
action which the Guarantor, such Subsidiary or such ERISA Affiliate proposes to
take with respect thereto.
(g) As soon as possible and in any event by the tenth day after
any required installment or other payment under Section 412 of the Code owed to
a Pension Plan shall have become due and owing and remain unpaid a copy of the
notice of failure to make required contributions provided to the PBGC by any
Credit Party, any of its Subsidiaries or any ERISA Affiliate under Section
412(n) of the Code, together with a certificate of an Authorized Signatory
setting forth the action which the Guarantor, such Subsidiary or such ERISA
Affiliate proposes to take with respect thereto.
(h) If the termination of any Pension Plan would result in the
imposition of any tax under Section 4980 of the Code, then as soon as possible,
but in no event less than 60 days before the due date of the tax, a certificate
of an Authorized Signatory of the Guarantor setting forth the estimated amount
of such tax, any reversion, and the proposed use of such reversion. This
subsection shall apply to a transaction notwithstanding a reduction or complete
elimination of a tax because of the operation of either Sections 4980(d) or
420(a)(3)(A) of the Code.
(i) Prompt written notice of any order, notice, claim or
proceeding received by, or brought against, any Credit Party or any of its
Subsidiaries, or with respect to any of the Real Property, under any
Environmental Law which could reasonably be expected to have a Material Adverse
Effect.
(j) Promptly after the same are received by any Credit Party or
any of its Subsidiaries, copies of all management letters and similar reports
provided to any Credit Party or any of its Subsidiaries by its independent
certified public accountants.
(k) Such other information as the Agent or any Lender shall
reasonably request from time to time.
7.3. Legal Existence
---------------
Maintain, and cause each of its Subsidiaries to maintain, its legal
existence in good standing in the jurisdiction of its incorporation or
formation and in each other jurisdiction in which the failure so to do could
reasonably be expected to have a Material Adverse Effect.
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<PAGE>
7.4. Taxes
-----
Pay and discharge when due, and cause each of its Subsidiaries so to
do, all Taxes, assessments and governmental charges, license fees and levies
upon, or with respect to it and all Taxes upon its income, profits and Property
which if unpaid, could reasonably be expected to have a Material Adverse Effect
or become a Lien on its Property (other than a Lien described in Section
8.2(i)), unless and to the extent only that such Taxes, assessments, charges,
license fees and levies shall be contested in good faith and by appropriate
proceedings diligently conducted by it and provided that any such contested Tax,
assessment, charge, license fee or levy shall not constitute, or create, a Lien
on any of its Property senior to the Liens, if any, granted to the Agent and the
Lenders on such Property, and, provided further, that the Credit Parties shall
give the Agent prompt notice of such contest and that such reserve or other
appropriate provision as shall be required by the Accountants in accordance with
GAAP shall have been made therefor.
7.5. Insurance
---------
Maintain, and cause each of its Subsidiaries to maintain, insurance
with financially sound insurance carriers on such of its Property, against at
least such risks, and in at least such amounts, as are usually insured against
by similar businesses and which, in the case of property insurance, shall be in
amounts sufficient to prevent either Credit Party from becoming a co-insurer,
including, without limitation, public liability (bodily injury and property
damage), fidelity, and workers' compensation, and file with the Agent within
ten days after request therefor a detailed list of such insurance then in
effect, stating the names of the carriers thereof, the policy numbers, the
insureds thereunder, the amounts of insurance, dates of expiration thereof, and
the Property and risks covered thereby, together with a certificate of the chief
financial officer (or such other officer as shall be acceptable to the Agent) of
the Credit Parties certifying that in the opinion of such officer such insurance
is adequate in nature and amount, complies with the obligations of the Credit
Parties under this Section, and is in full force and effect.
7.6. Payment of Indebtedness and Performance of Obligations
------------------------------------------------------
Pay and discharge when due, and cause each of its Subsidiaries to
pay and discharge, all lawful Indebtedness, obligations and claims for labor,
materials and supplies or otherwise which, if unpaid, might (i) have a Material
Adverse Effect, or (ii) become a Lien upon Property of any Credit Party or any
of its Subsidiaries other than a Permitted Lien, unless and to the extent only
that the validity of such Indebtedness, obligation or claim shall be contested
in good faith and by appropriate proceedings diligently conducted by it, and
further provided that the Credit Parties shall give the Agent prompt notice of
any such contest and that such reserve or other appropriate provision as shall
be required by the Accountants in accordance with GAAP shall have been made
therefor.
7.7. Condition of Property
---------------------
At all times, maintain, protect and keep in good repair, working
order and condition (ordinary wear and tear excepted), and cause each of its
Subsidiaries so to do, all Property necessary to the operation of each Credit
Party's or such Subsidiary's business.
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7.8. Observance of Legal Requirements
--------------------------------
Observe and comply in all respects, and cause each of its
Subsidiaries so to do, with all laws, ordinances, orders, judgments, rules,
regulations, certifications, franchises, permits, licenses, directions and
requirements of all Governmental Authorities, which now or at any time hereafter
may be applicable to it, including, without limitation, ERISA and all
Environmental Laws, a violation of which could reasonably be expected to have a
Material Adverse Effect, except such thereof as shall be contested in good faith
and by appropriate proceedings diligently conducted by it, provided that the
Credit Parties shall give the Agent prompt notice of such contest and that such
reserve or other appropriate provision as shall be required by the Accountants
in accordance with GAAP shall have been made therefor.
7.9. Inspection of Property; Books and Records; Discussions
------------------------------------------------------
Keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all requirements of law shall be
made of all dealings and transactions in relation to its business and activities
and permit, upon reasonable notice, representatives of the Agent and any Lender,
from time to time, to visit its offices, to inspect any of its Property and
examine and make copies or abstracts from any of its books and records during
regular business hours, and to discuss the business, operations, prospects,
licenses, Property and financial condition of each Credit Party and its
Subsidiaries with the officers thereof and the Accountants.
7.10. Licenses, Intellectual Property
-------------------------------
Maintain, and cause each of its Subsidiaries to maintain, in full
force and effect, all material licenses, franchises, Intellectual Property,
permits, licenses, authorizations and other rights as are necessary for the
conduct of its business.
7.11. FCC Licenses, Etc.
-----------------
Maintain and cause each of its Subsidiaries to maintain, in full
force and effect all uplink and microwave facility licenses issued by the FCC
which are necessary for the operation of its business. Each Credit Party shall
also maintain and cause each of its Subsidiaries to maintain, in full force and
effect, all other material licenses, copyrights, patents, including all
licenses, permits, applications, reports, authorizations and other rights as are
necessary for the conduct of its business, except to the extent that such
ownership or right to use shall terminate as a matter of law or expire as a
matter of contractual right through no action or default by any Credit Party or
any of its Subsidiaries.
7.12. Leverage Ratio.
--------------
Maintain at all times a Leverage Ratio of not more than 3.00:1.00:
7.13. EBITDA to Pro-Forma Debt Service.
--------------------------------
Maintain at all times a ratio of EBITDA to Pro-Forma Debt Service of
not less than 2.00:1.00.
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7.14. EBITDA to Interest Expense.
--------------------------
Maintain at all times a ratio of EBITDA to Interest Expense of not
less than 2.25:1.00.
7.15. Margin Stock of Guarantor.
--------------------------
In the event any Margin Stock of the Guarantor is to be acquired by
the Guarantor and if and to the extent that such acquisition would result in a
violation of Section 8.16, the Guarantor shall immediately upon such acquisition
(i) by resolution of its board of directors, take such action under (S)243 of
the Delaware General Corporation law (or such other applicable law) as may be
required to retire at least a number of such shares such that, after giving
effect thereto, no violation of Section 8.16 shall exist and (ii) make such
adjustments in accordance with (S)244 of the Delaware Corporation Law (or such
other applicable law) to the stated capital of the Guarantor as may be
appropriate.
8. NEGATIVE COVENANTS
------------------
Each Credit Party agrees that, so long as this Agreement is in effect, any
Loan remains outstanding and unpaid, or any other amount is owing under any Loan
Document to any Lender or the Agent, each Credit Party shall not, directly or
indirectly:
8.1. Indebtedness
------------
Create, incur, assume or suffer to exist any liability for
Indebtedness, or permit any of its Subsidiaries so to do, except (i)
Indebtedness due under the Loan Documents, (ii) Indebtedness of the Credit
Parties under the Note Agreement, (iii) Indebtedness of each Credit Party or any
of its Subsidiaries existing on the date hereof as set forth on Schedule 8.1,
excluding increases and refinancings thereof, (iv) Indebtedness of the Borrower
constituting purchase money Indebtedness and Capital Lease Obligations incurred
in connection with the purchase or lease of Property in the ordinary course of
business, in an aggregate outstanding principal amount not to exceed $10,000,000
and (v) other unsecured Indebtedness created, incurred or assumed after the date
hereof not enumerated in clauses (i) through (iv) above, provided that the
aggregate outstanding principal amount of such Indebtedness shall not exceed
$5,000,000 at any one time outstanding.
8.2. Liens
-----
Create, incur, assume or suffer to exist any Lien upon any of its
Property, whether now owned or hereafter acquired, or permit any of its
Subsidiaries so to do, except (i) Liens for Taxes, assessments or similar
charges incurred in the ordinary course of business which are not delinquent or
which are being contested in accordance with Section 7.4, provided that
enforcement of such Liens is stayed pending such contest, (ii) Liens in
connection with workers' compensation, unemployment insurance or other social
security obligations (but not ERISA), (iii) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds and other obligations of like
nature arising in the ordinary course of business, (iv) zoning ordinances,
easements, rights of way, minor defects, irregularities, and other similar
restrictions affecting real Property which do not adversely affect the
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value of such real Property or the financial condition of each Credit Party or
such Subsidiary or impair its use for the operation of the business of each
Credit Party or such Subsidiary, (v) Liens arising by operation of law such as
mechanics', materialmen's, carriers', warehousemen's liens in curred in the
ordinary course of business which are not delinquent or which are being
contested in accordance with Section 7.6, provided that enforcement of such
Liens is stayed pending such contest, (vi) Liens arising out of judgments or
decrees which are being contested in accordance with Section 7.6, provided that
enforcement of such Liens is stayed pending such contest, (vii) Liens in favor
of the Agent and the Lenders under the Loan Documents, (viii) Liens on Property
of the Borrower acquired or leased after the date hereof to secure Indebtedness
of the Borrower permitted by Section 8.1(iv), incurred in connection with the
acquisition or lease of such Property, provided that each such Lien is limited
to such Property so acquired or leased, (ix) Liens on Property of each Credit
Party and its Subsidiaries existing on the Effective Date as set forth on
Schedule 8.2 as renewed from time to time, but not any increases in the amounts
secured thereby, (x) Liens on Property of the Borrower or any of its
Subsidiaries acquired after the Effective Date provided that such Liens are
limited to the Property so acquired and were not created in contemplation of
such acquisition, and (xi) Liens on Margin Stock.
8.3. Merger, Consolidation or Sale of Assets, Etc.
---------------------------------------------
Consolidate with, be acquired by, or merge into or with any Person,
or convey, sell, lease or otherwise dispose of all or any part of its Property,
or enter into any sale-leaseback transaction, or permit any of its Subsidiaries
so to do, except:
(a) Sales or other dispositions of inventory in the ordinary
course of business;
(b) Sales or other dispositions of equipment and materials in
the ordinary course of business which are obsolete or no longer useful in the
conduct of its business and sales of Investments (excluding sales of
Subsidiaries or Investments in Subsidiaries), in each case as to which the
following conditions have been satisfied:
(i) no Default or Event of Default shall exist
immediately before or after giving effect thereto, and
(ii) 85% of the total consideration received or to be
received therefor by the Credit Parties or any of their Subsidiaries shall be
payable in cash or Cash Equivalents on or before the closing thereof and shall
not be less than the fair market value thereof;
(c) Sales or other dispositions of Margin Stock for fair value;
and
(d) any wholly-owned Subsidiary of the Borrower may merge into,
be acquired by or otherwise dispose of all or any part of its Property to the
Borrower or another wholly-owned Subsidiary of the Borrower.
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8.4. Restricted Payments
-------------------
Declare or pay any Restricted Payments payable in cash or otherwise
or apply any of its Property thereto or set apart any sum therefor, or permit
any of its Subsidiaries so to do, except that: (i) a wholly-owned Subsidiary may
declare and pay Restricted Payments to the Borrower, (ii) provided that no
Default or Event of Default has occurred and is then continuing or would occur
after giving effect thereto, each Credit Party may declare and pay cash
dividends on its Stock and (iii) the Borrower may declare and pay cash
dividends to the Guarantor in amounts and at times sufficient to enable the
Guarantor, as the consolidated taxpayer for itself and the Borrower and its
Subsidiaries, if applicable, to pay taxes when due.
8.5. Investments, Acquisitions, Loans, Etc.
--------------------------------------
At any time, purchase or otherwise acquire, hold or invest in the
Stock or Property of, or any other interest in, any Person, or make any loan or
advance to, or enter into any arrangement for the purpose of providing funds or
credit to, or make any other investment, whether by way of capital contribution,
deposit or otherwise, in or with any Person, or permit any of its Subsidiaries
so to do (all of which are sometimes referred to herein as "Investments"),
-----------
except:
(a) Investments in Cash or Cash Equivalents;
(b) Investments existing on the date hereof as set forth on
Schedule 8.5;
(c) normal business banking accounts and short-term certificates
of deposit and time deposits in, or issued by, federally insured institutions in
amounts not exceeding the limits of such insurance;
(d) Investments in wholly owned Subsidiaries owned by the
Guarantor on the Effective Date;
(e) Investments in the form of purchases or other acquisitions
of inventory, materials and equipment in the ordinary course of business;
(f) Investments by the Guarantor in the form of the purchase or
other acquisition of its Stock with the proceeds of the first Loans as
contemplated by Section 2.14 and subject to the terms and conditions hereof;
(g) Investments used to provide "upfront payments" to the FCC in
connection with the auction of C block personal communications services (PCS)
licenses to the extent that such upfront payments (calculated after deduction
for any withdrawal, default, disqualification and/or other penalties imposed by
the FCC) are not to be retained by the FCC and (i) all actions necessary to
obtain the return of such upfront payments and the repayment to the Borrower or
its applicable Subsidiaries of such Investments shall have been taken, (ii)
promptly upon receipt of the return of such upfront payments such Investments
shall be repaid to the Borrower or such applicable Subsidiaries, and (iii) the
Required Lenders shall have consented thereto and received such certificates and
documents in connection therewith as they may request; and
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(h) other Investments (including the purchase or other
acquisition by the Guarantor of its Stock, subject to the term and conditions
hereof, but excluding the purchase or other acquisition by any Subsidiary of the
Guarantor of the Stock of the Guarantor) made after the date hereof not
enumerated in clauses (a) through (g) above, provided that the aggregate amount
of such Investments (net of return of Investments) does not exceed $50,000,000.
8.6. Business and Name Changes
-------------------------
Materially change the nature of the business of any Credit Party or
any of its Subsidiaries as conducted on the Effective Date, or alter or modify
any Credit Party's name, structure or status, or permit any of its Subsidiaries
so to do, except to the extent permitted under Section 8.3.
8.7. Subsidiaries
------------
Create or acquire any other Subsidiary, or permit any of its
Subsidiaries so to do, except as permitted under Section 8.3 or 8.5.
8.8. Certificate of Incorporation and By-laws
----------------------------------------
Amend or otherwise modify its Certificate of Incorporation or By-
Laws in any way which would adversely affect the interests of the Agent and the
Lenders under any of the Loan Documents, or permit any of its Subsidiaries so to
do.
8.9. ERISA
-----
Permit any Pension Plan to have a Funded Current Liability
Percentage of less than 60 percent.
8.10. Sale and Leaseback
------------------
Enter into any arrangement with any Person providing for the leasing
by it of Property which has been or is to be sold or transferred by it to such
Person or to any other Person to whom funds have been or are to be advanced by
such Person on the security of such Property or its rental obligations, or
permit any of its Subsidiaries so to do, except to the extent permitted under
Section 8.3.
8.11. Fiscal Year
-----------
Change its fiscal year from that in effect on the Effective Date, or
permit any of its Subsidiaries so to do.
8.12. Amendments, Etc. of Certain Agreements
--------------------------------------
Enter into or agree to any amendment, modification or waiver of any
term or condition of the Stock Purchase Agreement, the Noncompetition Agreement
or the Note Agreement without the prior written consent of the Required Lenders.
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8.13. Transactions with Affiliates
----------------------------
Become a party to any transaction with an Affiliate unless the terms
and conditions relating thereto are as favorable to it as those which would be
obtainable at the time in a comparable arms-length transaction with a Person
other than an Affiliate, or permit any of its Subsidiaries so to do.
8.14. Limitation on Certain Restrictions on Subsidiaries
--------------------------------------------------
Directly or indirectly create or otherwise cause or suffer to exist
or become effective, any encumbrance or restriction on the ability of any
Subsidiary of any Credit Party to (i) pay dividends or make any other
distributions on its capital Stock or any other interest or participation in
such Subsidiary's profits owned by the Borrower or any of its Subsidiaries, or
pay any Indebtedness owed to the Borrower or any Subsidiary of the Borrower,
(ii) make loans or advances to the Borrower or any Subsidiary of the Borrower or
(iii) transfer any of its Property to the Borrower, or permit any Subsidiary so
to do, except for (a) the Note Agreement and (b) such encumbrances or
restrictions existing under or by reason of (x) applicable law and (y) the Loan
Documents.
8.15. Limitation on Negative Pledge Clauses.
-------------------------------------
Enter into any agreement, other than (i) this Agreement, (ii) the
Note Agreement and (iii) purchase money mortgages or capital leases permitted by
this Agreement (in which cases, any prohibition or limitation shall only be
effective against the assets financed thereby), which prohibits or limits the
ability of any Credit Party to create, incur, assume or suffer to exist any Lien
upon any of its Property or revenues, whether now owned or hereafter acquired.
8.16. Investments in Margin Stock.
---------------------------
Acquire or hold any Margin Stock, or permit any of its Subsidiaries
so to do, if more than 25% of the value of the assets of each of the Guarantor
and the Borrower is represented by assets consisting of Margin Stock.
9. DEFAULT
-------
9.1. Events of Default
-----------------
The following shall each constitute an "Event of Default" hereunder:
(a) The failure of the Borrower to pay any principal on any Note
on the date when due and payable; or
(b) The failure of any Credit Party to pay any interest or any
other fees or expenses payable under any Loan Document or otherwise to the Agent
with respect to the loan facilities established hereunder within three Business
Days of the date when due and payable; or
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<PAGE>
(c) The failure of any Credit Party to observe or perform any
covenant or agreement contained in Sections 2.14, 7.3, 7.11, 7.12, 7.13, 7.14,
7.15 or Section 8; or
(d) The failure of any Credit Party to observe or perform any
term, covenant, or agreement contained in any Loan Document (except those
described in Section 9.1(a), (b), (c) or (e)) and such failure shall have
continued unremedied for a period of 30 days after any Responsible Party of the
applicable Credit Party shall have obtained knowledge thereof; or
(e) Any representation or warranty made by any Credit Party in
any Loan Document or in any certificate, report or other document delivered or
to be delivered pursuant thereto, shall prove to have been incorrect or
misleading in any material respect when made; or
(f) Any obligation of any Credit Party (other than its
obligations under the Loan Documents) or any of its Subsidiaries, whether as
principal, guarantor, surety or other obligor, for the payment of any
Indebtedness or operating leases, in an aggregate amount in excess of $500,000,
(i) shall become or shall be declared to be due and payable prior to the
expressed maturity thereof, or (ii) shall not be paid when due or within any
grace period for the payment thereof, or (iii) in respect of which a Responsible
Party of any Credit Party shall have obtained knowledge that any holder of any
such obligation shall have the right to declare such obligation due and payable
prior to the expressed maturity thereof and the default, event of default or
other circumstances giving rise to such right to declare such obligation due and
payable shall not have been waived or otherwise cured (such that such right
shall no longer exist) within 30 days of such Responsible Party having obtained
such knowledge;
(g) Any Credit Party or any of its Material Subsidiaries shall
suspend or discontinue its business substantially as a whole and such suspension
or discontinuance shall have a Material Adverse Effect;
(h) Any Credit Party or any of its Subsidiaries shall (i) make
an assignment for the benefit of creditors, (ii) generally not be paying its
debts as such debts become due, (iii) admit in writing its inability to pay its
debts as they become due, (iv) file a voluntary petition in bankruptcy, (v)
become insolvent, (vi) file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment of debt, liquidation or
dissolution or similar relief under any present or future statute, law or
regulation of any jurisdiction, (vii) petition or apply to any tribunal for any
receiver, custodian or any trustee for any substantial part of its Property,
(viii) be the subject of any such proceeding filed against it which remains
undismissed for a period of 45 days, (ix) file any answer admitting or not
contesting the material allegations of any such petition filed against it or any
order, judgment or decree approving such petition in any such proceeding, (x)
seek, approve, consent to, or acquiesce in any such proceeding, or in the
appointment of any trustee, receiver, sequestrator, custodian, liquidator, or
fiscal agent for it, or any substantial part of its Property, or an order is
entered appointing any such trustee, receiver, custodian, liquidator or fiscal
agent and such order remains in effect for 45 days, or (xi) take any formal
action for the purpose of effecting any of the foregoing or looking to the
liquidation or dissolution of any Credit Party or any of its Subsidiaries; or
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(i) An order for relief is entered under the United States
bankruptcy laws or any other decree or order is entered by a court having
jurisdiction (i) adjudging any Credit Party or any of its Subsidiaries bankrupt
or insolvent, (ii) approving as properly filed a petition seeking
reorganization, liquidation, arrangement, adjustment or composition of or in
respect of any Credit Party or any of its Subsidiaries under the United States
bankruptcy laws or any other applicable Federal or state law, (iii) appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of any Credit Party or any of its Subsidiaries or of any
substantial part of the Property thereof, or (iv) ordering the winding up or
liquidation of the affairs of any Credit Party or any of its Subsidiaries and
any such decree or order continues unstayed and in effect for a period of 45
days; or
(j) Judgments or decrees against any Credit Party or any of its
Subsidiaries aggregating in excess of $500,000 shall remain unpaid, unstayed on
appeal, undischarged, unbonded or undismissed for a period of 30 days; or
(k) Any Loan Document shall cease, for any reason, to be in full
force and effect, or any Credit Party shall so assert in writing or shall
disavow any of its obligations thereunder; or
(l) (i) Any Termination Event shall occur; (ii) any Accumulated
Funding Deficiency, whether waived, shall exist with respect to any Pension
Plan; (iii) any Person shall engage in any Prohibited Transaction involving any
Employee Benefit Plan; (iv) the Guarantor, any of its Subsidiaries or any ERISA
Affiliate shall fail to pay when due an amount which is payable by it to the
PBGC or to a Pension Plan under Title IV of ERISA; (v) the imposition of any tax
under Section 4980(B)(a) of the Code; (vi) the assessment of a civil penalty
with respect to any Employee Benefit Plan under Section 502(c) of ERISA; or
(vii) any other event or condition shall occur or exist with respect to an
Employee Benefit Plan which would have a Material Adverse Effect and in the case
of clauses (ii), (iv), (v) and (vi) of this subsection, the aggregate liability
of any Credit Party or any of its Subsidiaries or ERISA Affiliates shall exceed
$500,000; or
(m) If for any reason there shall occur a Change of Control.
Upon the occurrence, or at any time during the occurrence, of an
Event of Default (a) if such event is an Event of Default specified in clause
(h) or (i) above, the Aggregate Commitments shall immediately and automatically
terminate and the Loans, all accrued and unpaid interest thereon and all other
amounts owing under the Loan Documents shall immediately become due and payable,
and the Agent may, and, upon the direction of the Required Lenders shall,
exercise any and all remedies and other rights provided in the Loan Documents,
and (b) if such event is any other Event of Default, any or all of the following
actions may be taken: (i) with the consent of the Required Lenders, the Agent
may, and upon the direction of the Required Lenders shall, by notice to the
Borrower, declare the Aggregate Commitments to be terminated forthwith,
whereupon the Aggregate Commitments shall immediately terminate, and (ii) with
the consent of the Required Lenders, the Agent may, and upon the direction of
the Required Lenders shall, by notice of default to the Borrower, declare the
Loans, all accrued and unpaid interest thereon, and all other amounts owing
under the Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable, and the Agent may, and upon the
direction of the Required Lenders shall, exercise any and all remedies
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and other rights provided pursuant to the Loan Documents. Except as otherwise
provided in this Section, presentment, demand, protest and all other notices of
any kind are hereby expressly waived. Each Credit Party hereby further expressly
waives and covenants not to assert any appraisement, valuation, stay, extension,
redemption or similar laws, now or at any time hereafter in force which might
delay, prevent or otherwise impede the performance or enforcement of any Loan
Document.
In the event that the Aggregate Commitments shall have been
terminated or the Notes shall have been declared due and payable pursuant to the
provisions of this Section, any funds received by the Agent and the Lenders from
or on behalf of the Credit Parties shall be applied by the Agent and the Lenders
in liquidation of the Loans and the obligations of the Borrower under the Loan
Documents in the following manner and order: (i) first, to the payment of
interest on, and then the principal portion of, any Loans which the Agent may
have advanced on behalf of any Lender for which the Agent has not then been
reimbursed by such Lender or the Credit Parties; (ii) second, to the payment of
any fees or expenses due the Agent from the Credit Parties, (iii) third, to
reimburse the Agent and the Lenders for any expenses (to the extent not paid
pursuant to clause (ii) above due from the Credit Parties pursuant to the
provisions of Section 11.5; (iv) fourth, to the payment of accrued Commitment
Fees, and all other fees, expenses and amounts due under the Loan Documents
(other than principal and interest on the Notes); (v) fifth, to the payment of
interest due on the Notes; (vi) sixth, to the payment of principal outstanding
on the Notes; and (vii) seventh, to the payment of any other amounts owing to
the Agent and the Lenders under any Loan Document.
10. THE AGENT
---------
10.1. Appointment
-----------
Each Lender hereby irrevocably designates and appoints BNY as the
Agent of such Lender under the Loan Documents and each such Lender hereby
irrevocably authorizes BNY, as the Agent for such Lender, to take such action on
its behalf under the provisions of the Loan Documents and to exercise such
powers and perform such duties as are expressly delegated to the Agent by the
terms of the Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
any Loan Document, the Agent shall not have any duties or responsibilities other
than those expressly set forth therein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into the Loan Documents or otherwise
exist against the Agent.
10.2. Delegation of Duties
--------------------
The Agent may execute any of its duties under the Loan Documents by
or through agents or attorneys-in-fact and shall be entitled to rely upon the
advice of counsel concerning all matters pertaining to such duties.
10.3. Exculpatory Provisions
----------------------
Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to
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be taken by it or such Person under or in connection with the Loan Documents
(except the Agent for its own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Credit Party or any officer thereof
contained in the Loan Documents or in any certificate, report, statement or
other document referred to or provided for in, or received by the Agent under or
in connection with, the Loan Documents or for the value, validity,
effectiveness, genuineness, perfection, enforceability or sufficiency of any of
the Loan Documents or for any failure of any Credit Party or any other Person to
perform its obligations thereunder. The Agent shall not be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, the Loan Documents, or to
inspect the properties, books or records of any Credit Party. The Agent shall
not be under any liability or responsibility whatsoever, as Agent, to any Credit
Party or any other Person as a consequence of any failure or delay in
performance, or any breach, by any Lender of any of its obligations under any of
the Loan Documents.
10.4. Reliance by Agent
-----------------
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
opinion, letter, cablegram, telegram, fax, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to any Credit Party), independent accountants and other experts selected by the
Agent. The Agent may treat each Lender, or the Person designated in the last
notice filed with it under this Section, as the holder of all of the interests
of such Lender in its Loans and in its Note until written notice of transfer,
signed by such Lender (or the Person designated in the last notice filed with
the Agent) and by the Person designated in such written notice of transfer, in
form and substance satisfactory to the Agent, shall have been filed with the
Agent. The Agent shall not be under any duty to examine or pass upon the
validity, effectiveness, enforceability, perfection or genuineness of the Loan
Documents or any instrument, document or communication furnished pursuant
thereto or in connection therewith, and the Agent shall be entitled to assume
that the same are valid, effective and genuine, have been signed or sent by the
proper parties and are what they purport to be. The Agent shall be fully
justified in failing or refusing to take any action under the Loan Documents
unless it shall first receive such advice or concurrence of the requisite
Lenders as it deems appropriate. The Agent shall in all cases be fully protected
in acting, or in refraining from acting, under the Loan Documents in accordance
with a request or direction of the Required Lenders, and such request or
direction and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Notes.
10.5. Notice of Default
-----------------
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default unless the Agent has received
written notice thereof from a Lender or the Borrower. In the event that the
Agent receives such a notice, the Agent shall promptly give notice thereof to
the Lenders and the Borrower. The Agent shall take such action with respect to
such Default or Event of Default as shall be directed by the Required Lenders,
provided, however, that unless and until the Agent shall
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have received such directions, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem to be in the best interests of the
Lenders.
10.6. Non-Reliance on Agent and Other Lenders
---------------------------------------
Each Lender expressly acknowledges that neither the Agent nor any of
its respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Agent hereinafter, including any review of the affairs of any Credit Party,
shall be deemed to constitute any representation or warranty by the Agent to any
Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own evaluation of and
investigation into the business, operations, Property, financial and other
condition and creditworthiness of the Credit Parties and made its own decision
to enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, evaluations and decisions in taking or
not taking action under any Loan Document, and to make such investigation as it
deems necessary to inform itself as to the business, operations, Property,
financial and other condition and creditworthiness of the Credit Parties. Except
for notices, reports and other documents expressly required to be furnished to
the Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, Property, financial and other condition or
creditworthiness of the Credit Parties which may come into the possession of the
Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
10.7. Indemnification
---------------
Each Lender agrees to indemnify and reimburse the Agent in its
capacity as such (to the extent not promptly reimbursed by the Borrower and
without limiting the obligation of any Credit Party to do so), pro rata
according to the outstanding principal balance of the Loans (or at any time when
no Loans are outstanding, according to its Commitment Percentage), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever including, without limitation, any amounts paid to the Lenders
(through the Agent) by the Borrower pursuant to the terms of the Loan Documents,
that are subsequently rescinded or avoided, or must otherwise be restored or
returned) which may at any time (including, without limitation, at any time
following the payment of the Notes) be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of the Loan Documents or
any other documents contemplated by or referred to therein or the transactions
contemplated thereby or any action taken or omitted to be taken by the Agent
under or in connection with any of the foregoing; provided, however, that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements to the extent resulting solely from the finally
adjudicated gross negligence or willful misconduct of the Agent. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its pro rata share of any unpaid fees owing to the Agent, and
any costs and expenses (including, without limitation, reasonable fees and
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expenses of counsel) payable by the Borrower under Section 11.5, to the extent
that the Agent has not been paid such fees or has not be reimbursed for such
costs and expenses, by the Borrower or any other Credit Party. The failure of
any Lender to reimburse the Agent promptly upon demand for its pro rata share of
any amount required to be paid by the Lenders to the Agent as provided in this
Section shall not relieve any other Lender of its obligation hereunder to
reimburse the Agent for its pro rata share of such amount, but no Lender shall
be responsible for the failure of any other Lender to reimburse the Agent for
such other Lender's pro rata share of such amount. The agreements in this
Section shall survive the payment of all amounts payable under the Loan
Documents.
10.8. Agent in Its Individual Capacity
--------------------------------
BNY and its respective affiliates may make loans to, accept deposits
from, issue letters of credit for the account of, and generally engage in any
kind of business with, any Credit Party as though BNY were not Agent hereunder.
With respect to the Commitment made or renewed by BNY and the Note issued to
BNY, BNY shall have the same rights and powers under the Loan Documents as any
Lender and may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall in each case include BNY.
10.9. Successor Agent
---------------
If at any time the Agent deems it advisable, in its sole discretion,
it may submit to each of the Lenders a written notice of its resignation as
Agent under the Loan Documents, such resignation to be effective upon the
earlier of (i) the written acceptance of the duties of the Agent under the Loan
Documents by a successor Agent and (ii) on the 30th day after the date of such
notice. Upon any such resignation, the Required Lenders shall have the right to
appoint from among the Lenders a successor Agent. If no successor Agent shall
have been so appointed by the Required Lenders and accepted such appointment in
writing within 30 days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which successor Agent shall be a commercial bank organized
under the laws of the United States of America or any State thereof and having a
combined capital, surplus, and undivided profits of at least $100,000,000. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent's rights, powers, privileges and duties as Agent under the Loan Documents
shall be terminated. The Borrower and the Lenders shall execute such documents
as shall be necessary to effect such appointment. After any retiring Agent's
resignation as Agent, the provisions of the Loan Documents shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under the Loan Documents. If at any time there shall not be a duly appointed and
acting Agent, the Borrower agrees to make each payment due under the Loan
Documents directly to the Lenders entitled thereto during such time.
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11. OTHER PROVISIONS
----------------
11.1. Amendments and Waivers
----------------------
With the written consent of the Required Lenders, the Agent and the
appropriate Credit Parties may, from time to time, enter into written
amendments, supplements or modifications of the Loan Documents and, with the
consent of the Required Lenders, the Agent on behalf of the Lenders may execute
and deliver to any such parties a written instrument waiving or a consent to a
departure from, on such terms and conditions as the Agent may specify in such
instrument, any of the requirements of the Loan Documents or any Default or
Event of Default and its consequences; provided, however, that:
(a) no such amendment, supplement, modification, waiver or consent
shall, without the consent of all of the Lenders, (i) increase the Commitments
of any Lender or the Aggregate Commitments, (ii) extend the Maturity Date, (iii)
decrease the rate, or extend the time of payment, of the Commitment Fee or of
interest on any Note, or change or forgive the principal amount of, or change
the pro rata allocation, or extend the time of payment, of payments under, any
Note, (iv) change the provisions of Sections 2.11, 2.13, 2.14, 2.15, 11.1 or
11.7(a), (v) release the Guaranty or (v) change the definition of Required
Lenders; and
(b) without the written consent of the Agent, no such amendment,
supplement, modification or waiver shall amend, modify or waive any provision of
Section 10 or otherwise change any of the rights or obligations of the Agent
hereunder or under the Loan Documents.
Any such amendment, supplement, modification or waiver shall apply
equally to each of the Lenders and shall be binding upon the parties to the
applicable Loan Document, the Lenders, the Agent and all future holders of the
Notes. In the case of any waiver, the parties to the applicable Loan Document,
the Lenders and the Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes and other Loan Documents to the extent
provided for in such waiver, and any Default or Event of Default waived shall
not extend to any subsequent or other Default or Event of Default. The Loan
Documents may not be amended orally or by any course of conduct.
11.2. Notices
-------
All notices, requests and demands to or upon the respective parties
to the Loan Documents to be effective shall be in writing and, unless otherwise
expressly provided therein, shall be deemed to have been duly given or made when
delivered by hand, or when deposited in the mail, first-class postage prepaid,
or, in the case of notice by fax, when sent, addressed as follows in the case of
the Borrower, the Guarantor or the Agent, at the Domestic Lending Office, in the
case of each Lender, or to such other addresses as to which the Agent may be
hereafter notified by the respective parties thereto or any future holders of
the Notes:
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The Borrower:
Black Entertainment Television, Inc.
1900 W Place, N.E.
Washington, D.C. 20018
Attention: William T. Gordon, III,
Executive Vice President, Finance
Chief Financial Officer and Treasurer
Telephone: (202) 608-2440
Facsimile: (202) 608-2595
The Guarantor:
BET Holdings, Inc.
1900 W Place, N.E.
Washington, D.C. 20018
Attention: William T. Gordon, III,
Executive Vice President, Finance
Chief Financial Officer and Treasurer
Telephone: (202) 608-2440
Facsimile: (202) 608-2595
for both the Borrower and the Guarantor,
with a copy to:
Black Entertainment Television, Inc.
1900 W Place, N.E.
Washington, D.C. 20018
Attention: Debra L. Lee,
Executive Vice President,
General Counsel
Corporate Secretary
Telephone: (202) 608-2448
Facsimile: (202) 608-2506
The Agent:
The Bank of New York
One Wall Street
Agency Function Administration
18th Floor
New York, New York 10286
Attention: Patricia Clancy
Telephone: (212) 635-4696
Facsimile: (212) 635-6365 or 6366 or 6367
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<PAGE>
with a copy to:
The Bank of New York
One Wall Street
New York, New York 10286
Attention: Wade E. Layton,
Vice President
Telephone: (212) 635-8693
Facsimile: (212) 635-8593
except that any notice, request or demand by the Borrower to or upon the Agent
or the Lenders pursuant to Sections 2.3 or 2.6 shall not be effective until
received. Any party to a Loan Document may rely on signatures of the parties
thereto which are transmitted by fax or other electronic means as fully as if
originally signed.
11.3. No Waiver; Cumulative Remedies
------------------------------
No failure to exercise and no delay in exercising, on the part of
the Agent or any Lender, any right, remedy, power or privilege under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
under the Loan Documents are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
11.4. Survival of Representations and Warranties
------------------------------------------
All representations and warranties made under the Loan Documents and
in any document, certificate or statement delivered pursuant thereto or in
connection therewith shall survive the execution and delivery of the Loan
Documents.
11.5. Payment of Expenses and Taxes
-----------------------------
The Borrower agrees, promptly upon presentation of a statement or
invoice therefor, and whether any Loan is made (i) to pay or reimburse the Agent
for all its out-of-pocket costs and expenses reasonably incurred in connection
with the development, preparation and execution of, the Loan Documents and any
amendment, supplement or modification thereto (whether or not executed), any
documents prepared in connection therewith and the consummation of the
transactions contemplated thereby, including, without limitation, the reasonable
fees and disbursements of Special Counsel, (ii) to pay or reimburse the Agent
and the Lenders for all of their respective costs and expenses, including,
without limitation, reasonable fees and disbursements of counsel, incurred in
connection with (A) any Default or Event of Default and any enforcement or
collection proceedings resulting therefrom or in connection with the negotiation
of any restructuring or "work-out" (whether consummated or not) of the
obligations of the Credit Parties under any of the Loan Documents and (B) the
enforcement of this Section, (iii) to pay, indemnify, and hold each Lender and
the Agent harmless from and against, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other similar taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of
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the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, the Loan Documents and any
such other documents, and (iv) to pay, indemnify and hold each Lender and the
Agent and each of their respective officers, directors and employees harmless
from and against any and all other liabilities, obligations, claims, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever (including, without limitation, reasonable
counsel fees and disbursements) with respect to the enforcement of the Loan
Documents and the use of the proceeds of the Loans (all the foregoing,
collectively, the "indemnified liabilities") and, if and to the extent that the
-----------------------
foregoing indemnity may be unenforceable for any reason, the Borrower agrees to
make the maximum payment permitted or not prohibited under applicable law;
provided, however, that the Borrower shall have no obligation hereunder to pay
indemnified liabilities to the Agent or any Lender arising from the finally
adjudicated gross negligence or willful misconduct of the Agent or such Lender
or claims between one indemnified party and another indemnified party. The
agreements in this Section shall survive the termination of the Aggregate
Commitments and the payment of all amounts payable under the Loan Documents.
11.6. Lending Offices
---------------
(a) Each Lender shall have the right at any time and from time to
time to transfer its Loans to a different office, provided that such Lender
shall promptly notify the Agent and the Borrower of any such change of office.
Such office shall thereupon become such Lender's Domestic Lending Office or
Eurodollar Lending Office, as the case may be, provided, however, that no such
Lender shall be entitled to receive any greater amount under Sections 2.9, 2.11
or 2.12 as a result of a transfer of any such Loans to a different office of
such Lender than it would be entitled to immediately prior thereto unless such
claim would have arisen even if such transfer had not occurred.
(b) Each Lender agrees that, upon the occurrence of any event
described in Sections 2.8, 2.9, 2.10, 2.11 or 2.12 with respect to such Lender,
it will, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Lender) to designate another lending
office for any Loans affected by such event, provided that such designation is
made on such terms that such Lender and its lending office suffer no economic,
legal or regulatory disadvantage, with the object of avoiding the consequence of
the event giving rise to the operation of any such Section. Nothing in this
Section shall affect or postpone any of the obligations of the Borrower or the
right of any Lender provided in any of such Sections.
11.7. Assignments and Participations
------------------------------
(a) The Loan Documents shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Agent, all future holders of the Notes
and their respective successors and assigns, except that no Credit Party may
assign, delegate or transfer any of its rights or obligations under the Loan
Documents without the prior written consent of the Agent and each Lender.
(b) Each Lender shall have the right at any time, upon written
notice to the Agent of its intent to do so, to sell, assign, transfer or
negotiate all or any part of such Lender's rights under the Loan Documents to
one or more of its affiliates, to one or more
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of the other Lenders (or to affiliates of such other Lenders) or, with the prior
written consent of the Borrower (which consent shall not be unreasonably
withheld), to sell, assign, transfer or negotiate all or any part of such
Lender's rights and obligations under the Loan Documents to any other bank,
insurance company, pension fund, mutual fund or other financial institution,
provided that (i) each such sale, assignment, transfer or negotiation (other
than sales, assignments, transfers or negotiations (x) to affiliates of such
Lender or (y) of a Lender's entire interest) shall be in a minimum amount of
$5,000,000 and (ii) there shall be paid to the Agent by the assigning Lender a
fee (the "Assignment Fee") of $3,000. For each assignment, the parties to such
--------------
assignment shall execute and deliver to the Agent for its acceptance and
recording an Assignment and Acceptance Agreement. Upon such execution, delivery,
acceptance and recording by the Agent, from and after the effective date
specified in such Assignment and Acceptance Agreement, the assignee thereunder
shall be a party hereto and, to the extent provided in such Assignment and
Acceptance Agreement, the assignor Lender thereunder shall be released from its
obligations under the Loan Documents. The Borrower agrees upon written request
of the Agent and at the Borrower's expense to execute and deliver (1) to such
assignee, a Note, dated the effective date of such Assignment and Acceptance
Agreement, in an aggregate principal amount equal to the Loans assigned to, and
Commitments assumed by, such assignee and (2) to such assignor Lender, a Note,
dated the effective date of such Assignment and Acceptance Agreement, in an
aggregate principal amount equal to the balance of such assignor Lender's Loans
and Commitments, if any, and each as signor Lender shall cancel and return to
the Borrower its existing Note. Upon any such sale, assignment or other
transfer, the Commitments and the Commitment Percentages set forth in Exhibit A
shall be adjusted accordingly by the Agent and a new Exhibit A shall be
distributed by the Agent to the Borrower and each Lender.
(c) Each Lender may grant participations in all or any part of its
Loans, its Note and its Commitment to one or more banks, insurance companies,
financial institutions, pension funds or mutual funds, provided that (i) such
Lender's obligations under the Loan Documents shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties to the Loan
Documents for the performance of such obligations, (iii) the Borrower, the Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under the Loan
Documents,(iv) no sub-participations shall be permitted and (v) the voting
rights of any holder of any participation shall be limited to decisions that
only do any of the following: (A) subject the participant to any additional
obligation, (B) reduce the principal of, or interest on the Notes or any fees or
other amounts payable hereunder, (C) postpone any date fixed for the payment of
principal of, or interest on the Notes or any fees or other amounts payable
hereunder or (D) release any guarantor under any guarantee. The Borrower
acknowledges and agrees that any such participant shall for purposes of Sections
2.9, 2.11, 2.12 and 2.15 be deemed to be a "Lender"; provided, however, the
Borrower shall not, at any time, be obligated to pay any participant in any
interest of any Lender hereunder any sum in excess of the sum which the Borrower
would have been obligated to pay to such Lender in respect of such interest had
such Lender not sold such participation.
(d) If any (i) assignment made pursuant to subsection (b) above or
(ii) any participation granted pursuant to subsection (c) above, shall be made
to any Person that is not a U.S. Person, such Person shall furnish such
certificates, documents or other evidence to the Borrower and the Agent, in the
case of clause (i) and to the Borrower and
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the Lender which sold such participation in the case of clause (ii), as shall be
required by Section 2.9(c).
(e) No Lender shall, as between and among the Borrower, the Agent
and such Lender, be relieved of any of its obligations under the Loan Documents
as a result of any sale, assignment, transfer or negotiation of, or granting of
participations in, all or any part of its Loans, its Commitment or its Note,
except that a Lender shall be relieved of its obligations to the extent of any
such sale, assignment, transfer, or negotiation of all or any part of its Loans,
its Commitment or its Note pursuant to subsection (b) above.
(f) Notwithstanding anything to the contrary contained in this
Section, any Lender may at any time or from time to time assign all or any
portion of its rights under the Loan Documents to a Federal Reserve Bank,
provided that any such assignment shall not release such assignor from its
obligations thereunder.
11.8. Counterparts
------------
Each Loan Document (other than the Notes) may be executed by one or
more of the parties thereto on any number of separate counter parts and all of
said counterparts taken together shall be deemed to constitute one and the same
document. It shall not be necessary in making proof of any Loan Document to
produce or account for more than one counterpart signed by the party to be
charged. A counterpart of any Loan Document or to any document evidencing, and
of any an amendment, modification, consent or waiver to or of any Loan Document
transmitted by fax shall be deemed to be an originally executed counterpart. A
set of the copies of the Loan Documents signed by all the parties thereto shall
be deposited with each of the Borrower and the Agent. Any party to a Loan
Document may rely upon the signatures of any other party thereto which are
transmitted by fax or other electronic means to the same extent as if originally
signed.
11.9. Adjustments; Set-off
--------------------
(a) If any Lender (a "Benefited Lender") shall at any time receive
----------------
any payment of all or any part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or in voluntarily, by set-
off, pursuant to events or proceedings of the nature referred to in Section 9.1
(h) or (i), or otherwise) in a greater proportion than any such payment to and
collateral received by any other Lender in respect of such other Lender's Loans,
or interest thereon, such Benefited Lender shall purchase for cash from each of
the other Lenders such portion of each such other Lender's Loans, and shall
provide each of such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such Benefited Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders, provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefited Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest. The Borrower agrees that
each Lender so purchasing a portion of another Lender's Loans may exercise all
rights of payment (including, without limitation, rights of set-off, to the
extent not prohibited by law) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
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(b) In addition to any rights and remedies of the Lenders provided
by law, upon the acceleration of the obligations owing in connection with the
Loan Documents, or at any time upon the occurrence or during the continuance of
an Event of Default under Section 9.1(a) or (b), each Lender shall have the
right, without prior notice to the Borrower, any such notice being expressly
waived by each Credit Party to the extent not prohibited by applicable law, to
set-off and apply against any obligations, whether matured or unmatured, of such
Credit Party to such Lender, any amount owing from such Lender to such Credit
Party. To the extent not prohibited by applicable law, the aforesaid right of
set-off may be exercised by such Lender against such Credit Party or against any
trustee in bankruptcy, custodian, debtor in possession, assignee for the
benefit of creditors, receiver, or execution, judgment or attachment creditor of
such Credit Party, or against anyone else claiming through or against such
Credit Party or such trustee in bankruptcy, custodian, debtor in possession,
assignee for the benefit of creditors, receiver, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of set-off shall
not have been exercised by such Lender prior to the making, filing or issuance,
or service upon such Lender of, or of notice of, any such petition, assignment
for the benefit of creditors, appointment or application for the appointment of
a receiver, or issuance of execution, subpoena, order or warrant. Each Lender
agrees promptly to notify the applicable Credit Party and the Agent after any
such set-off and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
11.10. Construction
------------
Each Credit Party represents that it has been represented by counsel
in connection with the Loan Documents and the transactions contemplated thereby
and that the principle that agreements are to be construed against the draftsman
shall be inapplicable.
11.11. Indemnity
---------
The Borrower agrees to indemnify and hold harmless the Agent and
each Lender and their respective affiliates, directors, officers, employees,
attorneys and agents (each an "Indemnified Person") from and against any loss,
------------------
cost, liability, damage or expense (including the reasonable fees and
disbursements of counsel of such Indemnified Person, including all local counsel
hired by any such counsel) incurred by such Indemnified Person in investigating,
preparing for, defending against, or providing evidence, producing documents or
taking any other action in respect of, any commenced or threatened litigation,
administrative proceeding or investigation under any federal securities law or
any other statute of any jurisdiction, or any regulation, or at common law or
otherwise, which is alleged to arise out of or is based upon or related to (i)
any of the Loan Documents, the Commitments or the use by any Credit Party or any
of its Subsidiaries or agents of the proceeds of any Loans; or (ii) any
acquisition or proposed acquisition by any Credit Party of Stock. The indemnity
set forth herein shall be in addition to any other obligations or liabilities of
the Borrower to each Indemnified Person under the Loan Documents or at common
law or otherwise, and shall survive any termination of the Loan Documents, the
expiration of the Commitments and the payment of all obligations of the Borrower
under the Loan Documents, provided that the Borrower shall have no obligation
under this Section to an Indemnified Person with respect to any of the foregoing
to the extent found in a final judgment of a court having jurisdiction to have
resulted primarily
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out of the gross negligence or wilful misconduct of such Indemnified Person or
arising solely from claims between one such Indemnified Person and another such
Indemnified Person.
11.12. Governing Law
-------------
The Loan Documents and the rights and obligations of the parties
thereunder shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of New York, without regard to principles
of conflict of laws.
11.13. Headings Descriptive
--------------------
Section headings have been inserted in the Loan Documents for
convenience only and shall not be construed to be a part thereof.
11.14. Severability
------------
Every provision of the Loan Documents is intended to be severable,
and if any term or provision thereof shall be invalid, illegal or unenforceable
for any reason, the validity, legality and enforceability of the remaining
provisions thereof shall not be affected or impaired thereby, and any
invalidity, illegality or unenforceability in any jurisdiction shall not affect
the validity, legality or enforceability of any such term or provision in any
other jurisdiction.
11.15. Integration
-----------
All exhibits to a Loan Document shall be deemed to be a part
thereof. Except for agreements between the Agent and the Borrower with respect
to certain fees, the Loan Documents embody the entire agreement and
understanding among the Credit Parties, the Agent and the Lenders with respect
to the subject matter thereof and supersede all prior agreements and
understandings among the Credit Parties, the Agent and the Lenders with respect
to the subject matter thereof.
11.16. Consent to Jurisdiction
-----------------------
Each Credit Party hereby irrevocably submits to the jurisdiction of
any New York State or Federal court sitting in the City of New York over any
suit, action or proceeding arising out of or relating to the Loan Documents.
Each Credit Party hereby irrevocably waives, to the fullest extent permitted or
not prohibited by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in such a
court and any claim that any such suit, action or proceeding brought in such a
court has been brought in an inconvenient forum. Each Credit Party hereby agrees
that a final judgment in any such suit, action or proceeding brought in such a
court, after all appropriate appeals, shall be conclusive and binding upon it.
11.17. Service of Process
------------------
Each Credit Party hereby further irrevocably consents to the service
of process in any suit, action or proceeding by sending the same by first class
mail, return receipt requested or by overnight courier service, to the address
of such Credit Party set
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forth in or referred to in Section 11.2 or in the applicable Loan Document
executed by such Credit Party. Each Credit Party hereby agrees that any such
service (i) shall be deemed in every respect effective service of process upon
it in any such suit, action, or proceeding, and (ii) shall to the fullest extent
enforceable by law, be taken and held to be valid personal service upon and
personal delivery to it.
11.18. No Limitation on Service or Suit
--------------------------------
Nothing in the Loan Documents or any modification, waiver, consent
or amendment thereto shall affect the right of the Agent or any Lender to serve
process in any manner permitted by law or limit the right of the Agent or any
Lender to bring proceedings against any Credit Party in the courts of any
jurisdiction or jurisdictions in which such Credit Party may be served.
11.19. WAIVER OF TRIAL BY JURY
-----------------------
THE AGENT, THE LENDERS AND EACH CREDIT PARTY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREIN. FURTHER, EACH CREDIT PARTY
HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE AGENT, OR THE LENDERS,
OR COUNSEL TO THE AGENT OR THE LENDERS, HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE AGENT OR THE LENDERS WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK
TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. EACH CREDIT PARTY
ACKNOWLEDGES THAT THE AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS SECTION.
----- ----
12. GUARANTY
--------
In order to induce the Agent and the Lenders to enter into this Agreement
and to induce the Lenders to make the Loans, the Guarantor hereby agrees as
follows:
12.1. Guaranty.
--------
The Guarantor absolutely, irrevocably and unconditionally guarantees
to the Agent and the Lenders the full and prompt payment when due, whether at
stated maturity, by acceleration, by mandatory prepayment, by notice of
intention to prepay or otherwise, of all obligations, now existing and
hereafter arising, of the Borrower, including all principal and interest
(whether accruing before or after any event set forth in sections 9.1(h) or (i)
and whether or not allowed as a claim in connection therewith) under the Loan
Documents to which it is a party, and whether direct, indirect or contingent,
incurred as primary obligor or otherwise, secured or unsecured and whether or
not on open account, and all costs and expenses incurred by the Agent and the
Lenders in enforcing any thereof, whether or not suit is instituted (as the same
may be amended, increased, modified, renewed, refunded, extended, increased or
refinanced from time to time, collectively, the " Guaranteed Obligations").
-----------------------
Regardless of whether the Agent or the Lenders are prevented
-60-
<PAGE>
or otherwise hindered by law from collecting or otherwise enforcing any of the
Guaranteed Obligations in accordance with their terms, whether as the result of
the commencement of any bankruptcy or similar proceedings against the Borrower
or otherwise, the Agent and the Lenders shall be entitled to receive hereunder
from the Guarantor upon demand therefor the sums which would have been otherwise
due had such collection or enforcement not been prevented or hindered.
12.2. Absolute Obligation.
-------------------
The obligations of the Guarantor hereunder shall be absolute,
irrevocable, unconditional and continuing until all of the Guaranteed
Obligations are indefeasibly paid in full in cash and have terminated and this
Agreement is of no further force and effect and shall not be subject to any
counterclaim, right of set-off or any defense whatsoever. The Guarantor
acknowledges and agrees that the Agent and the Lenders have no responsibility or
liability, and shall not be deemed to have made any representation or warranty,
with respect to the validity, enforceability or collectability of any of the
Loan Documents or any document executed or delivered in connection therewith, or
any preference or priority ranking with respect to the payment of the Loans. The
Agent and the Lenders shall have no obligation to enforce any Loan Document, by
any action, including, without limitation, making or perfecting any claim
against the Borrower, prior to being entitled to the benefits of this Guaranty.
Nothing except the indefeasible cash payment in full of the Guaranteed
Obligations shall release the Guarantor from liability under this Guaranty.
12.3. Guaranty of Payment.
-------------------
This Guaranty is a guaranty of payment. The liability and
obligations of the Guarantor shall be primary, direct and absolute, and the
Guarantor hereby waives any right to require that resort be had by the Agent or
the Lenders against the Borrower or any other Person, or to require that resort
be had by the Agent or the Lenders to any direct or indirect collateral
security. The Agent may, at its option, proceed against in the first instance to
enforce any obligation to collect any monies, the payment of which is guaranteed
hereby, without first proceeding against the Borrower or any other Person and
without first resorting to any other remedies, as the Agent may deem advisable.
The liability of the Guarantor hereunder shall in no way be affected or impaired
by any acceptance by the Agent or the Lenders of any direct or indirect security
for, or other guarantor upon, any indebtedness, liability or obligation of the
Borrower to the Agent and the Lenders, or by any failure, delay, neglect or
omission of the Agent or any Lender to realize upon or perfect any such
security, indebtedness, liability or obligation, or by any direct or indirect
collateral security therefor, or by the bankruptcy, reorganization or insolvency
of, or by any other proceeding for the relief of debtors commenced against, the
Borrower or any other Person, or by the release, exchange, substitution or any
loss or impairment of any collateral security, or the liability of any other
Person in respect of the Guaranteed Obligations, including, without limitation,
the release of any other guarantor or any collateral security provided thereby,
or by the invalidity or unenforceability of this Agreement, the Notes or any
other Loan Document, or any of the Guaranteed Obligations against the Borrower
for any reason, or by any amendment or waiver of or any consent to or departure
from this Agreement, the Notes or any other Loan Document, or by any other
reason whatsoever.
-61-
<PAGE>
12.4. Repayment in Bankruptcy.
-----------------------
If, at any time or times subsequent to the performance by the
Guarantor of its obligations hereunder or the termination of this Guaranty, the
Agent or any Lender shall be required to repay any amounts previously paid by or
on behalf of the Borrower in reduction of the Guaranteed Obligations under any
Loan Document by virtue of an order of any court having jurisdiction in the
premises, including, without limitation, as a result of an adjudication that
such amounts constituted preferential payments or fraudulent conveyances, the
Guarantor unconditionally agrees to pay to the Agent or such Lender on demand a
sum in cash equal to the amount of such repayment, together with interest on
such amount from the date of such demand to the date of payment to the Agent or
such Lender at the applicable post-Default rate set forth in section 2.7(b).
12.5. Waiver of Subrogation.
---------------------
The Guarantor expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which it
may now or hereafter have against any other Person directly or contingently
liable for the Guaranteed Obligations, or against or with respect to such
Person's Property, arising from the existence or performance of this Guaranty,
in each case until the Guaranteed Obligations shall have been indefeasibly paid
in full in cash.
12.6. Other Provisions in Guaranty.
----------------------------
(a) No failure by the Agent or any of the Lenders to exercise, and
no delay by the Agent or any of the Lenders in exercising, any right or remedy
hereunder shall operate as a waiver thereof.
(b) This Guaranty, and the obligations of the Guarantor under this
Guaranty, may not be assigned or otherwise delegated.
(c) The Guarantor waives all errors or omissions of the Agent or any
Lender in connection with the administration of the Loans and any collateral
security therefor, except errors or omissions which constitute gross negligence
or willful misconduct.
(d) Without limiting the foregoing, the Guarantor waives to the
maximum extent permitted by applicable law any act or omission of the Agent or
any Lender which may affect or change in any way the liability of the Guarantor
under this Guaranty.
(e) Each and every right, remedy and power granted to the Agent and
the Lenders hereunder or allowed at law or by any other agreement shall be
cumulative and not exclusive, and may be exercised by the Agent and the Lenders
from time to time.
(f) This Guaranty shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the Agent and the
Lenders and their respective successors and assigns.
(g) The Guarantor hereby waives presentment, demand for payment,
notice of default, non-performance and dishonor, protest and notice of protest
of or in respect of
-62-
<PAGE>
this Agreement, the Notes and any other Loan Documents and the incurrence of the
Guaranteed Obligations, notice of acceptance of this Guaranty and reliance
hereupon by the Agent and the Lenders, and notice of the making of any Loans
pursuant to this Agreement, notice of any sale of collateral security or any
default of any sort.
(h) The Guarantor agrees that the Agent and the Lenders may at any
time, without notice to or consent of the Guarantor, and without in any manner
affecting the liability of the Guarantor hereunder, amend, increase, extend,
modify, supplement or waive any term or condition of this Agreement, the Notes,
any other Loan Document or all or any part of the Guaranteed Obligations and any
collateral security therefor and otherwise deal with the Borrower as if this
Guaranty did not exist, and the Guarantor shall be bound by, and this Guaranty
shall automatically extend to this Agreement, the Notes and the other Loan
Documents and the Guaranteed Obligations as so amended, increased, extended,
modified, supplemented or waived without any action required by the Guarantor.
(i) No provision of this Guaranty may be waived, modified or
otherwise changed by any means, including, without limitation, any course of
dealing, course of performance or trade usage, or oral evidence of any nature,
except pursuant to a writing executed pursuant to Section 11.1 by the party
against which enforcement of such waiver, modification or change is sought.
(j) The Guarantor agrees that any statement of account from the
Agent or any Lender to the Borrower which binds the Borrower, absent manifest
error, shall also be binding upon the Guarantor and that copies of the Agent's
or such Lender's said statements of account maintained in the regular course of
business may be used in evidence against the Guarantor in order to establish the
obligations of the Guarantor hereunder.
-63-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
BLACK ENTERTAINMENT TELEVISION, INC.,
as Borrower
By: [SIGNATURE ILLEGIBLE]
-------------------------
Name: William T. Gordon III
-----------------------
Title: Executive Vice President, Finance
---------------
Chief Financial Officer and Treasurer
BET HOLDINGS, INC., as Guarantor
By: [SIGNATURE ILLEGIBLE]
-------------------------
Name: William T. Gordon III
-----------------------
Title: Executive Vice President, Finance
---------------
Chief Financial Officer and Treasurer
THE BANK OF NEW YORK,
Individually and as Agent
By: ________________________
Name: ______________________
Title: ___________________
THE BANK OF NEW YORK COMPANY, INC.
By: ________________________
Name: ______________________
Title: ___________________
THE RIGGS NATIONAL BANK OF
WASHINGTON, D.C.
By: ________________________
Name: ______________________
Title: ___________________
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
BLACK ENTERTAINMENT TELEVISION, INC.,
as Borrower
By: ________________________
Name: ______________________
Title: ___________________
BET HOLDINGS, INC., as Guarantor
By: ________________________
Name: ______________________
Title: ___________________
THE BANK OF NEW YORK,
Individually and as Agent
By: [SIGNATURE ILLEGIBLE]
------------------------
Name: [SIGNATURE ILLEGIBLE]
----------------------
Title: Vice President
-------------------
THE BANK OF NEW YORK COMPANY, INC.
By: Kalpana Raina
------------------------
Name: KALPANA RAINA
----------------------
Title: Autherized Signer
-------------------
THE RIGGS NATIONAL BANK OF
WASHINGTON, D.C.
By: ________________________
Name: ______________________
Title: ___________________
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
BLACK ENTERTAINMENT TELEVISION, INC.,
as Borrower
By: ________________________
Name: ______________________
Title: ___________________
BET HOLDINGS, INC., as Guarantor
By: ________________________
Name: ______________________
Title: ___________________
THE BANK OF NEW YORK,
Individually and as Agent
By:_________________________
Name:_______________________
Title: ___________________
THE BANK OF NEW YORK COMPANY, INC.
By: ________________________
Name:_______________________
Title:____________________
THE RIGGS NATIONAL BANK OF
WASHINGTON, D.C.
By: David H. Olson
------------------------
Name: David H. Olson
----------------------
Title: V.P
-------------------
<PAGE>
CRESTAR BANK
By: [SIGNATURE ILLEGIBLE]
------------------------
Name: [SIGNATURE ILLEGIBLE]
----------------------
Title: Vice President
-------------------
INDUSTRIAL BANK N.A.
By: ________________________
Name: ______________________
Title: ___________________
NATIONSBANK OF TEXAS, N.A.
By: ________________________
Name: ______________________
Title: ___________________
<PAGE>
CRESTAR BANK
By: ________________________
Name:_______________________
Title: ___________________
INDUSTRIAL BANK N.A.
By: [SIGNATURE ILLEGIBLE]
------------------------
Name: JAMES D. SHERARD
----------------------
Title: VICE PRESIDENT
-------------------
NATIONSBANK OF TEXAS, N.A.
By: ________________________
Name: ______________________
Title: ___________________
<PAGE>
CRESTAR BANK
By: ________________________
Name:_______________________
Title: ___________________
INDUSTRIAL BANK N.A.
By: ________________________
Name: ______________________
Title: ___________________
NATIONSBANK OF TEXAS, N.A.
By: Jennifer F. Zydney
------------------------
Name: Jennifer F. Zydney
----------------------
Title: Vice President
-------------------
<PAGE>
BLACK ENTERTAINMENT TELEVISION EXHIBIT A
LIST OF COMMITMENTS
-------------------
Commitment
Bank Commitment Percentage
- ---- ---------- ----------
The Bank of $29,000,000 38.66666667%
New York Company, Inc
Crestar Bank $15,000,000 20.00000000%
Nationsbank of Texas, N.A. $15,000,000 20.00000000%
The Riggs National Bank
of Washington, D.C. $15,000,000 20.00000000%
Industrial Bank N.A. $ 1,000,000 1.33333333%
TOTAL $75,000,000 100%
----------- ----
<PAGE>
BLACK ENTERTAINMENT TELEVISION EXHIBIT B
FORM OF NOTE
------------
$______ December 13, 1995
New York, New York
FOR VALUE RECEIVED, BLACK ENTERTAINMENT TELEVISION, INC., a District of
Columbia corporation (the "Borrower"), hereby promises to pay on the Maturity
--------
Date, to the order of _______________ (the "Lender"), at the office of THE BANK
------
OF NEW YORK, as Agent (the "Agent"), located at One Wall Street, New York, New
-----
York or at such other place as the Agent may specify from time to time, in
lawful money of the United States of America, the principal sum of $______, or
such lesser unpaid principal balance as shall be outstanding hereunder,
together with interest from the date hereof, on the unpaid principal balance
hereof, payable at the rate or rates and at the time or times provided for in
the Revolving Credit and Guaranty Agreement, dated as of December 13, 1995,
among the Borrower, BET Holdings, Inc., as Guarantor, the Lenders party thereto
and the Agent (as the same may be amended, modified or supplemented from time
to time, the "Agreement"). Capitalized terms used herein that are defined in
---------
the Agreement shall have the meanings therein defined. In no event shall
interest payable hereon exceed the Highest Lawful Rate.
This Note is one of the Notes referred to in the Agreement and is entitled
to the benefits of, and is subject to the terms set forth in, the Agreement.
The principal of this Note is payable in the amounts and under the
circumstances, and its maturity is subject to acceleration upon terms, set forth
in the Agreement. Except as otherwise provided in the Agreement, if any payment
on this Note become due and payable on a day which is not a Business Day, the
maturity thereof shall be extended to the next Business Day and interest shall
be payable at the applicable rate or rates specified in the Agreement during
such extension period.
The (i) date and amount of each Loan made by the Lender, (ii) its character
as an ABR Advance, a Eurodollar Advance, or a combination thereof, (iii) the
interest rate and Interest Period (if any) applicable to Eurodollar Advances,
and (iv) each payment and prepayment of the principal thereof, shall be recorded
by the Lender on its books and, prior to any transfer of this Note, indorsed by
the Lender on the schedule attached hereto or any continuation thereof, provided
that the failure of the Lender to make any such recordation or indorsement shall
not affect the obligations of the Borrower to make payment when due of any
amount owing hereunder.
Presentment for payment, demand, protest, notice of protest and notice of
dishonor and all other demands and notices in connection with the delivery,
performance and enforcement of this Note are hereby waived, except as
specifically otherwise provided in the Agreement.
This Note is being delivered in, is intended to be performed in, shall be
construed and interpreted in accordance with, and be governed by the internal
laws of, the State of New York, without regard to principles of conflicts of
law.
<PAGE>
This Note may only be amended by an instrument in writing executed pursuant
to the provisions of Section 11.1 of the Agreement.
BLACK ENTERTAINMENT TELEVISION, INC.
By:__________________________
Name:________________________
Title:_______________________
-2-
<PAGE>
SCHEDULE TO
-----------
NOTE
----
Interest
Rate on
Eurodollar
Advances
Amount of (without Interest
Type of principal regard to Period (if
Advance (ABR Amount of paid or Applicable Eurodollar Notation
Date or Eurodollar) Advance prepaid Margin) Advance) Made by
- ---- -------------- --------- ------- ---------- ---------- --------
<PAGE>
BLACK ENTERTAINMENT TELEVISION EXHIBIT C
FORM OF BORROWING REQUEST
-------------------------
December 13, 1995
The Bank of New York, as Agent
One Wall Street
New York, New York 10286
Attention: Patricia Clancy
Agency Function Administration
The Bank of New York, as Agent
One Wall Street
New York, New York 10286
Attention: Wade E. Layton,
Vice President
Re: Revolving Credit and Guaranty Agreement, dated as of
December 13, 1995, by and among BLACK ENTERTAINMENT
TELEVISION, INC., (the "Borrower"), BET HOLDINGS,
--------
INC., the Lenders party thereto and THE BANK OF NEW
-----------
YORK, as Agent (the "Agreement")
---------------------------------------------------
Capitalized terms used herein that are defined in the Agreement shall have
the meanings therein defined.
1. Pursuant to Section 2.3 of the Agreement, the Borrower hereby gives
notice of its intention to borrow Loans in an aggregate principal amount of
$_____ on _______, which borrowing(s) shall consist of the following Advances:
Initial Interest
Type of Advance Period for Eurodollar
(Eurodollar or ABR) Amount Advances
- ------------------- ------ ---------------------
(a)
(b)
(c)
2. Each of the Borrower (with respect to itself) and the Guarantor hereby
certifies that on the date hereof and on the Borrowing Dare set forth above, and
after giving effect to the Loans requested hereby:
(a) Each Credit Party is and shall be in compliance with all of the
terms, covenants and conditions of the Loan Documents.
<PAGE>
(b) There exists and there shall exist no Default or Event of Default
under the Agreement.
(c) Each of the representations and warranties contained in the Loan
Documents (other than the representations and warranties which expressly speak
only as of a different date) which is required to be made on such Borrowing Date
is and shall be true and correct.
(d) After giving effect to the Loans requested to be made hereby, the
aggregate outstanding principal amount of the Loans shall not exceed the
Aggregate Commitments.
IN WITNESS WHEREOF, each of the Borrower and the Guarantor has each caused
this certificate to be executed by its Authorized Signatory as of the date and
year first written above.
BLACK ENTERTAINMENT TELEVISION, INC.
By:__________________________
Name:________________________
Title:_______________________
BET HOLDINGS, INC.
By:__________________________
Name:________________________
Title:_______________________
-2-
<PAGE>
BLACK ENTERTAINMENT TELEVISION EXHIBIT D
FORM OF COMPLIANCE CERTIFICATE
------------------------------
The undersigned each hereby certifies that he/she is duly authorized to
execute and deliver this Compliance Certificate pursuant to Section 7.1(c) of
the Revolving Credit and Guaranty Agreement, dated as of December 13, 1995, by
and among Black Entertainment Television, Inc. (the "Borrower"), BET Holdings,
--------
Inc. (the "Guarantor"), the Lenders party thereto and The Bank of New York, as
---------
Agent (as the same may be amended or otherwise modified from time to time, the
"Agreement"). Capitalized terms used herein that are defined in the Agreement
---------
shall have the meanings therein defined.
We hereby certify that:
1. The Leverage Ratio as of _______, is __.___:1.00, calculated as
set forth on Schedule 1.
2. The ratio of EBITDA to Pro-Forma Debt Service as of ________, is
__.___:1.00, calculated as set forth on Schedule 2.
3. The ratio of EBITDA to Interest Expense as of _______, is
__.___:1.00, calculated as set forth on Schedule 3.
4. There exists no Default or Event of Default under the Agreement.
5. The representations and warranties contained in the Loan
Documents (other than the representations and warranties which expressly speak
only as of a different date) are true and correct in all material respects.
IN WITNESS WHEREOF, the undersigned have executed this Compliance
Certificate on this ____ day of _____________, 19__.
BLACK ENTERTAINMENT TELEVISION, INC.
By:__________________________
Name:________________________
Title:_______________________
BET HOLDINGS, INC.
By:__________________________
Name:________________________
Title:_______________________
<PAGE>
dated __/__/__
I. Section 7.12: Leverage Ratio
A. Maximum for applicable period: 3.00:1.00
B. Actual
1. Funded Debt as of the
date of determination
(see Annex A) $______
2. EBITDA for the immediately
preceding four fiscal
3. Leverage Ratio (1 divided by 2)
___:___
C. In Compliance Yes ___ No ___
<PAGE>
Schedule 2 to Compliance Certificate
dated __/__/__
I. Section 7.13: EBITDA to Pro-Forma Debt Service
A. Minimum for applicable period: 2.00:1.00
B. Actual
1. EBITDA for the immediately
preceding four fiscal
quarters (see Annex A) $______
2. Pro-Forma Debt Service
a. Pro-Forma Interest Expense
(see Annex A) $______
b. The scheduled payments of
principal on Funded Debt
required to be made during
the four fiscal quarters
immediately succeeding any
determination thereof $______
c. Pro-Forma Debt Service
(a+b) $______
3. EBITDA to Pro-Forma Debt Service
(1 divided by 2(c)) ___:___
C. In Compliance Yes ___ No ___
<PAGE>
Schedule 3 to Compliance Certificate
dated __/__/__
I. Section 7.14: EBITDA to Interest Expense
A. Minimum for applicable period: 2.25:1.00
B. Actual
1. EBITDA for the immediately
preceding four fiscal
quarters (see Annex A) $______
2. Interest Expense for
the immediately preceding
four fiscal quarters $______
3. EBITDA to Interest Expense
(1 divided by 2) ___:___
C. In Compliance Yes ___ No ___
<PAGE>
Annex A to Compliance Certificate
I. EBITDA ADJUSTMENT (95% Test)
EBITDA (Consolidated);
A. Income or (loss) from operations
of the Guarantor and its Subsidiaries
on a Consolidated basis for the
immediately preceding four fiscal
quarters $______
B. Depreciation and amortization of
intangibles (excluding amortization
of programming rights) for the
immediately preceding four fiscal
quarters $______
C. Sum of A + B $______
EBITDA (Wholly-Owned):
D. Income or (loss) from operations
of the Guarantor and its
Wholly-Owned Subsidiaries on
a Consolidated basis for the
immediately preceding four fiscal
quarters $______
E. Depreciation and amortization of
intangibles (excluding amortization
of programming rights) for the
immediately preceding four fiscal
quarters $______
F. Sum of D + E $______
EBITDA:
G. EBITDA (Wholly-Owned) as a
percentage of EBITDA (Consolidated)
(F divided by C) ______%
H. If G is less than 95%, then
for each non-Wholly Owned Subsidiary
----
(if more than one non-Wholly Owned
Subsidiary, attach additional sheets
for item H):
<PAGE>
1. Portion of EBITDA (Consolidated)
allocable to such non-Wholly Owned
Subsidiary: $______
2. Percentage ownership interest
of such non-Wholly Owned Subsidiary
not owned, directly or indirectly,
---
by the Guarantor ______%
3. EBITDA (Consolidated) reduction
for such non-Wholly Owned Sub-
sidiary (1 multiplied by 2) $______
I. Total reduced EBITDA (Consolidated)
(C minus the sum of 3 for each
non-Wholly Owned Subsidiary) $______
J. EBITDA for the immediately
preceding four fiscal quarters
ending _____________ shall equal C
or if G is less than 95% then I $______
II. FUNDED DEBT
As at __________________.
Pro Forma
Interest Interest
Amount Rate Expense
------ -------- ---------
A. Outstandings under
the Revolving Credit
and Guaranty Agreement
B. Senior Secured Notes
C. Capital Lease Obligations
D. Other Debt
E. Cash and Cash Equivalents in
excess of $1,000,000
F. Funded Debt for all purposes
other than Leverage Ratio
(A + B + C + D)
G. Funded Debt for Leverage Ratio
purposes (F-E)
-2-
<PAGE>
BLACK ENTERTAINMENT TELEVISION EXHIBIT E
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
-------------------------------------------
This Assignment and Acceptance Agreement is made and entered into as of
_______, by and between _____________ (the "Assignor") and ____________ (the
--------
"Assignee").
--------
R E C I T A L S
- - - - - - - -
A. The Assignor, certain other lenders (together with any prior
assignees, the "Lenders") and The Bank of New York, as agent (the "Agent), are
------- -----
parties to that certain Revolving Credit and Guaranty Agreement, dated as of
December 13, 1995 (the "Credit Agreement"), with Black Entertainment Television,
----------------
Inc., a District of Columbia corporation (the "Borrower), and BET Holdings,
--------
Inc., a Delaware corporation ( the "Guarantor"). Pursuant to the Credit
---------
Agreement, the Lenders agreed to make Loans under the Aggregate Commitments in
the aggregate amount of $75,000,000. The amount of the Assignor's Commitment
(without giving effect to the assignment effected hereby or to other assignments
thereof which have not yet become effective) is specified in Item 1 of Schedule
1 hereto. The outstanding principal amount of the Assignor's Loans (without
giving effect to the assignment effected hereby or to other assignments thereof
which have not yet become effective) is specified in Item 2 of Schedule 1
hereto. All capitalized terms not otherwise defined herein are used herein as
defined in the Credit Agreement.
B. The Assignor wishes to sell and assign to the Assignee, and the
Assignee wishes to purchase and assume from the Assignor, (i) the portion of the
Assignor's Commitment specified in Item 3 of Schedule 1 hereto (the "Assigned
--------
Commitment") and (ii) the portion of the Assignor's Loans specified in Item 5 of
- ----------
Schedule 1 hereto (the "Assigned Loans").
--------------
The parties agree as follows:
1. Assignment. Subject to the terms and conditions set forth herein and
----------
in the Credit Agreement, the Assignor hereby sells and assigns to the Assignee,
and the Assignee hereby purchases and assumes from the Assignor, without
recourse, on the date set forth above (the "Assignment Date") (a) all right,
---------------
title and interest of the Assignor to the Assigned Loans and (b) all obligations
of the Assignor under the Credit Agreement with respect to the Assigned
Commitment. As full consideration for the sale of the Assigned Loans and the
Assigned Commitment, the Assignee shall pay to the Assignor on the Assignment
Date the principal amount of the Assigned Loans (the "Purchase Price") [and the
--------------
Assignor shall pay to the Assignee on the Assignment Date the fee specified in
Item 6 of Schedule 1 hereto.]/1/
2. Representation and Warranties. Each of the Assignor and the Assignee
-----------------------------
represents and warrants to the other that (a) it has full power and legal right
to execute and deliver this Agreement and to perform the provisions of this
Agreement; (b) the execution, delivery and performance of this Agreement have
been authorized by all action, corporate
_______________________
1 Omit bracketed language if no fee is being paid.
<PAGE>
or otherwise, and do not violate any provisions of its charter or by-laws or any
contractual obligations or requirement of law binding on it; and (c) this
Agreement constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms. The Assignor further represents that it
is the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim created by the
Assignor.
3. Condition Precedent. The obligations of the Assignor and the Assignee
-------------------
hereunder shall be subject to the fulfillment of the condition that the Assignor
shall have (a) received payment in full of the Purchase Price and (b) complied
with the other applicable provisions of Section 11.7 of the Credit Agreement.
4. Notice of Assignment. The Assignor agree to give notice of the
--------------------
assignment and assumption of the Assigned Loans and the Assigned Commitment to
the Agent and the Borrower and hereby instructs the Agent and the Borrower to
make all payments with respect to the Assigned Loans and the Assigned Commitment
directly to the Assignee at the applicable Lending Offices specified on Schedule
2 hereto; provided, however, that the Borrower and the Agent shall be entitled
to continue to deal solely and directly with the Assignor in connection with the
interests so assigned until the Agent and the Borrower, to the extent required
by Section 11.7 of the Credit Agreement, shall have received notice of the
assignment, the Borrower shall have consented in writing thereto, and the Agent
shall have recorded and accepted this Agreement and received the Assignment Fee
required to be paid pursuant to Section 11.7 of the Credit Agreement. From and
after the date (the "Effective Date") on which the Agent shall notify the
--------------
Borrower and the Assignor that the requirements set forth in the foregoing
sentence shall have occurred and all consents (if any) required shall have been
given, (i) the Assignee shall be deemed to be a party to the Credit Agreement
and, to the extent that rights and obligations thereunder shall have been
assigned to Assignee as provided in such notice of assignment to the Agent,
shall have rights and obligations of a Lender under the Credit Agreement, and
(ii) the Assignee shall be deemed to have appointed the Agent to take such
action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto. After the Effective Date, the Agent
shall make all payments in respect of the interest assigned hereby (including
payments of principal, interest, fees and other amounts) to the Assignee. The
Assignor and Assignee shall make all appropriate adjustment in payments under
the Assigned Loans and the Assigned Commitment for periods prior to the
Effective Date hereof directly between themselves. If the Assignee is not a
United States Person as defined in Section 7701(a)(30) of the Code, the Assignee
shall deliver herewith the forms required by Section 2.9(c) of the Credit
Agreement to evidence the Assignee's compete exemption from United States
withholding taxes with respect to payments under the Loan Documents.
5. Independent Investigation. The Assignee acknowledges that it is
-------------------------
purchasing the Assigned Loans and the Assigned Commitment from the Assignor
totally without recourse and, except as provided in Section 2 hereof, without
representation or warranty. The Assignee further acknowledges that it has made
it own independent investigation and credit evaluation of the Borrower and the
Guarantor in connection with its purchase of the Assigned Loans and the Assigned
Commitment. Except for the representations or warranties set forth in
Section 2, the Assignee acknowledges that it is not relying on any
representation or warranty of the Assignor, expressed or implied, including
without
-2-
<PAGE>
limitation, any representation or warranty relating to the legality, validity,
genuineness, enforceability, collectibility, interest rate, repayment schedule
or accrual status of the Assigned Loans or the Assigned Commitment, the
legality, validity, genuineness or enforceability of the Credit Agreement, the
related Notes, or any other Loan Document referred to in or delivered pursuant
to the Credit Agreement, or financial condition or creditworthiness of the
Borrower, the Guarantor or any other Person. The Assignor has not and will not
be acting as either the representative, agent or trustee of the Assignee with
respect to matters arising out of or relating to the Credit Agreement or this
Agreement. From and after the Effective Date, except as set forth in Section 4
above, the Assignor shall have no rights or obligations with respect to the
Assigned Loans or the Assigned Commitment.
6. Consent of the Borrower; Exchange of Notes.
------------------------------------------
(a) Pursuant to the provisions of Section 11.7 of the Credit
Agreement, and to the extent required thereby, the Borrower, by signing below,
consents to this Agreement and to the assignment contemplated herein. The
Borrower further agrees to execute and deliver:
(i) to the Assignee, a Note, in the aggregate principal amount
of $_____.
(ii) to the Assignor, a Note, in the aggregate principal amount
of $_____.
(b) The Assignor agrees to promptly return to the Borrower its Note,
which has been replaced by the Notes referred to in clause (a) above.
7. Method of Payment. All payments to be made by either party hereunder
-----------------
shall be in funds available at the place of payment on the same day and shall be
made by wire transfer to the account designated by the party to receive payment.
8. Integration. This Agreement shall supersede any prior agreement or
-----------
understanding between the parties (other than the Credit Agreement) as to the
subject matter hereof.
9. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and shall be
binding upon the parties hereto, their successors and assigns.
10. Headings. Section headings have been inserted herein for convenience
--------
only and shall not be construed to be a part hereof.
11. Amendments; Waivers. This Agreement may not be amended, changed,
-------------------
waived or modified except by a writing executed by the parties hereto, and may
not be amended, changed, waived or modified in any manner inconsistent with
Section 11.7 of the Credit Agreement without prior written consent of the Agent.
12. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with the laws of, the State of New York.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
___________________, as Assignor
By:______________________________
Name:____________________________
Title:___________________________
___________________, as Assignee
By:______________________________
Name:____________________________
Title:___________________________
Consented to:
BLACK ENTERTAINMENT TELEVISION, INC.
By:______________________________
Name:____________________________
Title:___________________________
Accepted:
THE BANK OF NEW YORK, as Agent
By:______________________________
Name:____________________________
Title:___________________________
-4-
<PAGE>
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE AGREEMENT
between
___________________, as Assignor
and
___________________, as Assignee
relating to
Revolving Credit and Guaranty Agreement among
Black Entertainment Television, Inc.,
BET Holdings, Inc.,
the Lenders party thereto,
and
The Bank of New York, as Agent,
dated as of December 13, 1995
Item 1. Assignor's Commitment* $________
Item 2. Assignor's Loans*
Consisting of:
ABR Advances $________
Eurodollar Advances $________
Item 3. Amount of Assigned Commitment $________
Item 4. Percentage of Assigned Commitment
assigned as a percentage of
the Aggregate Commitments
of all Lenders: ______%
Item 5. Amount of Assigned Loans:
consisting of:
ABR Advances $________
Eurodollar Advances $________
_________________________
* Without giving effect to the assignment effected hereby or to other
assignments thereof which have not yet become effective.
<PAGE>
Item 6. Amount of Fee
payable to Assignee/1/ $____________
______________________
1 Omit if no fee is to be paid.
-2-
<PAGE>
SCHEDULE 2
TO
ASSIGNMENT AND ACCEPTANCE AGREEMENT
Between
___________________, as Assignor
and
___________________, as Assignee
relating to
Revolving Credit and Guaranty Agreement among
Black Entertainment Television, Inc.,
BET Holdings, Inc.,
the Lenders party thereto,
and
The Bank of New York, as Agent,
dated as of December 13, 1995
Domestic Lending Office
- -----------------------
_______________________
_______________________
Attention:_____________
_____________
Telephone:(___)___-____
Fax: (___)___-____
Eurodollar Lending Office
- -------------------------
_________________________
_________________________
Attention:_____________
_____________
Telephone:(___)___-____
Fax: (___)___-____
Address for Notices
- -------------------
_________________________
_________________________
Attention:_____________
_____________
Telephone:(___)___-____
Fax: (___)___-____
<PAGE>
EXHIBIT 10.27
ORION ATLANTIC SATELLITE SERVICES
CAPACITY SERVICES AGREEMENT
This Capacity Services Agreement (the "Agreement") is entered into on this First
day of June, 1996 by and between Orion Atlantic, L.P. ("OA"), a Delaware limited
partnership having its principal office at 2440 Research Boulevard, Suite 400,
Rockville, Maryland 20850-3234 (USA) and BET Satellite Services, Inc. (the
"Customer"), a Delaware corporation having its principal office at 913 Market
Street, Wilmington, Delaware 19801.
OA agrees to provide to Customer and Customer agrees to take from OA capacity
services described herein (the "Service") pursuant to the Terms and Conditions
and other associated attachments appended hereto, the Satellite Access
Procedures (Exhibit A) and Service Performance Standards (Exhibit B), all of
which together comprise the "Agreement." The Service described herein can be
amended by attaching to this Agreement an Amended Service Description setting
forth additional capacity services to be provided, which will be governed by the
Terms and Conditions of this Agreement. The Service shall be provided in
accordance with the Service Description below described ("Service Description").
Unless otherwise defined herein capitalized terms shall have the meanings given
such terms in the Service Description.
SERVICE DESCRIPTION
- -------------------
1. BILLING NAME AND ADDRESS OF CUSTOMER:
-------------------------------------
BET Satellite Services Inc.
One BET Plaza
1900 W Place N.E.
Washington, D.C. 20018-1211
Attention: Clay E. Carney, V.P. Finance
with copy to:
BET Networks
1899 9th. Street NE
Washington, DC 20018-1211
Attention: Mr. Stephen Nease, Director, Engineering Development for
Business Affairs
2. TERRESTRIAL FACILITIES:
-----------------------
OA shall provide to Customer a terrestrial transmission service ("Terrestrial
Facilities") as follows:
-1-
<PAGE>
. Transmission of an NTSC analog video signal with three (3) audio
subcarriers defined as "Left Channel," "Right Channel," and "Cue
Tones" ("Signal") from the Bell Atlantic interface located at
Customer's Master Control facility in Washington using a TV-1 analog
terrestrial analog circuit provided by Bell Atlantic to the
Diversified Communications, Inc. uplink facility in Washington, DC.
. Standards conversion of the Signal from the NTSC video standard
to the PAL video standard.
Compression of the Signal to one (1) 8.5 MBPS Compressed Digital
Video (CDV) channel using a Tiernan, MPEG-2, SCPC encoder.
. Uplink of the Channels to the Orion 1 satellite, located at 37.5
degree W. L. ("Serving Satellite").
3. SPACE SEGMENT, ORION 1
----------------------
OA shall provide nine (9) MHz of Space Segment on the Serving Satellite within
the coverage of the trans-Atlantic Broad Beam. The minimum technical
performance standards for the Service are set forth in the Circuit Parameters
("Minimum Standards") attached herein.
4. ANTENNA HARDWARE:
-----------------
During the Service Term, or as otherwise agreed by the parties, OA shall provide
a maximum of ten (10) receive-only antennas (maximum size 2.4 meter) with LNBs
and ten (10) Integrated Receiver Decoders (collectively, the "Antenna Hardware")
for the sole purpose of receiving the Service. OA shall deliver the Antenna
Hardware to entities designated by Customer in countries within the European
Broad Beam downlink of the Serving Satellite ("End Users"). Customer shall be
responsible for: (i) notifying OA in writing with at least 30 days' notice of
when and where the Antenna Hardware will be required, and (ii) providing OA with
a list of End Users authorized to receive and operate the Antenna Hardware. OA
shall not be responsible for the payment of any customs, taxes, in-country
shipping, installation, and maintenance of Antenna Hardware.
OA shall transfer the benefit of the equipment warranties for the Antenna
Hardware to the End Users during the period in which the Antenna hardware is
being used by such End User. Customer shall provide to OA (i) written
verification from each End User that the Antenna Hardware is installed and
operational; and (ii) written certification by each End User that the Antenna
Hardware shall be used only for reception of signals from the Serving Satellite.
In the event that no transmission of signals from the Serving Satellite to any
particular End User site occurs within a two-month period during the Service
Term, OA may remove the Antenna Hardware from such End User site at OA's cost,
subject to OA's provision of a 30-day written cure notice for which no cure is
timely effected.
5. SERVICE TERM:
-------------
-2-
<PAGE>
A. SERVICE TERM:
The Service shall begin on the Service Commencement Date and shall continue for
a fixed term of sixty (60) consecutive months (the "Service Term").
B. SERVICE RENEWAL:
Six months prior to the end of the Service Term, and if the Customer still
requires capacity the Service or alternative capacity services, the Customer and
OA agree to negotiate in good faith to reach a new agreement ("New Agreement").
The Customer further agrees to offer to OA the opportunity to match any
comparable bona fide offer for the New Agreement. If OA makes a comparable
offer, then the New Agreement shall be negotiated in good faith and effectuated
by the parties.
6. SERVICE FEE:
------------
The value of this Agreement has been determined to be $3,810,000 ($US).
7. PAYMENT TERMS:
--------------
A. PAYMENT OPTIONS
Customer shall have the following payment options:
. A one-time payment of $3,378,313 ($US) ("Pre-Service Payment"),
due ten (10) days after complete execution of the Service Commencement
Date. This payment has been determined based on OA's interest carrying
costs.
. A monthly recurring service fee of $63,500 ($US) per month. If
Customer selects this option, an initial $63,500 ($US) ("Deposit")
shall be due on the date of the Agreement. The Deposit shall be
applied to the monthly recurring service fee for the first month of
service.
If Customer initially elects to pay a Monthly Recurring Service Fee, then later
decides that it desires to make a one-time payment to "pay off" the balance of
the Service Fee for the Service Term (the "Service Balance"), it may do so by
providing written notice thereof to OA. OA will promptly respond by providing to
Customer in written its determination of the Service Balance which shall take
into account OA's interest carrying costs and credit the amounts paid to date by
Customer. Customer shall continue to timely pay the Monthly Recurring Service
Fees when due until an agreement is reached between the Parties regarding the
Service Balance and payment thereof is made by Customer in full.
-3-
<PAGE>
B. REFUND OF PRE-PAID SERVICE FEES
If Customer selects the Pre-Service Payment, and this Agreement is terminated
pursuant to paragraphs 6 (A), 6 (D), or 7 of the Terms and Conditions of this
Agreement, the Pre-Service Payment shall be pro-rated for the unused portion of
the Service Term. OA shall refund the pro-rated portion of the Pre-Service
Payment together with interest at the rate of 8% per annum.
8. SERVICE COMMENCEMENT DATE:
--------------------------
The Service Commencement Date shall be June 1, 1996.
9. CONTACT POINTS:
---------------
CUSTOMER CONTACT POINT: OA CONTACT POINT:
Mr. Stephen Nease, Mr. Richard Shay, VP Corporate & Legal Affairs
Dir. Engineering Development Orion Atlantic, L.P.
BET Networks 2440 Research Boulevard, Ste. 400
1899 9th Street NE Rockville, Maryland 20850 (USA)
Washington, DC 20018-1211
________________________________________________________________________________
TELEPHONE: (202) 608-2727 TELEPHONE: 1 (301) 258-3209
TELECOPY: (202) 608-2798 TELECOPY: 1 (301) 258-8119
with copy to:
Ms. Celeste Moy Mr. John J. Albert, Senior VP and GM
VP, Deputy General Counsel Orion Atlantic
One BET Plaza 2440 Research Boulevard, Ste. 400
1900 W Place NE Rockville, Maryland 20850 (USA)
Washington D.C. 20018-1211
TELEPHONE: (202) 608-2072 TELEPHONE: 1 (301) 258-3205
TELECOPY: (202) 608-2504 TELECOPY: 1 (301) 258-3222
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first set forth above.
-4-
<PAGE>
ORION ATLANTIC, L.P., BET SATELLITE SERVICES, INC.
By: Orion Satellite Corporation,
Its General Partner
By: ______________________________ By: ____________________________
John J. Albert Mr. Clay E. Carney
Senior Vice President & General Manager President, BET Satellite
Satellite Services Services, Inc.
-5-
<PAGE>
ORION ATLANTIC SATELLITE SERVICES
TERMS AND CONDITIONS FOR CAPACITY SERVICE
1. SCOPE OF AGREEMENT:
This Agreement is for the Service, and no property interest is created nor does
it grant any rights to Customer to assert any right, interest, lien or
encumbrance of any kind upon OA property and assets, including but not limited
to, the Serving Satellite or related equipment owned by OA. The Service shall
be provided on the Orion-1 satellite located at 37.5 degree W.L. ("Serving
Satellite") and the Transponder(s) (the "Serving Transponder") and the beam(s)
("beams") designated by OA.
2. TERM AND RENEWAL:
Customer hereby acquires the right to use the Service set forth in the
Service Description. The Service Term shall commence on the Service
Commencement Date and continue for the Service Term specified in the
Service Description.
3. LIMITS ON LIABILITY:
(A) OA's obligation under this Agreement is to provide Service to Customer in
accordance with the Minimum Standards set forth in Technical Specifications
and/or circuit parameters, and its liability for any failure to do so is limited
exclusively to granting credits as expressly provided in this Agreement.
(B) THE FOREGOING UNDERTAKING IS IN LIEU OF ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
(C) OA SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL,
SPECIAL, PUNITIVE OR OTHER SIMILAR DAMAGES, INCLUDING, BUT NOT LIMITED TO,
DAMAGES RESULTING FROM LOSS OF ACTUAL OR ANTICIPATED REVENUES OR PROFITS, OR
LOSS OF BUSINESS, DATA, CUSTOMERS OR GOOD WILL.
(D) In no event shall OA's total liability in connection with performance of
this Agreement exceed an amount equal to the Service Fees to be paid by Customer
during a particular invoiced period, AND ALL OTHER REMEDIES OF ANY KIND ARE
EXPRESSLY EXCLUDED.
4. INDEMNIFICATION:
Customer shall indemnify and hold harmless OA, its affiliates, and the
respective directors, officers, employees and shareholders of OA or such
affiliates against all claims and causes of actions, damages, expenses and
liabilities arising from or in connection with the following: the use of the
Service by Customer; content of material Customer transmits through use of
Service, including, but not limited to, claims for defamation, distribution of
obscene, indecent or otherwise unlawful programming, invasion of privacy,
disparagement, trademark or copyright; any breach by Customer of obligations
hereunder.
5. CUSTOMER OBLIGATION:
Customer, in connection with its use of the Service including, without
limitation, the transmission/program content, shall comply with all applicable
rules and regulations of any federal, state or other domestic or foreign
government authority with appropriate jurisdiction, both current and as may come
into effect, as well as with this Agreement.
-1-
<PAGE>
Further, Customer will obtain all necessary authorization for the ground segment
equipment, and shall strictly comply with the provisions set forth in Exhibit A,
Satellite Access Procedures.
6. TERMINATION:
(A) Either party may terminate this Agreement on written notice to the other
party in the event of: (i) Service Failure on a Serving Transponder providing
the Service which cannot be restored or replaced by OA; (ii) a Service Failure
on a Serving Transponder for which Alternative Service, Spare or Service
Accommodation is not offered by OA; (iii) a Service Interruption on Serving
Transponder that would otherwise qualify as a Service Failure, but for fact it
resulted from Force Majeure, for which Alternative Service is not offered by OA;
(iv) no available transponder can meet Minimum Standards; (v) there is a control
outage as set forth in Exhibit B; or (vi) retirement of the Serving Satellite.
(B) OA may terminate this Agreement on written notice in the event of : (i)
non-payment of sums due OA for a period of ten (10) days after receiving notice
of non-payment from OA; (ii) Customer fails to comply in material respects with
all covenants, agreements and conditions hereunder, and failure remains for
thirty (30) days after written notification from OA; (iii) Customer engages in
violation of the Satellite Access Procedures and fails to immediately cease such
violation(s) upon receipt of notice to do so from OA; or (iv) Customer is held
by a competent authority to have violated government laws or regulations in
connection with the Service or its use.
(C) If OA is able to terminate this Agreement in accordance with 6(B), OA may
its sole option, upon twenty four (24) hours notice, exercise any one or more of
the following remedies: accelerate any sums due OA under this Agreement;
temporarily suspend service to Customer until Customer corrects reason for
suspension; terminate Service completely; terminate the Agreement; proceed by
court action to recover damages for breach and any sums due thereunder,
including all fees, damages and fees due; pursue other remedies available
hereunder or at law or in equity.
(D) Agreement can also be terminated or canceled by OA without liability if:
(i) OA is prohibited from furnishing the Service or if any material term,
condition or rate contained herein is substantially changed by order of a court
of competent jurisdiction, by any federal, state or any other domestic or
foreign government; (ii) Customer's programming content and/or business
operations violate the regulation and laws of any federal, state or any other
domestic or foreign government; or (iii) Customer is precluded by law from
transmitting its programming signal into any country or part of a country served
by the Serving Transponder(s). Following such, no further payments shall be
payable by either party except for payments concerning obligations relating to
periods prior to and including the date of termination; provided however, the
indemnification provisions set forth in Section 4 will continue in full force
and effect.
(E) In the event of termination in accordance with Paragraphs 6(A), 6(D) or
7(B), OA shall promptly refund to Customer any Service Fees paid for Service not
provided and any deposits received and not applied to Service Fees for services
provided to Customer, unless otherwise agreed to in the Service Description.
7. FORCE MAJEURE:
(A) OA shall not be liable for Service Interruptions resulting from any causes
beyond its reasonable control, including, but not limited to, acts of God, fire,
flood, adverse weather conditions, meteorological or atmospheric occurrences or
disturbances (including, but not limited to, Sun outages) or other natural
events, externally caused interference, acts of government (including, but not
limited to, any law, rule, order, regulation or direction of the United States
Government or of any other government, or of any department, agency, commission,
bureau, court, or instrumentality thereof, or of any civil or military
authority); national emergencies; insurrections; riots; acts of war; civil
disorder; quarantine restrictions; embargoes, delays of suppliers, contractors,
material, vendors and other
-2-
<PAGE>
carriers; and strikes, lockouts, work stoppages, labor difficulties, or acts or
omissions of Customer or its Employees, Agents or Contractors. Each such event
shall constitute a Force Majeure.
(B) In the event of a Service Interruption that would otherwise qualify as a
Service Failure but for the fact that such Service Interruption resulted from a
Force Majeure, OA's obligation to provide Service and Customer's obligation to
pay for Service not yet provided on the affected Serving Transponder(s) will be
suspended until (i) the Service is restored; (ii) OA offers to provide Service
on the same Serving Satellite on a Transponder meeting the Minimum Standards of
the same Transponder Class as the affected Serving Transponder, or (iii) until
30 days have elapsed, whichever is less. If, within such thirty (30) day period,
the affected Serving Transponder is restored to meet the Minimum Standards or OA
offers Alternative Service, the parties' obligations with respect to the
affected Serving Transponder under this Agreement shall be reinstated for the
remainder of the term of this Agreement. If Service is not reinstated at the end
of the 30 day period either party may terminate this Agreement
(C) For the purpose of this Section, an irreparable satellite component failure
shall be deemed a Force Majeure, regardless of the cause(s) of such failure.
8. FEES AND PAYMENT
(A) The Monthly Recurring Service Fees and payment terms are set forth in the
Service Description. These Service Fees do not include any federal, state or
local sales or use taxes, value added taxes, fees or assessments however
denominated which may now or hereafter be levied on the Services provided or
payments made under this Agreement. Any such taxes, fees or assessments shall be
paid by Customer. Should OA be required to pay or pays these taxes, fees or
assessments, Customer shall promptly reimburse OA for such payments upon receipt
of an invoice from OA.
(B) Customer shall notify OA within ten (10) days of receipt of an invoice in
the event it disputes any invoiced amount, and shall timely pay any undisputed
charges. In the event that any undisputed sums are not paid in full by
Customer when due or a disputed amount is not paid in full when initially due
and said amount is later determined to a valid charge, OA shall assess Customer
a late payment fee calculated on outstanding balance then due at the lower of
1.5% interest per month for each month or part thereof or the highest rate
permitted under the applicable New York law, plus costs of collection including
reasonable attorneys fees.
(C) Unless otherwise indicated in the Service Description, the Monthly
Recurring Service Fees shall be due in advance, on or before the first day of
the month in which Service will be provided. In instances where an occasional
use service is provided and a monthly recurring service fee is not specified,
payment shall be due upon Customer's receipt of invoice from OA.
(D) All payments by Customer hereunder shall be made in U.S. dollars; shall be
deemed to be made upon receipt of collected funds by OA; and shall be made by
Customer check drawn from a U.S. bank or bank wire transfer to such bank account
as OA shall designate by notice to Customer. Any and all transfer, exchange or
similar fees are the responsibility of Customer.
(E) Partial month Service shall be billed pro-rata, using a thirty (30) day
month. Any Service provided in a day (beginning and ending by Greenwich Mean
Time ("GMT")), shall be considered a full day.
(F) No interest shall be paid on pre-paid Service Fees and deposits.
9. ASSIGNMENT
(A) This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their successors and permitted assigns.
-3-
<PAGE>
(B) Customer may only assign in whole its rights or obligations set forth in
this Agreement and only upon OA's prior written consent, which consent may be
conditioned but not unreasonably withheld.
(C) OA may assign this Agreement to its corporate parent or wholly owned
subsidiary of Orion Network Systems, Inc., or to any affiliate or an affiliate
of affiliate or to any other entity, for any reason.
(D) Upon receipt of written notification of a permitted assignment hereunder,
each party shall perform all its obligations hereunder to or for the benefit of
the assignee and deliver and execute such documentation as may reasonably be
required under this Agreement.
(E) "Assign" shall mean for the purposes of this sub-section to sell, assign,
convey, lease, sublease or permit the utilization of in any manner directly or
indirectly the rights, services or obligations set forth herein.
(F) No assignment shall relieve either party of its rights and obligations to
the other party.
10. ADDITIONAL PROVISIONS
(A) Waivers or Consents by either party to any variation from any
provision of this Agreement shall be valid only in the specific
instance in which waiver or consent is given, and shall not be
construed as a waiver of any other provision of this Agreement or with
respect to any similar instance or circumstance.
(B) THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE COUNTERPARTS, ALL
OF WHICH TAKEN TOGETHER SHALL CONSTITUTE ONE INSTRUMENT.
(C) If any provision of this Agreement shall be finally determined by
a court of proper jurisdiction to be invalid or unenforceable, the
remainder of this Agreement shall not be affected thereby and shall be
valid and enforced to fullest extent permitted by law consistent with
parties' intent as expressed in this Agreement.
(D) THIS AGREEMENT MAY NOT BE AMENDED, ALTERED, OR MODIFIED EXCEPT BY
AN INSTRUMENT IN WRITING, DULY EXECUTED BY BOTH PARTIES.
(E) This Agreement is the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior oral or
written agreements, commitments, or understandings with respect to the
matters provided for herein.
(F) ALL NOTICES OR OTHER COMMUNICATIONS WHICH MAY BE OR ARE REQUIRED
TO BE GIVEN BY EITHER PARTY TO THE OTHER UNDER THIS AGREEMENT SHALL BE
IN WRITING AND MAILED BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID, OR TRANSMITTED BY HAND DELIVERY, OR
FACSIMILE MACHINE TO THOSE PERSONS WHOSE NAMES AND BUSINESSES
ADDRESSES APPEAR IN THE SERVICE DESCRIPTION.
(G) This Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland (U.S.A.) (not including the choice-of-law rules
thereof), and the parties hereby irrevocably submit to the non-exclusive
jurisdiction and venue of the state and federal courts sitting in the State of
Maryland for the purpose of all legal proceedings arising out of or relating to
this Agreement. The Customer hereby irrevocably consents to the service of any
and all process in any such action or proceeding by the mailing of copies of
such process to the Customer at its address specified herein or in any other
manner permitted by law. To the extent that the Customer has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attached prior to judgment, attachment in
aid of execution, execution or otherwise) with respect
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<PAGE>
to itself or its property, the Customer hereby irrevocably waives such immunity
in respect of its obligations under this Agreement.
(H) Neither party shall issue a public notice or news release concerning this
Agreement and the transactions contemplated hereby without the prior approval of
the other, which approval shall include the right to approve the form, content
and timing of any such publicity.
(I) The contents of this Agreement and information considered proprietary by OA
and Customer shall be treated as confidential and shall be disclosed only to
authorized employees, representatives or agents.
INITIAL: __________ ("Customer")
__________ ("OA")
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<PAGE>
ORION ATLANTIC SATELLITE SERVICES
SATELLITE ACCESS PROCEDURES
EXHIBIT A
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<PAGE>
ORION ATLANTIC SATELLITE SERVICES
SERVICE PERFORMANCE STANDARDS FOR CAPACITY SERVICES
EXHIBIT B
1. SERVICE PERFORMANCE AND SERVICE INTERRUPTIONS:
(A) OA will provide the Service on one or more Transponders that meet or exceed
the Minimum Technical Performance Standards ("Minimum Standards") set forth in
the Service Description. For any period during which a Serving Transponder fails
to meet the Minimum Standards and Customer ceases to use the Service (such
period is a "Service Interruption") OA will give Customer a credit allowance. A
failure to meet the Minimum Standards does not constitute a Service Interruption
when due to any of the following causes: (i) the failure or non-performance of
any terrestrial facilities or equipment, including any out-of-tolerance earth
station or terrestrial facilities conditions; (ii) the fault, negligent act, or
failure to act of Customer (any service user), its employees, or agents; (iii)
sun outages, rain fade, or externally caused interference; (iv) suspensions or
termination of Service made in accordance with this Agreement; or (v)
transponder/beam switching duration.
(B) Customer shall immediately notify OA of a suspected Service Interruption.
After consultation with Customer, OA will confirm whether a Service Interruption
has occurred and will notify the Customer. The duration of a Service
Interruption is measured from the earlier of the time that (i) OA is notified by
Customer of a Service Interruption, or (ii) OA otherwise becomes aware of a
service interruption, until the earlier of (iii) Customer is notified that the
affected Serving Transponder again meets the Minimum Standards or (iv)
Customer's resumption of use of the Service. No credit shall be allowed for a
Service Interruption of less than fifteen (15) minutes. Credit shall be given
for each thirty (30) minutes of interrupted Service which shall be computed on a
proportionate basis using the number of hours in the month during which Service
was interrupted.
(C) In the event of a Service Interruption, other than for those causes set
forth in paragraph 2 below, Customer shall be entitled to a credit against the
next invoiced payment due OA. All credits for Service Interruption shall be set
forth in the next billed invoice that follows the interruption in Service.
Customer shall notify OA within ten (10) days of the date an invoiced amount is
due if it disputes the invoiced amount. Customer shall timely pay any and all
sums due that are not disputed.
2. FAILURE OF SERVICE:
(A) For the purpose of this Agreement, a "Service Outage" shall be deemed to
have occurred if (i) one or more Service Interruptions of one (1) minute or more
in duration occur on the affected Serving Transponder during any consecutive
seven hundred twenty (720) hour period, and (ii) the aggregate of all such
Service Interruptions on the affected Serving Transponder during such period
exceeds one hundred twenty (120) minutes.
(B) Except as provided in Paragraph 2(C) below, Serving Transponder shall be
deemed to have failed (a "Service Failure") if: (i) OA fails to restore the
affected Serving Transponder to meet the Minimum Standards within twenty four
(24) hours of the occurrence of a Service Outage; (ii) OA determines that the
affected Serving Transponder cannot be restored to meet Minimum Standards within
twenty four (24) hours of the occurrence of a Service Outage; or (iii) the
affected Serving Transponder is restored to meet the Minimum Standards within
twenty four (24) hours of the occurrence of a Service Outage and during the
seven hundred twenty (720) hour period following any such restoration, the
affected Serving Transponder again experiences a Service Outage.
(C) The following shall not constitute a Service Failure: (i) Service Testing.
---------------
OA may perform Service Testing after a minimum of forty-eight (48) hours prior
notice to Customer, and after reasonable efforts to coordinate such testing with
Customer to minimize disruption of its use of the Service. OA shall limit such
testing to circumstances
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in which testing is necessary to maintain or initiate new service on the Serving
Satellite, to properly coordinate with other satellite users or operators, or to
otherwise prudently manage its Satellites while minimizing Service Testing to
the greatest extent possible; (ii) Emergency Testing. OA may, at its sole
-----------------
discretion, perform Emergency Testing on the greatest reasonable notice to
Customer allowed by the circumstances, and only for the purpose of restoring, or
determining the cause of, a failure of a component or subsystem on the Serving
Satellite, or in response to an order of a court or the FCC, or to determine the
cause or source of interference, or to protect the overall satellite
performance; and (iii) Force Majeure Interruption. A Service
--------------------------
Interruption that would otherwise qualify as a Service Failure, but
for the fact that such Service Interruption resulted from a Force Majeure.
(D) Customer shall use all reasonable efforts to aid and cooperate with OA in
determining the cause of Serving Satellite's failure to meet Minimum Standards,
at no cost to Customer.
3. SERVICE RESTORATION, SPARES AND SUBSTITUTE CAPACITY:
(A) In the event of a Service Failure, OA may, but shall not be required to,
re-establish Service on available capacity meeting the Minimum Standards
("Available Capacity") on a first come, first serve basis among all similar
Customers, including OA, unless such Customer is classified for rights to
restoration of Service. Provided however, if a service problem can be
compensated for by increasing the power of transmission to the Serving
Satellite, OA has the option in lieu of providing Alternative Service to require
the Customer to increase the power of transmission to the extent possible on its
Existing Equipment and/or to improve the customer provided transmission and/or
reception equipment or antenna size (at OA's sole discretion, cost and expense)
("Service Compensation").
(B) In order to facilitate satellite and transponder loading efficiencies, OA
may, upon notification to Customer, reassign the Capacity frequency and/or move
Service to another transponder(s) meeting same Minimum Standards as the Serving
Transponder(s) at no space segment or ground segment equipment cost to Customer.
Customer and OA will cooperate and make a best reasonable effort in finding
convenient date and time for relocating the Service to avoid and/or minimize any
service interruptions. OA will endeavor to give reassignment notification at
least ninety (90) days in advance to Customer.
4. CONTROL OUTAGE:
If a Service Outage occurs due to loss of control of the Serving Satellite and
the Service is not restored within a period of less than one hundred twenty
(120) hours from the start of such Service Outage, a "Control Outage" shall be
deemed to have occurred. During the period of such Service Outage that Service
is not available, OA's obligation to provide Service and Customer's obligation
to pay for Service not yet provided on the affected Serving Transponder(s) shall
be suspended.
5. SATELLITE OPERATIONS:
(A) Nothing in this Agreement shall be construed to prevent OA from taking any
action necessary to protect its satellites or to implement its obligations
hereof on a non-discriminatory basis to all customers, including Protected
Transponder Service customers and OA usage, or those otherwise contracting for
restoration, or to act in accordance with the Transmission Access Procedures.
(B) OA reserves the right to periodically transmit essential station-keeping
signals to selected transponders. Such transmissions will not degrade the
performance of the Service and/or Service Transponder.
(C) OA reserves the right to relocate the Serving Satellite in accordance with
applicable laws and regulations of any federal, state or other domestic of
foreign government authority with appropriate jurisdiction. Prior to any such
relocation of the Serving Satellite, OA will give written notice to Customer of
the Serving Satellite's new
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location and whether the Serving Transponder(s) will continue to meet the
Minimum Standards. Thereafter, the rights and obligations of the parties under
this Agreement shall continue.
6. RETIREMENT OF SATELLITE:
(A) The owner of the Serving Satellite shall be entitled to retire the Serving
Satellite without liability: (i) if fifty percent (50%) or more of the
Transponders on the Satellite have failed or are unusable for any reason; (ii)
in the event that the Satellite's station-keeping fuel, required to meet + 0.05
-
degrees, becomes depleted to a level sufficient only to ensure removal of the
Serving Satellite from its assigned orbital position; (iii) if required to do so
by any governmental authority; or (iv) if special circumstances require
retirement, and such FCC authority as is required for retirement is obtained.
(B) OA will use its best efforts to provide Customer written notice of a
decision to retire the Serving Satellite prior to the expiration of this
Agreement as far in advance of the date of retirement as the circumstances
allow. Upon retirement of the Serving Satellite, all future performance
obligations of the parties under this Agreement shall terminate.
7. CUSTOMER RESPONSIBILITIES:
(A) Unless otherwise specified in the Service Description, no terrestrial
facilities shall be provided by OA and Customer shall be responsible to install,
license and maintain the terrestrial facilities which communicate to and from
the Serving Satellite. Customer will not transmit or otherwise act in any manner
that violates the technical requirements of the Satellite Access Procedures.
Customer will always provide the necessary capability at its transmit facilities
to cease transmission immediately upon notice from OA via phone and/or fax. OA
may, but is not obligated to, inspect Customer provided facilities to insure
compliance to this requirement.
(B) Customer shall provide to OA all pertinent technical characteristics of
Customer-provided equipment used in connection with the Service as specified in
the Satellite Access Procedures.
(C) If OA provides terrestrial facilities and/or services to Customer, such
terrestrial facilities and/or services shall be provided strictly an
accommodation to Customer. Terms and conditions governing the provision of
terrestrial facilities and/or services, if any, shall be set forth in either the
Service Description or a separate agreement between OA and Customer. In the
event that OA receives service interruption credits for a failure or malfunction
in the terrestrial facilities and/or services from a third party facilities
provider, OA will pass through these service interruption credits to Customer in
the next month's invoiced billing statement. A malfunction or failure of the
terrestrial facilities and/or services shall not relieve Customer of any
obligation to timely pay any Service Fee(s) and/or Monthly Recurring Fee(s) due
OA.
INITIAL: ___________ ("Customer")
___________ ("OA")
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EXHIBIT 10.28
______________________________________________________________________
______________________________________________________________________
BET WEEKEND
JOINT VENTURE AGREEMENT
a New York Joint Venture
by and between
Black Entertainment Television, Inc.
a District of Columbia corporation,
and
Daily News, L.P.
a Delaware limited partnership
July 31, 1996
______________________________________________________________________
______________________________________________________________________
<PAGE>
JOINT VENTURE AGREEMENT
JOINT VENTURE AGREEMENT (the "Agreement") is made as of this 31st day of
July, 1996 effective as of January 1, 1996, by and between Black Entertainment
Television, Inc. a District of Columbia corporation and Daily News, L.P. ("DAILY
NEWS"). (The parties are sometimes referred to herein individually as a "Joint
Venturer" and collectively as "Joint Venturers".)
WHEREAS, BET and DAILY NEWS wish to enter into a joint venture (the "Joint
Venture") for the development, production and distribution of a weekend
newspaper Supplement which would be published at least quarterly during the
first year of the term and which would be inserted in the Sunday New York Daily
News and other newspapers, and to be targeted toward an African-American
audience; and
WHEREAS, each of the Joint Venturers will contribute capital, resources and
certain expertise in marketing, production and distribution to the Joint
Venture; and
WHEREAS, each of the Joint Venturers believe it would be in their best
interests to form the Joint Venture.
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. CREATION OF JOINT VENTURE. BET and DAILY NEWS agree to form the Joint
-------------------------
Venture for the purpose of developing, producing and distributing a weekend
newspaper Supplement which would be published at least quarterly during the
first year of the term and which would be inserted in the Sunday New York Daily
News and other newspapers, and to be targeted toward a middle-class African-
American audience (the "Supplement"), and later to be expanded by the Joint
Venture to Sunday newspapers in other markets. The parties agree that the
Supplement shall be entitled BET Weekend. The Joint Venture shall be formed
according to the laws of the State of New York for the limited purpose and scope
set forth herein. The rights and obligations of BET and DAILY NEWS and the
status, administration and termination of the Joint Venture shall be governed by
the laws of the State of New York.
2. SCOPE OF JOINT VENTURE.
----------------------
A. The scope of the Joint Venture shall be limited to the following:
(1) Development of a Supplement focusing on issues and personalities
of interest to middle-class African-Americans;
(2) Production, distribution and sale of advertising of the
Supplement; and
(3) Engagement in all other necessary or ancillary activities to (1)
and (2), and such other business(es) as may be agreed to by the
Joint Venturers.
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B. Except as provided in Section 17 hereof, nothing in this Agreement
shall be deemed to restrict in any way the right of BET and DAILY NEWS to
conduct any other business or activity whatsoever for its own account without
any accountability to the Joint Venture or the other Joint Venturer.
3. INTENTIONALLY DELETED.
----------------------
4. INTENTIONALLY DELETED.
----------------------
5. TERM OF JOINT VENTURE. The Term of this Joint Venture shall commence upon
----------------------
the date hereof and terminate on the thirtieth anniversary thereof; provided
that the Joint Venture shall earlier terminate (A) upon the occurrence of any of
the events set forth in Subsection B of Section 19 hereof or (B) ninety (90)
days after the execution of this Agreement if, within said ninety (90) day
period or such extension thereof as is mutually agreed upon by the parties, the
Joint Venturers have not mutually agreed upon either (i) the budget for the
Joint Venture's initial twelve (12) month period, as discussed in Section 7
herein, (ii) the mutual cash contributions and the valuations of cash equivalent
contributions as discussed in Subsection 8A herein, or (iii) the valuation of
services provided by BET and the Daily News as discussed in Sections 10 and 11
herein; or (C) upon the mutual agreement of the Joint Venturers.
6. MANAGEMENT BY MANAGING JOINT VENTURER. Daily News shall be the Managing
--------------------------------------
Joint Venturer. In its capacity as Managing Joint Venturer, Daily News shall be
responsible for the day-to-day management of the Joint Venture, consistent with
Section 9 below. BET shall be responsible for the day-to-day editorial affairs,
consistent with Section 9 below.
7. ANNUAL BUDGET. The Joint Venturers each agree that the budget agreed upon
-------------
pursuant to Section 5 above, shall constitute the annual budget of the Joint
Venture for its first twelve (12) months (the "Initial Budget"). The budget for
any other annual period shall be as mutually agreed to by the parties. In the
event that the parties fail to agree on an Initial Budget, the Joint Venture may
continue to incur expenses in the regular course of business and pursuant to the
terms of this Agreement until such time as the parties dissolve the Joint
Venture pursuant to Section 19 hereof.
8. CAPITAL CONTRIBUTIONS; OWNERSHIP PERCENTAGES; LOANS.
---------------------------------------------------
A. Each Joint Venturer shall make an initial contribution of cash (or
mutually agreeable cash equivalent) to the Joint Venture in the amount of one-
half of the Initial Budget. Such initial contributions shall be due and payable
to the Joint Venture pursuant to a schedule to be mutually agreed upon at the
same time as the Initial Budget is established. Cash equivalent contributions
are to be valued as mutually agreed upon by the Joint Venturers.
(1) To the extent that the Joint Venture has insufficient funds or is
otherwise unable to satisfy expenses incurred by the Joint Venture, or to pay
the expenses of the Joint Venturers, the Managing Joint Venturer shall, from
time to time, call upon the Joint Venturers who shall contribute cash to the
capital of the Joint Venture or provide cash equivalents in the form of certain
services referred to in Sections 10 and 11 (each a "Capital Contribution" and
collectively, the "Capital Contributions"). The parties shall mutually agree to
the allocation of cash and cash equivalents
3
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between the parties. All Capital Contributions shall be made in the following
percentages as adjusted pursuant to this Agreement ("Capital Contribution
Percentage"):
BET - 50%
DAILY NEWS - 50%
(2) In each case in which Capital Contributions are required, the
Managing Joint Venturer shall provide written notice of the call therefor (the
"Call Notice"), which shall specify:
(a) The total amount of the call (the "Capital Call");
(b) Each Joint Venturer's proportionate amount of the Capital
Call;
(c) The date ("Default Date") by which each Joint Venturer shall
make its capital contribution, which Default Date shall be
not more than thirty (30) days after the date on which the
Call Notice is given.
(3) Upon the provision of any Call Notice pursuant to Subsection (A)
of this Section 8, each Joint Venturer shall contribute the Capital Contribution
required by the Call Notice on or before the Default Date.
(4) If a Joint Venturer fails to make a Capital Contribution, in
whole or in part, on or before the applicable Default Date:
(a) the non-defaulting Joint Venturer may, at its sole
discretion, make a Capital Contribution within five (5) business days of the
Default Date in an amount less than or equal to the amount not contributed by
the defaulting Joint Venturer; and
(b) the Capital Contribution Percentage and Ownership Percentage
(as defined below) of the defaulting Joint Venturer shall be reduced. The
Capital Contribution Percentage and Ownership Percentage of the defaulting Joint
Venturer immediately following the Capital Call, with respect to which the
default occurred (the "Defaulted Capital Call") shall be equal to the total
capital contributed by the defaulting Joint Venturer, including any amounts
contributed by the defaulting Joint Venturer as part of the Defaulted Capital
Call, divided by the total capital contributed by both Joint Venturers as of the
time of the Defaulted Capital Call, including all amounts contributed (a) by the
Defaulting Joint Venturer as part of the Defaulted Capital Call and (b) by the
non-defaulting Joint Venturer pursuant to the provisions of Subsection A(3) and
A(4)(a) of this Section 8; and
(c) the Capital Contribution Percentage and Ownership Percentage
of the non-defaulting Joint Venturer shall be increased by an amount consistent
with the contributions made. The Capital Contribution Percentage and Ownership
Percentage of the non-defaulting Joint Venturer immediately following the
Defaulted Capital Call shall be equal to its Capital Contribution Percentage and
Ownership Percentage immediately prior to the Defaulted Capital Call, plus the
difference between the Defaulting Joint Venturer's Capital Contribution
Percentage and Ownership Percentage immediately before the Defaulted Capital
Call and immediately thereafter.
(5) No interest shall accrue or be payable to any Joint Venturer by
reason of its Capital Contribution.
4
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B. Ownership of the Joint Venture shall be in the following percentages
(each an "Ownership Percentage" and collectively, the "Ownership Percentages"):
BET - 51%
DAILY NEWS - 49%
C. Loans may be made to the Joint Venture by a Joint Venturer under such
terms and conditions as shall be determined by the Managing Joint Venturer and
agreed to by BET; provided that if either party has failed to make a Call
pursuant to Section 8(A) hereof, the other party may make a loan to the Joint
Venture upon reasonable terms at an interest rate not to exceed the Prime Rate
as stated from time to time in the Wall Street Journal plus Three Percent (3%).
The loan of money to the Joint Venture by any Joint Venturer shall not be
treated as a capital contribution but shall be a debt due such Joint Venturer by
the Joint Venture.
9. OPERATION OF JOINT VENTURE.
---------------------------
A. Duties of Managing Joint Venture
--------------------------------
The Joint Venture will be operated under the overall supervision of the
Managing Joint Venturer. The Managing Joint Venturer shall be required to obtain
the prior consent of BET for any of the following actions:
(1) Any change in the nature or purpose of the business of the Joint
Venture;
(2) The development of any new projects or products;
(3) The adoption of any subsequent annual budgets and the adoption of
any budget for any issues of the Supplement;
(4) The transfer of any Joint Venturer's interest in the Joint
Venture or the admission of another Joint Venturer;
(5) The sale of the business of the Joint Venture, or any merger of
the Joint Venture with or into another entity;
(6) The disposition of all or substantially all of the assets of the
Joint Venture, or the discontinuance of the business of the Joint
Venture; and
(7) Any change in the Ownership Percentages, other than as provided
in Section 8 hereof, or the fees, expenses or other amounts paid
or charged to either Joint Venturer.
In connection with the above, the Managing Joint Venturer may, without
the consent of BET: (1) make any operational decisions related to the Joint
Venture, including but not limited to printing, advertising, distribution, pre-
press and inserting, consistent with the Annual Budget agreed to by the Parties,
and (2) enter into any contracts for other matters not in excess of $10,000.00
per contract; and incur debt up to $5,000.00 in any single occurrence. The
Managing Joint Venturer's managerial control, including control of advertising,
shall not impede BET's control over the editorial affairs of the Joint Venture.
5
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B. Duties of BET
--------------
BET shall be responsible for the day-to-day editorial affairs of the
Supplement. The parties agree that the editorial focus of the Supplement shall
be consistent with the description set forth in Exhibit B. BET may, without the
consent of the Managing Joint Venture but consistent with the budget agreed to
by the parties, the terms of Exhibit B, general publication standards regarding
editorial content and First Amendment principles, make all editorial decisions
related to the Joint Venture, including but not limited to: (a) story, photo and
art selections; (b) layout; (c) editorial staffing, including recruitment,
retention and discharge of permanent and freelance personnel, but excluding the
Editor; (d) overall direction of editorial content. BET must obtain the consent
of Daily News on any and all matters that relate to the day-to-day management of
the Joint Venture and entry into any contracts in excess of $10,000.00. BET
shall also provide Daily News with a proposed story selection (i.e., editorial
line-up) of each issue of the Supplement and copies of editorial content for
each issue by a mutually agreed upon period of time prior to publication date.
C. Editor
------
If, at any time, the Editor does not enjoy the support of either Daily
News or BET, either party may, with or without cause, immediately terminate the
Editor.
D. Co-Publishers
-------------
Throughout the term of this Agreement, Daily News shall exercise its
responsibilities as Managing Joint Venturer through a Co-Publisher that it shall
designate, and BET shall exercise its responsibilities as a Joint Venturer
through a Co-Publisher that it shall designate.
10. PROVISION OF SERVICES BY BET.
-----------------------------
A. BET or any entity controlling, controlled by or under common control
with that of BET shall provide the following services to the Joint Venture:
(1) Development of overall "look" and length of the Supplement and
the subject matter of the articles in each issue of the Supplement, as well as
general editorial services;
(2) Preparation of each issue for printing; and
(3) Engagement in all other necessary or ancillary activities to (1)
and (2), and such other business(es) as may be agreed to by the Joint Venturers.
B. The Joint Venture shall reimburse BET for the expenses allocable under
generally-accepted accounting principles ("GAAP") to the performance of the
services it renders to the Joint Venture.
C. The parties agree that the services performed by BET shall be valued
in a manner mutually agreed upon by the Joint Venturers.
6
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11. PROVISION OF SERVICES BY DAILY NEWS.
-----------------------------------
A. DAILY NEWS or any entity controlling, controlled by or under common
control with that of Daily News shall provide or arrange for the provision of
the following services to the Joint Venture:
(1) Pre-Printing, Printing, insertion and distribution services;
(2) Advertising, sales and marketing; and
(3) Engagement in all other necessary or ancillary activities to (1)
and (2), and such other business(es) as may be agreed to by the
Joint Venturers.
B. The Joint Venture shall reimburse DAILY NEWS for the expenses properly
allocable under GAAP to the performance of the services it renders to the Joint
Venture.
C. The parties agree that the services performed by Daily News shall be
valued in a manner mutually agreed upon by the Joint Venturers.
12. TAX MATTERS.
------------
A. Except as otherwise provided in the Internal Revenue Code of 1986, as
amended (the "Code"), for each taxable year of the Joint Venture, each item of
income, gain, loss, deduction or credit shall be allocated to the Joint
Venturers in a manner to cause their respective Capital Accounts to be increased
or decreased in the same ratio as the ratio of each Joint Venturer's total
Capital Contributions to the aggregate Capital Contributions of both Joint
Venturers.
B. The Joint Venture shall, for each taxable year, file a United States
partnership income tax return within the time prescribed by law. The Joint
Venture shall file such state and local tax returns as may be required by the
states in which the Joint Venture or the income thereof may be taxable.
C. The fiscal and taxable year of the Joint Venture shall be the period
as may be required by the Code.
D. The Managing Joint Venturer is hereby designated as the "Tax Matters
Partner" as defined in Section 6231 (a)(7) of the Code. In that capacity, the
Managing Joint Venturer shall ensure that:
(1) The Tax Matters Partner shall comply with the requirements of
Sections 6221 through 6233 of the Code.
(2) The Tax Matters Partner shall promptly take such action as may be
necessary to cause all Joint Venturers to become "notice partners" within the
meaning of Section 6231(a)(8) of the Code.
(3) The Tax Matters Partner shall keep the other Joint Venturer
informed of all matters which may come to the attention of the Managing Joint
Venturer in its capacity as Tax Matters Partner by giving the other Joint
Venturer notice thereof within thirty (30) days after the Tax Matters
7
<PAGE>
Partner becomes informed of any such matter or within such shorter period as may
be required by statute or regulation.
(4) The Tax Matters Partners shall not take any action contemplated
by Sections 6222 through 6232, inclusive, of the Code without the approval of
all Joint Venturers; provided, however, that nothing contained herein shall be
-------- -------
construed to limit the ability of the Managing Joint Venturer to take any action
under Sections 6222 through 6232, inclusive, of the Code which is left to the
determination of a partner so long as such action is not legally binding on the
other Joint Venturer.
(5) The foregoing shall apply equally with respect to any provision
of state or local tax law which is similar to sections 6221 through 6232 of the
Code.
13. CAPITAL ACCOUNTS.
----------------
A capital account ("Capital Account") shall be maintained for each
Joint Venturer in accordance with Section 704 of the Code and the Treasury
Regulations (the "Regulations") promulgated thereunder, including Regulations
Section 1.704-1(b)(2)(iv). It is intended that all allocations shall have
substantial economic effect. The Managing Joint Venturer shall take all steps
necessary to ensure that allocations have substantial economic effect and shall
comply with Section 704 of the Code and the Regulations promulgated thereunder.
14. DISTRIBUTIONS.
-------------
A. At such intervals as the Managing Joint Venturer shall determine, but
not less frequently than annually, the Joint Venturers shall determine the
amount of cash available for distribution to the Joint Venturers, if any, taking
into consideration the current financial position of the Joint Venture,
anticipated operating income, expenses and liabilities, projected capital
expenditures, and such reserves as shall be deemed prudent by the Joint
Venturers. In no event, however, shall any distributions be made until all
current expenses and current liabilities that have been incurred by the Joint
Venture have been paid in full.
B. The Joint Venturers shall agree upon the amount of cash available for
distribution. All distributions shall occur based on a percentage equal to each
Joint Venture's total Capital Contributions divided by the total Capital
Contributions of both Joint Venturers.
15. ACCOUNTING AND RECORDS.
-----------------------
A. Books of account and supporting records for the Joint Venture shall be
kept by the Managing Joint Venturer. Upon request of any Joint Venturer, such
books and records, and all other documents and files of the Joint Venture, shall
be made available for examination, audit and copying by representatives of the
requesting Joint Venturer at its own expense during regular business hours at
the principal office of the Joint Venture.
B. The books of account and supporting records and all other documents
and files of the Joint Venture shall be preserved in good order as long as may
be required by any applicable law or by prudent business practice, whichever is
longest.
C. The Managing Joint Venturer shall deliver to the other Joint Venturer:
8
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(1) Within thirty (30) days after the end of each fiscal quarter in
each fiscal year, a statement of revenues and expenses of the Joint Venture, a
statement of changes in financial position of the Joint Venture, a statement of
Joint Venturers' capital for the period from the beginning of the current fiscal
year to the end of such quarterly period, and a balance sheet of the Joint
Venture as at the end of such quarterly period; and
(2) Within ninety (90) days after the end of each fiscal year, a
statement of revenues and expenses and a statement of changes in financial
position of the Joint Venture, a statement of each Joint Venturer's Capital
Contribution and Capital Account as of the end of such year, and a balance sheet
of the Joint Venture as at the end of such year.
16. BANK ACCOUNTS. All funds received by the Joint Venture shall be handled in
--------------
the following manner:
A. All funds shall be deposited promptly in an account to be opened and
maintained in the name of the Joint Venture and controlled and managed by the
Managing Joint Venturer (the "Account"), at a bank designated by the Joint
Venturers. The Managing Joint Venturer shall designate in writing its
representative(s) who shall be authorized signatories on the Account.
B. The opening of the Account shall be authorized by the Managing Joint
Venturer in writing.
C. All disbursements from the Account shall be issued at the sole
direction of the Managing Joint Venturer.
17. WITHDRAWAL FROM JOINT VENTURE. If either Joint Venturer withdraws from the
------------------------------
Joint Venture, prior to its expiration in accordance with Subsection 19(B)(2)
or if an event described in Subsection 19(B)(1) occurs, then the non-withdrawing
or non-defaulting Joint Venturer, as the case may be shall be permitted to
proceed with the operation and distribution of the existing Supplement;
provided, however, in any event the Daily News shall have no continuing rights
in, and shall promptly discontinue all use of the name "BET Weekend". In the
event that BET is the withdrawing or defaulting Joint Venturer, BET shall not
use the name "BET Weekend" for a period of twelve (12) months from the date of
termination of the Joint Venture. Notwithstanding the foregoing, the
withdrawing or defaulting Joint Venturer shall be responsible for all
liabilities of the Joint Venture incurred through dissolution as provided in
Subsection 20(A)(1), (2) and (3) before such party's withdrawal or default
(and, in the case of a defaulting Joint Venturer, all liabilities arising from
such default). No amount shall be distributed to the withdrawing or defaulting
Joint Venturer pursuant to Subsection 20(A)(4). Upon a withdrawal from the
Joint Venture pursuant to the terms of this Section 17, legal title to the
property of the Joint Venture, including without limitation any logos,
trademarks, tradenames or copyrights (except as otherwise stated herein) shall
be retained by the non-withdrawing or non-defaulting party. In no event shall a
defaulting party retain legal title to the property of the Joint Venture (except
as otherwise set forth herein).
18. INTENTIONALLY DELETED.
----------------------
19. DISSOLUTION.
-----------
A. Neither Joint Venturer shall have the right, power or authority at any
time to sell, transfer, pledge, or otherwise dispose of all or any part of its
interest in the Joint Venture, whether
9
<PAGE>
voluntarily or by operation of law (excluding any internal partnership or
corporate reorganization of either party or the transfer, sale or other
disposition of either party's interest to a wholly owned subsidiary or
affiliate; provided, however, such transfer is consistent with Section 24(I)),
without first obtaining the prior written approval of the other Joint Venturer.
B. The Joint Venture shall be dissolved upon the occurrence of any of the
following events:
(1) An Event of Default, as defined in Section 22 hereof, which is
not cured by the defaulting Joint Venturer within thirty (30) days of the
provision of notice of such default by the non-defaulting Joint Venturer;
(2) Upon not less than ninety (90) days' prior written notice,
withdrawal of a Joint Venturer;
(3) The bankruptcy, insolvency or complete liquidation or dissolution
of either Joint Venturer, but, in the case of such complete liquidation or
dissolution, such liquidated and dissolved Joint Venturer shall remain fully and
entirely liable to the Joint Venture and any other Joint Venturer for any and
all of the liabilities of such liquidated and dissolved Joint Venturer;
(4) The mutual agreement of the Joint Venturers;
(5) The disposition of all or substantially all of the assets of the
Joint Venture; or
(6) The occurrence of any other event causing the dissolution of a
partnership under the laws of the State of New York; or
(7) The expiration of the Term of the Joint Venture referred to in
Section 5 herein.
C. The Joint Venture shall terminate when all of its assets shall have
been disposed of (except for any liquid assets not so disposed of), and the net
proceeds therefrom, as well as any other liquid assets of the Joint Venture,
shall, after payment of or due provision for all liabilities to creditors of the
Joint Venture (including loans, if any, from the Joint Venturers to the Joint
Venture), have been distributed to the Joint Venturers in accordance with
Section 20 hereof.
D. Notwithstanding the foregoing, upon the Event of Dissolution under
Subsection 19B(1) or B(2), the provisions of Section 17 shall apply. Upon any
other Event of Dissolution, neither Joint Venturer shall be permitted to proceed
with the operation and distribution of the existing Supplement, without the
consent of the other and the Joint Venture will be terminated in accordance with
Section 20, but it is understood and agreed that either or both Joint Venturers
may proceed with the operation and distribution of newspaper supplement, whether
or not substantially similar to the Supplement, without the other Joint
Venturer's consent.
20. DISTRIBUTION UPON TERMINATION AND DISSOLUTION.
---------------------------------------------
A. Upon the termination and dissolution of the Joint Venture, except as
provided in Section 17, herein the Managing Joint Venturer shall liquidate the
Joint Venture as promptly as possible, but in an orderly and businesslike
manner. The proceeds of such liquidation shall be distributed and applied in
the following order of priority:
10
<PAGE>
(1) The payment of the debts and liabilities of the Joint Venture to
third parties;
(2) The payment of the debts and liabilities of the Joint Venture to
the Joint Venturers, on a pro-rata basis according to the percentages of such
debts and liabilities;
(3) The establishment of any reserves reasonably necessary for any
contingent or unforeseen liabilities or obligations of the Venture arising out
of or in connection with the business of the Venture, as shall be mutually
agreed upon by the Joint Venturers. Such reserves shall be placed in an escrow
account by the Managing Joint Venturer, to be held for the purpose of disbursing
such reserves in payment of any of the aforementioned contingencies, and, at the
expiration of such period as the Joint Venturers shall deem advisable, to
distribute the balance thereafter remaining in the manner hereinafter provided;
and
(4) The balance, if any, to the Joint Venturers in accordance with
the positive balances in their Capital Accounts, after giving effect to all
contributions, distributions, and allocations for all periods. If any Joint
Venturer's Capital Account has a deficit balance (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the taxable year during which such liquidation occurs), such Joint Venturer
shall, by the end of the taxable year of the liquidation (or, if later, within
ninety (90) days after the date of the liquidation), contribute to the capital
of the Venture the amount necessary to restore such deficit balance to zero in
compliance with Regulations Section 1.704-1(b)(2)(ii)(B)(3).
B. All property which cannot reasonably be liquidated shall be allocated
among the Joint Venturers on a pro-rata basis according to the percentages in
which Capital Contributions are made, based on the aggregate fair market value
of the property.
21. REPRESENTATIONS AND WARRANTIES. Each Joint Venturer hereby represents and
-------------------------------
warrants to the other as follows:
A. Organization and Good Standing. It is a corporation or limited
------------------------------
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has full corporate or partnership
power and authority to conduct its business as it is now being conducted, to
own, lease and operate its assets, and to perform all its obligations under the
agreements and instruments to which it is a party or by which it is bound.
B. Authority. This Agreement constitutes the legally valid and binding
---------
obligation of it enforceable against it in accordance with its terms. The Joint
Venturer has the full corporate or partnership power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement and the other agreements contemplated
herein have been authorized by all requisite corporate or partnership action on
the part of the Joint Venturer.
C. No Breach. Neither the execution and delivery of this Agreement nor
----------
the consummation of the transactions contemplated herein will (i) violate any
provision of its Articles of Incorporation or Bylaws or Partnership Agreement,
or (ii) result in a breach of, or constitute any default under, any contract,
agreement or instrument to which it is a party.
D. Consents and Approvals. The execution and delivery by Joint Venturer
----------------------
of this Agreement, the performance by it of its obligations hereunder and the
consummation by Joint Venturer
11
<PAGE>
of the transactions contemplated hereby do not require it to obtain any consent,
approval or action of, or make any filing with or give any notice to, any
corporation, partnership, person, firm or other entity, or any governmental or
judicial authority, which consent, approval or action has not already been
obtained.
22. DEFAULT.
--------
The occurrence of any one or more of the following shall constitute an
"Event of Default" under this Agreement unless expressly waived in writing by
the non-defaulting Joint Venturer:
A. Either Joint Venturer shall fail to make any Capital Contribution
prior to the applicable Default Date;
B. Either Joint Venturer shall make any material representations or
warranties in this Agreement or in any certificate or statement furnished at any
time under or in connection herewith or therewith which were false or materially
misleading when made or furnished hereunder;
C. Either Joint Venturer shall materially default in its material
obligations of this Agreement;
23. INDEMNIFICATION.
---------------
A. Indemnity.
---------
(1) Each Joint Venturer agrees to indemnify and hold harmless the
other and each of its partners and all of their respective officers, directors,
employees and agents against any and all claims, damages, liabilities, losses,
penalties, fines, forfeitures, reasonable attorneys' fees, judgments, amounts
paid in settlement and related litigation costs, and other fees and expenses
which result from the gross negligence or willful misconduct of such Joint
Venturer, its principals, employees, agents, or permitted assigns in connection
with its performance under this Agreement.
(2) BET agrees to indemnify and hold harmless the other and each of
its partners and all of their respective officers, directors, employees and
agents against any and all claims, damages, liabilities, losses, penalties,
fines, forfeitures, reasonable attorneys' fees, judgments, amounts paid in
settlement and related litigation costs, and other fees and expenses which
result from the editorial decisions made by BET or its designees of the
Supplement.
B. Notice of Claims.
----------------
(1) The Joint Venturer seeking indemnification (the "Indemnitee")
shall immediately notify the Joint Venturer from whom indemnification is sought
(the "Indemnitor") if it receives a complaint, claim or other notice of any
loss, claim, damage or liability giving rise to a claim for indemnification, but
failure to provide such notice shall not relieve the Indemnitor from any duty to
indemnify unless the Indemnitor is materially prejudiced by such failure and had
no actual knowledge of such complaint, claim or other notice.
(2) With respect to any claim made or threatened against the
Indemnitee for which the Indemnitee is or may be entitled to indemnification,
the Indemnitee shall:
12
<PAGE>
(a) Give written notice to the Indemnitor of such claim as soon
as practicable after such claim is made or threatened, which notice shall
specify in reasonable detail the nature of the claim and the amount (or an
estimate of the amount of the claim);
(b) Provide the Indemnitor such information and cooperation with
respect to such claim as the Indemnitor may reasonably require, including,
without limitation, making appropriate personnel available to the Indemnitor at
such reasonable times as the Indemnitor shall request;
(c) Cooperate and take all such steps as the Indemnitor may
reasonably request to preserve and protect any defense of such claim;
(3) In the event suit is brought with respect to such claim, upon
reasonable prior notice, the Indemnitee shall afford to the Indemnitor the
right, which the Indemnitor may exercise in its sole discretion and at its
expense, to participate and control in the investigation, defense, and
settlement of such claim;
In such case Indemnitor shall not release or settle such claim or
make any admission with respect thereto (other than routine or incontestable
admission or factual admissions the failure to make which would expose the
Indemnitee to unindemnified liability) without the prior written consent of the
Indemnitee.
24. MISCELLANEOUS.
--------------
A. Office Space. The Joint Venture shall operate from a location to be
------------
determined by the parties.
B. Joint Liability. Both Joint Venturers shall be equally liable for all
---------------
obligations of the Joint Venture.
C. Legal Title to Joint Venture Property.
-------------------------------------
(1) Legal title to Joint Venture property, including any logos,
trademarks, tradenames or copyrights (except as set forth below), shall be held
in the name of the Joint Venture. Subject to the provisions of Section 9
hereof, the Managing Joint Venturer shall have the right, power and authority,
acting for and on behalf of the Joint Venture, to enter into and execute any
lease, contract, agreement, bill of sale, deed, mortgage or other instrument or
document required or otherwise appropriate to lease, sell, mortgage, convey or
finance the Joint Venture property (or any part thereof) and to convey the Joint
Venture property in fee simple by deed, mortgage or otherwise.
(2) Each party shall retain any and all rights to the use of each
party's respective names or tradenames and any of the tradenames or service
marks currently held by that party or its parent company or any entity under
common control with that of the party. In the event that the Joint Venture uses
any name or mark of one of the parties, the Joint Venture shall enter into a
license agreement for the use of such names or marks on a no-cost basis. Upon
dissolution of the Joint Venture, all such license agreements automatically
terminate.
D. Terminology. All pronouns and any variations thereof shall be deemed
-----------
to refer to the masculine, feminine, neuter, singular or plural as the identity
of the person or persons may require.
13
<PAGE>
E. Notices. Any and all notices, calls, offers, acceptances, or other
-------
communications provided for herein shall be given in writing, by telecopy,
overnight delivery or U.S. certified or registered mail, return receipt
requested, postage prepaid;
If to BET: Debra L. Lee, President and COO
Black Entertainment Television, Inc.
One BET Plaza
1900 W Place, N.E.
Washington, DC 20018
If to Daily News, L.P.: Les Goodstein,
Associate Publisher
c/o Daily News, L.P.
450 West 33rd Street
New York, NY 10001
cc: Martin D. Krall, Esq.
c/o Daily News, L.P.
450 West 33rd Street
New York, NY 10001
or to such other address as any of them may from time to time designate by
notice to the other Joint Venturer. Any such notice or other communication
shall be deemed delivered when sent or mailed. Notice by overnight courier,
facsimile or by hand shall be deemed delivered when received by the addressee.
F. No Waiver. This Agreement may not be changed or terminated orally.
---------
No waiver of any provision of this Agreement shall be valid unless in writing.
No waiver of a breach of or default under any provision of this Agreement shall
be deemed a waiver of such provision or of any subsequent breach or default of
any kind. No delay or omission to exercise any right or power accruing upon any
breach or default shall impair such right or power or be construed to be a
waiver of any such breach or default or an acquiescence therein.
G. Other Businesses. Except as provided herein, nothing contained herein
----------------
shall be construed to constitute either Joint Venturer as the agent of the other
Joint Venturer or to limit in any manner the Joint Venturers in the carrying on
of their own respective businesses or activities. Except as provided in
Sections 17 and 19D hereof, either Joint Venturer may engage in and/or possess
any interest in other business ventures of every nature and description,
independently or with others, whether existing as of the date hereof or
hereafter coming into existence; and neither the Joint Venture nor either Joint
Venturer shall have any rights in or to any such independent ventures or the
income or profits derived therefrom.
H. Limits of Joint Venture. This Agreement shall be construed and deemed
-----------------------
to create a joint venture for the sole purpose of developing, distributing and
marketing the Supplement. Except as expressly authorized by this Agreement or
otherwise in a written document signed by both Joint Venturers, neither Joint
Venturer shall act as an agent for or otherwise bind the other Joint Venturer or
hold itself out to third parties as having authority to act on behalf of the
other Joint Venturer. Neither the Joint Venture nor any Joint Venturer shall be
responsible or liable for any indebtedness of another Joint Venturer incurred
either before or after the execution of this Agreement, other than those joint
14
<PAGE>
responsibilities, liabilities, indebtedness or obligations incurred from and
after the date hereof pursuant to and as limited by the terms of this Agreement.
I. Assignability. Neither party may assign or pledge this Agreement
-------------
without the prior written consent of the other party, which consent may be
withheld for any reason; provided, however, that either party may assign,
transfer, sale or otherwise dispose of its obligations under this Agreement for
the purposes of (i) internal partnership or corporate reorganization or (ii) to
a wholly owned subsidiary or affiliate. In the event that either party assigns
this Agreement pursuant to the terms of this Section 24(I), the assigning party
shall remain liable for the performance of the obligations of this Agreement.
This Agreement shall be binding upon and inure to the benefit of the Joint
Venturers and their permitted assignees.
J. Cost of Performance. Except as otherwise set forth herein, each Joint
--------------------
Venturer shall bear its own costs and expenses in performing the terms of this
Agreement.
K. Notice of Claims. Each Joint Venturer shall immediately notify the
----------------
other Joint Venturer in writing of any and all litigation and claims made or
threatened against one or more of the Joint Venturers in connection with this
Agreement. The Managing Joint Venturer shall oversee all litigation instituted
by or against the Joint Venture.
L. Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of New York. In the event any litigation
should arise concerning this Agreement, the Joint Venturers hereby specifically
consent to the jurisdiction of any federal or local court sitting within the
State of New York.
M. Entire Agreement. This Agreement represents the full and complete
----------------
understanding of the Joint Venturers with respect to the subject matter hereof,
replacing and superseding all prior agreements and understandings.
N. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be valid under applicable law, but if
such provision is invalid or prohibited under said law, then such provision
shall be ineffective only to the extent of such invalidity or prohibition,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
O. Execution in Counterparts. This Agreement may be executed in any one
-------------------------
or more counterparts, each of which shall be deemed an original hereof and all
of which when taken together shall constitute one and the same instrument. This
Agreement may be delivered by telecopier.
15
<PAGE>
P. Binding Agreement. This Agreement shall not be binding upon either
-----------------
party unless and until it is signed by both parties hereto and a fully executed
original of the Agreement is delivered to each party.
IN WITNESS WHEREOF, the undersigned have set their hands and seals as of
the date and year first above written.
BLACK ENTERTAINMENT TELEVISION, INC. DAILY NEWS, L.P.
By New DN Company its General
Partners
/s/ Debra L. Lee /s/ Martin D. Krall
- ------------------------------------ -----------------------------------
Debra L. Lee, President and COO Name: Martin D. Krall,
------------------------------
Executive Vice President
Date: July 31, 1996 Date:______________________________
------------------------------
16
<PAGE>
EXHIBIT A
---------
INTENTIONALLY DELETED
---------------------
<PAGE>
EXHIBIT B
The editorial parties agree that editorial focus of the Supplement will be
as follows:
BET Sunday magazine will be designed and edited for African-Americans of all
ages who want cutting-edge and culturally relevant information about what's
going on in the world around them. Personality-driven articles will allow
readers to examine issues, events and lifestyles through the eyes of individuals
much like themselves and to get an up-close look at the celebrities and other
prominent people who captivate their attention. This one-of-a-kind publication
will offer readers a lively and comprehensive package that they won't find
anywhere else. Coverage will include features, profiles of intriguing
individuals from all walks of like, culture, activism, stories of triumph, home
furnishings, interior design, fashion, health, fitness, business, personal
finance, careers, pastimes, sports, arts and entertainment, books, technology,
food, new products, trends, and adventure. Although BET Sunday Magazine is
targeted to African-Americans, readers of all backgrounds will be attracted to
this high-quality publication with its striking design, top-notch reporting,
upbeat writing and arresting photography.
<PAGE>
Exhibit 13
BET HOLDINGS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth, for the periods and as of the dates
indicated, selected consolidated financial data for the Company. The selected
consolidated financial data for the five years in the period ended July 31, 1996
have been derived from the Company's audited financial statements. This
information should be read in conjunction with the Company's consolidated
financial statements and notes thereto appearing elsewhere in this annual
report.
<TABLE>
<CAPTION>
In thousands of dollars, except per share amounts
Year Ended July 31, 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Advertising $ 67,562 $ 56,017 $ 48,616 $ 40,585 $ 34,194
Subscriber 61,797 56,045 47,509 33,272 26,910
Other 3,380 3,160 1,385 361 551
- ----------------------------------------------------------------------------------------------
Total Operating Revenue 132,739 115,222 97,510 74,218 61,655
- ----------------------------------------------------------------------------------------------
Operating Expenses 90,927 77,705 71,100 50,609 42,036
- ----------------------------------------------------------------------------------------------
Income From Operations 41,812 37,517 26,410 23,609 19,619
- ----------------------------------------------------------------------------------------------
Net Income* $ 22,063 $ 19,912 $ 14,776 $ 12,640 $ 11,678
- ----------------------------------------------------------------------------------------------
PER COMMON SHARE*
Net Income $ 1.20 $ 1.00 $ 0.72 $ 0.61 $ 0.58
- ----------------------------------------------------------------------------------------------
EBITDA** 2.70 2.23 1.51 1.30 l.06
- ----------------------------------------------------------------------------------------------
Cash dividends declared - - - - -
- ----------------------------------------------------------------------------------------------
Weighted average shares outstanding 18,454 19,867 20,490 20,844 20,295
- ----------------------------------------------------------------------------------------------
OTHER DATA
EBITDA** $ 49,914 $ 44,263 $ 31,022 $ 27,111 $ 21,533
- ----------------------------------------------------------------------------------------------
Capital expenditures 13,514 17,241 11,284 3,519 9,313
- ----------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $ 150,731 $ 157,810 $ 113,868 $104,842 $ 88,908
- ----------------------------------------------------------------------------------------------
Long-term debt*** 60,560 35,875 12,392 13,207 13,487
- ----------------------------------------------------------------------------------------------
Shareholders' equity $ 66,749 $ 96,684 $ 81,378 $ 77,791 $ 65,059
- ----------------------------------------------------------------------------------------------
</TABLE>
* Net income for fiscal year 1993 includes a $1.8 million non-cash charge
related to a litigation settlement effected by the transfer of a
shareholders' assets. Net income per common share for fiscal year 1993
approximated $0.66, exclusive of the after-tax effect of this non-cash
charge.
** EBITDA represents income before income taxes, net nonoperating expenses,
and depreciation and amortization of intangibles. EBITDA is presented as a
measure of the Company's ability to fund its operations. However, EBITDA
should not be considered in isolation from, or as a substitute for, net
income or cash flows from operating activities determined in accordance
with generally accepted accounting principles or as a measure of the
Company's profitability or liquidity.
*** Includes current maturities of long-term debt.
<PAGE>
BET HOLDINGS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
BUSINESS SEGMENTS
BET Holdings, Inc. (the Company) operates in two principal business segments:
cable television programming and magazine publishing.
Cable television programming operations are conducted through the Company's
Entertainment Group, which includes Black Entertainment Television (BET), BET on
Jazz: The Cable Jazz Channel (BET on Jazz) and Action Pay-Per-View (Action).
Both BET and BET on Jazz are basic cable networks with revenues derived
primarily from sales of advertising time and monthly subscribership fees. Action
provides programming on a pay-per-view basis. Ancillary Entertainment Group
businesses established to leverage and expand the BET Brand name include BET
Direct, which sells the Color Code (C) line of skin care products on a retail
basis and musical recordings on compact discs and cassettes primarily through
short-form direct advertising.
Magazine publishing operations are conducted through the Company's Publishing
Group and involve the publication of Emerge and Young Sisters and Brothers (YSB)
magazines with revenues derived primarily from circulation and advertising.
The Company has equity ownership interests in certain affiliated companies which
are accounted for under the equity method, including BET Film Productions and
BET Pictures, which produce low-budget feature length motion pictures, and a
joint venture with the New York Daily News which publishes BET Weekend, a Sunday
newspaper supplement.
CONSOLIDATED SUMMARY
Consolidated results of operations during the last three fiscal years were as
follows:
<TABLE>
<CAPTION>
In thousands of dollars, except per share amounts
- -------------------------------------------------------------------------
Year ended July 31, 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $ 132,739 $ 115,222 $ 97,510
Income from operations 41,812 37,517 26,410
Income before income taxes 37,370 35,138 26,571
- -------------------------------------------------------------------------
Net income $ 22,063 $ 19,912 $ 14,776
- -------------------------------------------------------------------------
Net income per common share $ 1.20 $ 1.00 $ .72
- -------------------------------------------------------------------------
</TABLE>
Decreased operating and net income margins incurred during fiscal year 1996 were
primarily due to operating losses incurred by BET on Jazz, which was launched in
January 1996, and losses resulting from BET Direct's May 1996 retail launch of
the Color Code (C) skin care line. Increased interest expense related to
financing the repurchase of 15% of the Company's outstanding common stock in
December 1995 resulted in significantly increased nonoperating costs. A
discussion of the results of operations of each of the Company's business
segments and other factors impacting the Company's results of operations
follows.
ENTERTAINMENT GROUP
Results of Entertainment Group operations during the last three fiscal years
were as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- -------------------------------------------------------
Year ended July 31, 1996 1995 1994
- -------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $126,888 $ 109,878 $92,249
Operating expenses 81,870 68,638 61,782
- -------------------------------------------------------
Income from operations $ 45,018 $ 41,240 $30,467
- -------------------------------------------------------
</TABLE>
Substantially all Entertainment Group revenues and operating income are
attributable to BET. Operating revenues and operating income attributable to
each of the Company's Entertainment Group operating activities during the last
three fiscal years were as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- ---------------------------------------------------------------
Year ended July 31, 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
BET $116,148 $100,471 $84,459
Action 8,775 8,470 6,937
BET on Jazz 405 - -
Ancillary Businesses 1,560 937 853
- --------------------------------------------------------------
Total $126,888 $109,878 $92,249
- --------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
BET $ 49,948 $ 42,496 $33,947
Action (730) (1,297) (3,402)
BET on Jazz (3,154) - -
Ancillary Businesses (1,046) 41 (78)
- --------------------------------------------------------------
Total $ 45,018 $ 41,240 $30,467
- --------------------------------------------------------------
</TABLE>
Income (loss) from operations presented in the preceding table does not reflect
the allocation of certain overhead and administrative costs incurred by BET
which relate to all Entertainment Group operating activities.
<PAGE>
OPERATING REVENUES
Components of Entertainment Group operating revenues during the last three
fiscal years were as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- --------------------------------------------------------
Year ended July 31, 1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
Advertising $ 64,211 $ 52,865 $45,610
Basic cable subscriber 50,613 45,459 38,331
Pay-per-view subscriber 8,775 8,470 6,937
Other 3,289 3,084 1,371
- --------------------------------------------------------
Total $126,888 $109,878 $92,249
- --------------------------------------------------------
</TABLE>
Advertising Revenues
- --------------------
Substantially all Entertainment Group advertising revenues are earned by BET
through the sale of national spot advertising, infomercial advertising and
direct response advertising. BET on Jazz is not expected to earn significant
advertising revenue until such time as it attains a subscriber base attractive
to advertisers. BET's total advertising revenues increased 21%, to $64.1
million, and 16%, to $52.9 million, during fiscal years 1996 and 1995,
respectively, as compared to the prior year comparable periods.
. National Spot Advertising
BET's national spot advertising revenues increased 27%, to $42.7 million, and
32%, to $33.6 million, during fiscal years 1996 and 1995, respectively, as
compared to the prior year comparable periods. These increases were primarily
due to rate increases resulting from a robust advertising market, increased
viewership and an increase in the amount of broadcast time devoted to more
profitable national spot advertising (which was primarily made available by a
corresponding reduction in the amount of broadcast time devoted to direct
response advertising).
. Infomercial Advertising
BET's infomercial advertising revenues increased 24%, to $17.5 million, and 13%,
to $14.1 million, during fiscal years 1996 and 1995, respectively, as compared
to the prior year comparable periods. Increased fiscal year 1996 revenues
resulted from a scheduled contractual 10% increase in the rate charged to BET's
largest purchaser of infomercial advertising time and an increase in the volume
of infomercial advertising time. Increased fiscal year 1995 revenues were
primarily due to a scheduled contractual 10% increase in the rate charged to
BET's largest purchaser of infomercial advertising time. BET's long-term
contract with its largest purchaser of infomercial advertising time provides for
rate increases of 22% in fiscal year 1997 and 10% in fiscal years 1998 and 1999.
. Direct Response Advertising
BET's direct response advertising revenues decreased 25%, to $3.9 million, and
32%, to $5.2 million, during fiscal years 1996 and 1995, respectively, as
compared to prior year comparable periods. These declines were primarily due to
a reduction in broadcast time made available for direct response advertising in
favor of more profitable national spot advertising, and advertising time
utilized by BET Direct. Direct response advertising revenues earned by BET from
BET Direct, which approximated $.2 million and $.15 million during fiscal years
1996 and 1995, respectively, are eliminated in the Company's consolidated
financial statements.
Basic Subscriber Revenue
- ------------------------
Substantially all Entertainment Group basic subscriber revenues are earned by
BET. While BET on Jazz's rate card provides for a monthly per subscriber fee of
5c, BET on Jazz's domestic and international affiliation agreements provide for
a free carriage period of up to two years. Accordingly, BET on Jazz is not
expected to earn significant subscriber revenue in the near future.
BET's subscriber revenues increased 11%, to $50.3 million, and 19%, to $45.5
million, during fiscal years 1996 and 1995, respectively, as compared to prior
year comparable periods. Subscriber revenue gains were primarily due to a
scheduled annual rate card increase of 1c per subscriber per month during
calendar years 1994 and 1995, coupled with continuing increases in BET's
subscriber base. BET's basic monthly subscriber fee was 10c and 11c during
calendar years 1994 and 1995, respectively, and remains at 11c during calendar
year 1996. BET's subscriber base increased 11% to 41.4 million at July 31, 1996
and increased 7% to 37.5 million at July 31, 1995 as compared to July 31, 1995
and July 31, 1994, respectively.
BET's rate card structure provides for a monthly per-subscriber rate of 12c in
calendar year 1997, 13c in 1998, and rate increases of .5c per year through
2003, at which time the monthly per-subscriber rate will be 15.5c. BET's
affiliation agreements are subject to cancellation by either BET or cable system
operators under certain circumstances. Additionally, substantially all of BET's
affiliation agreements include a "most favored nations" provision under which
BET is obligated to extend the terms and provisions of its most favorable
contractual rate structure to covered affiliates. Accordingly, in the event BET
enters into a new or renewed affiliation agreement with terms more favorable
than those contemplated under the current
<PAGE>
rate structure, it will be obligated to extend the more favorable terms to
substantially all other affiliates.
The Company is regulated under the Communications Act of 1934 (the
"Communications Act"), as it was most recently amended by the Telecommunications
Act of 1996. The Telecommunications Act of 1996 (the "1996 Act" or sometimes
the "Act") is responsible for the most significant changes in communications law
and regulation since enactment of the Communications Act. Almost every segment
of the communications industry is affected, and there are sweeping changes in
the way in which broadcasters, cable operators, video programmers, equipment
manufacturers, and electronic publishers are to be regulated. The 1996 Act
substantially amends the provisions of the Communications Act concerning cable
television systems and other multichannel video programming services. For
example, the Act benefits cable operators by significantly changing the current
regime of rate regulation. More specifically, rate regulation for cable
programming service ("CPS") or "expanded basic" tiers will end immediately for
many small cable operators, and will end for all cable systems in 1999. Rate
regulation will also end for particular cable operators if a local exchange
carrier offers video programming in such cable operators' franchise areas by any
means other than direct broadcast satellite ("DBS"). The 1996 Act also contains
various provisions to stimulate the development of new video programming
services or other services offered over multichannel video programming systems,
such as interactive services. These changes in federal regulation should have a
beneficial impact, to some degree, on the future growth of BET and BET on Jazz,
although the extent of such impact cannot yet be determined.
Pay-Per-View Subscriber Revenue
- -------------------------------
Pay-per-view revenue increased 4%, to $8.8 million, and 22%, to $8.5 million,
during fiscal years 1996 and 1995, respectively, as compared to prior year
comparable periods. Action's subscriber base increased 12% to 8.2 million at
July 31, 1996 and increased 1% to 7.3 million at July 31, 1995 as compared to
July 31, 1995 and July 31, 1994, respectively. Annual pay-per-view subscriber
revenues resulted from average monthly buy-rates of 5.2%, 5.1% and 5.1% during
fiscal years 1996, 1995 and 1994, respectively.
Other Revenue
- -------------
Substantially all "other" cable television programming operating revenues were
related to product sales earned by ancillary businesses, including Color Code
(C) product sales, rental of the Company's production studios and, prior to the
launch of BET on Jazz, the sublease of a satellite transponder.
OPERATING EXPENSES
Components of Entertainment Group operating expenses during the last three
fiscal years were as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- ---------------------------------------------------------------------
Year ended July 31, 1996 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Production and programming $39,496 $32,627 $30,686
Marketing 20,090 16,791 16,061
General and administrative 14,580 12,848 10,773
Depreciation and amortization of
intangibles 7,704 6,372 4,262
- ---------------------------------------------------------------------
Total $81,870 $68,638 $61,782
- ---------------------------------------------------------------------
</TABLE>
Total Entertainment Group operating expenses increased significantly during
fiscal year 1996, partially due to the launch of BET on Jazz and BET Direct's
retail launch of the Color Code (C) skin care line.
Production and Programming
- --------------------------
Production and programming expenses increased 21% and 6% during fiscal years
1996 and 1995, respectively, as compared to prior year comparable periods.
Increased fiscal year 1996 costs included $2 million of incremental production
and programming costs related to BET on Jazz and ancillary businesses. In
addition to costs incurred by BET on Jazz and ancillary businesses, increased
fiscal year 1996 costs primarily resulted from special event programming costs
incurred by BET related to a variety of special event programming, including
news and public affairs, sporting and musical events. Acquired programming
costs also increased significantly during fiscal year 1996 as compared to fiscal
year 1995. Fiscal year 1995 cost increases resulted from increased costs
incurred in connection with original programming produced by BET, including Jazz
Central, and increased variable pay-per-view programming costs. These cost
increases were partially offset by reduced transponder rental costs. In
September 1994, Action terminated its operating transponder lease and entered
into a capitalized transponder lease, which resulted in a $1 million reduction
in production and programming costs but increased depreciation and interest
costs of approximately $2 million.
Marketing
- ---------
Marketing expenses increased 20% and 4% during fiscal years 1996 and 1995,
respectively, as compared to the prior year comparable periods. Increased
fiscal year 1996 costs primarily resulted from marketing and promotional costs
related to the launch of BET on Jazz and the launch of the Color Code (C) skin
care line and variable incentive compensation costs related to increased BET
advertising and subscriber revenue.
<PAGE>
Increased fiscal year 1995 costs resulted from increased incentive compensation
and other personnel costs offset by reduced BET consumer marketing and
advertising related costs.
General and Administrative
- --------------------------
General and administrative expenses increased 13% and 19% during fiscal years
1996 and 1995, respectively, as compared to prior year comparable periods. Cost
increases during both years were primarily attributable to business development,
facilities and personnel costs.
Depreciation and Amortization of Intangibles
- --------------------------------------------
Depreciation and amortization of intangibles increased 21% and 49% during fiscal
years 1996 and 1995 as compared to prior year comparable periods. Increased
fiscal year 1996 depreciation costs related to increased facilities and
equipment costs, including equipment acquired to support BET on Jazz, were
partially mitigated by a significant cost basis reduction related to the buy-out
of a satellite transponder leased under a capitalized lease agreement.
Increased fiscal year 1995 depreciation costs primarily resulted from the
acquisition of two satellite transponders under capitalized lease agreements.
Also contributing to this increase was depreciation related to the Company's
corporate headquarters and production facilities, which were placed in service
during the third and fourth quarters of fiscal year 1995, respectively.
PUBLISHING GROUP
Results of Publishing Group operations during the last three fiscal years were
as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- ----------------------------------------------------------
YEAR ENDED JULY 31, 1996 1995 1994
==========================================================
<S> <C> <C> <C>
Operating Revenues $5,851 $5,344 $5,261
Operating Expenses 9,057 9,067 9,318
- ----------------------------------------------------------
Loss From Operations ($3,206) ($3,723) ($4,057)
==========================================================
</TABLE>
On September 30, 1996, the Company announced that it would discontinue
publishing YSB magazine, which incurred a $1.9 million operating loss during the
fiscal year 1996. Costs incurred to operate and discontinue YSB during fiscal
year 1997 are expected to be substantially less than YSB's fiscal year 1996
operating loss.
OPERATING REVENUES
Components of Publishing Group operating revenues during the last three fiscal
years were as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- -------------------------------------------------------
Year ended July 31, 1996 1995 1994
=======================================================
<S> <C> <C> <C>
Advertising $3,351 $3,152 $3,006
Subscriber 2,409 2,116 2,241
Other 91 76 14
- -------------------------------------------------------
Total $5,851 $5,344 $5,261
=======================================================
</TABLE>
Operating revenues increased slightly during fiscal year 1996 as compared to
fiscal year 1995 due to increases in the number of advertising pages sold by
Emerge, increased circulation for YSB and increased newsstand sales for Emerge.
Operating revenues increased slightly during fiscal year 1995 as compared to
fiscal year 1994, reflecting increases in advertising and circulation for YSB
and decreased advertising and circulation for Emerge. Fiscal year 1995 revenues
for Emerge were adversely affected by the Company's fiscal year 1994 plan to
dispose of its interest in Emerge, which was subsequently reversed.
OPERATING EXPENSES
Components of Publishing Group operating expenses during the last three fiscal
years were as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- ----------------------------------------------------------------------
Year ended July 31, 1996 1995 1994
======================================================================
<S> <C> <C> <C>
Production $5,220 $4,543 $4,704
Marketing 2,402 2,658 2,689
General and administrative 1,037 1,492 1,575
Depreciation and amortization of
intangibles 398 374 350
- ----------------------------------------------------------------------
Total $9,057 $9,067 $9,318
======================================================================
</TABLE>
Operating expenses remained flat during fiscal year 1996 as compared to fiscal
year 1995. Increased production costs, which primarily resulted from increased
circulation and increased magazine size, were partially offset by reduced
promotional and administrative costs. Operating expenses decreased 3% during
fiscal year 1995 as compared to fiscal year 1994, primarily due to reduced
production costs. The reduction in production costs primarily resulted from
certain operating efficiencies related to the consolidation of the Company's
magazine publishing operations.
<PAGE>
NONOPERATING EXPENSES AND INCOME TAXES
Interest expense increased 87% during fiscal year 1996 as compared to fiscal
year 1995 due to interest related to a $75 million revolving senior credit
facility the Company obtained in December 1995 in connection with the share
repurchase described in the following discussion of Liquidity and Capital
Resources. Also contributing to increased interest expense was a decrease in
the amount of interest capitalized due to the cessation of interest
capitalization related to the Company's headquarters and film production
facilities, which were placed into service during the later part of fiscal year
1995. Interest expense increased significantly in fiscal year 1995 due to
imputed interest related to two satellite transponders acquired under capital
lease agreements during the first quarter of fiscal year 1995.
Other nonoperating expenses increased in fiscal years 1996 and 1995 as compared
to fiscal years 1995 and 1994, respectively, primarily due to increased equity
in losses of unconsolidated affiliates, including BET Film Productions and BET
Pictures.
The Company's effective income tax rate was 41%, 43.3% and 44.4% during fiscal
years 1996, 1995 and 1994, respectively. The decreased effective income tax
rates were primarily due to the Company's fiscal year 1995 increased interest in
Emerge Communications, Inc. (ECI), the publisher of Emerge, which resulted in
the Company being able to deduct operating losses incurred by ECI for income tax
reporting purposes.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of working capital is internally generated cash
flow from operations. As reported in its consolidated statements of cash flows,
the Company generated net cash from operations of $33.2 million, $29.1 million
and $25.3 million during fiscal years 1996, 1995 and 1994, respectively. At
July 31, 1996, the Company's cash and marketable securities aggregated $4.2
million, and the Company had an excess of current assets over current
liabilities of $24.4 million. The Company expects that cash flow from
operations, as supplemented by credit facilities, if necessary, will be
sufficient to fund its operations, debt service and capital expenditures for the
foreseeable future.
As part of its ongoing strategic plan, the Company has invested, and plans to
continue to invest, significant amounts of capital in compatible media and other
businesses reaching the Black consumer marketplace. The Company recently
launched BET on Jazz, which will require significant operational funding. Since
it is anticipated that BET on Jazz affiliates will receive free carriage for two
years, management estimates that operational funding of BET on Jazz, inclusive
of the present cost of European and African distribution, will approximate $2
million per quarter during fiscal year 1997. The Company is also committed to
funding a prototype themed restaurant and is considering pursuing other
investment opportunities which may require significant funding, including a new
cable delivered pay television channel featuring programming with African-
American themes and/or talent and wireless communications companies.
Management estimates that capital expenditures for fiscal year 1997 will
approximate $15 million, a portion of which will be related to development of
the prototype themed restaurant. During fiscal years 1996 and 1995, the
Company's capital expenditures were $13.5 million and $17.2 million,
respectively, a significant portion of which was incurred in connection with the
launch of BET on Jazz in fiscal year 1996 and the construction and furnishing of
the corporate office and film production facilities in fiscal year 1995.
CAPITAL STOCK
During December 1995, the Company entered into a noncompetition agreement and
repurchased 1,518,300 shares of its outstanding Class A common stock and
1,518,300 shares of its outstanding Class B common stock beneficially owned by
Time Warner, Inc. for $58.9 million. The Company's noncompetition agreement
with Time Warner, Inc. restricts for three years Time Warner, Inc.'s ability to
initiate or acquire a basic cable network targeted to African-American viewers.
These transactions were financed from a combination of existing cash reserves
and borrowings under a five-year $75 million unsecured senior revolving credit
facility obtained concurrent with these transactions.
The Company's board of directors has authorized the repurchase of an unlimited
number of shares of outstanding Class A common stock. In addition to the shares
repurchased from Time Warner, Inc., during fiscal years 1995 and 1994, the
Company repurchased 301,800 and 757,900 shares of outstanding Class A common
stock, respectively, at an aggregate cost of $4.6 million and $11.8 million,
respectively.
EFFECTS OF INFLATION AND CHANGING PRICES
Management believes that the effect of inflation has not been material to the
Company during fiscal years 1996, 1995 and 1994. However, inflation in
personnel, programming and certain other costs could significantly affect the
Company's future operations.
<PAGE>
BET HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
In thousands of dollars
- -----------------------------------------------------------------------
ASSETS July 31, 1996 July 31, 1995
- -----------------------------------------------------------------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 4,147 $ 13,984
Marketable securities 100 14,648
Accounts receivable, less allowance for
doubtful accounts of $1,543 and
$1,363 at July 31, 1996 and 1995,
respectively 27,635 21,789
Inventories 3,060 141
Prepaid expenses and other assets 6,363 7,553
Current portion of programming rights, net 2,972 1,156
Deferred income tax benefit 1,775 1,443
- -----------------------------------------------------------------------
TOTAL CURRENT ASSETS 46,052 60,714
- -----------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Land 1,884 649
Buildings and leasehold improvements 32,386 32,432
Broadcasting and other equipment 27,844 21,964
Satellite transponders 32,782 37,993
Construction in progress 5,032 303
- -----------------------------------------------------------------------
Total 99,928 93,341
- -----------------------------------------------------------------------
Less: accumulated depreciation (23,146) (16,669)
- -----------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 76,782 76,672
- -----------------------------------------------------------------------
Notes receivable 7,235 2,072
Investments in and advances to 3,147 2,870
unconsolidated affiliates
Programming rights, less current portion 1,077 253
Goodwill and other intangibles, net 13,669 14,627
Other assets 2,769 602
- -----------------------------------------------------------------------
TOTAL ASSETS $ 150,731 $ 157,810
- -----------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BET HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
In thousands of dollars
- -----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY July 31, 1996 July 31, 1995
- -----------------------------------------------------------------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable and accrued expenses $ 6,857 $ 7,446
Current portion of programming rights
payable 4,155 2,836
Deferred revenue 3,231 4,171
Accrued compensation 5,318 4,026
Current maturities of long-term debt 2,067 1,888
- -----------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 21,628 20,367
- -----------------------------------------------------------------------
Long-term debt, less current maturities 58,493 33,987
Programming rights payable, less
current portion 308 -
Deferred income taxes 2,504 5,819
Other liabilities 1,049 953
- -----------------------------------------------------------------------
TOTAL LIABILITIES 83,982 61,126
- -----------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
SHAREHOLDERS' EQUITY
Preferred stock; $.01 par value,
15,000,000 shares authorized, no
shares issued or outstanding - -
Common stock; $.02 par value:
Class A; 50,000,000 shares authorized,
12,805,605 and 12,718,705 shares
issued, 10,115,805 and 11,547,405
shares outstanding at
July 31, 1996 and 1995, respectively 257 255
Class B; 15,000,000 shares authorized,
3,349,900 shares issued, 1,831,600 and
3,349,000 shares outstanding at July
31, 1996 and 1995, respectively 67 67
Class C; 15,000,000 shares authorized,
4,820,000 shares issued and outstanding 96 96
Additional paid-in capital 45,156 38,217
Retained earnings 98,207 76,144
Cost of 2,689,800 Class A and
1,518,300 Class B common shares held
in treasury at July 31, 1996 and
1,171,300 Class A common shares held (77,034) (18,095)
in treasury at July 31, 1995.
- -----------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 66,749 96,684
- -----------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 150,731 $ 157,810
- -----------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BET HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
In thousand of dollars, except per share amounts
- -----------------------------------------------------------------------------
Year ended July 31, 1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Advertising $ 67,562 $ 56,017 $ 48,616
Subscriber 61,797 56,045 47,509
Other 3,380 3,160 1,385
- -----------------------------------------------------------------------------
TOTAL OPERATING REVENUES 132,739 115,222 97,510
- -----------------------------------------------------------------------------
OPERATING EXPENSES
Production and programming 44,716 37,170 35,390
Marketing 22,492 19,449 18,750
General and administrative 15,617 14,340 12,348
Depreciation and amortization of
intangibles 8,102 6,746 4,612
- -----------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 90,927 77,705 71,100
- -----------------------------------------------------------------------------
INCOME FROM OPERATIONS 41,812 37,517 26,410
- -----------------------------------------------------------------------------
NONOPERATING INCOME (EXPENSE)
Interest income 1,504 1,325 1,279
Interest expense (4,162) (2,227) (596)
Other, net (1,784) (1,477) (522)
- -----------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 37,370 35,138 26,571
- -----------------------------------------------------------------------------
Provision for income taxes (15,307) (15,226) (11,795)
- -----------------------------------------------------------------------------
NET INCOME $ 22,063 $ 19,912 $ 14,776
- -----------------------------------------------------------------------------
NET INCOME PER COMMON SHARE $ 1.20 $ 1.00 $ .72
- -----------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 18,454 19,867 20,490
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BET HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
In thousands of dollars
==============================================================================================================
Year ended July 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $22,063 $19,912 $14,776
Adjustments to reconcile net income to net cash
provided by operating activities, net of effect of
business combinations:
Depreciation and amortization of intangibles 8,102 6,746 4,612
Amortization of programming rights 3,549 2,481 3,222
Equity in losses of unconsolidated affiliates 1,725 1,203 764
Loss on disposition of property and equipment 69 163 -
Deferred income taxes 1,428 1,249 817
Income tax benefit from exercise of common stock
options 312 - 79
Increase in accounts receivable (5,829) (2,454) (4,149)
Increase in inventory (2,232) (49) (92)
Decrease (increase) in prepaid expenses and other
assets 2,505 (3,677) (329)
(Decrease) increase in deferred revenue (940) 2,120 364
Increase in other liabilities 2,452 1,373 5,193
- --------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 33,204 29,067 25,257
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Business combinations, net of cash acquired (512) (902) (2,630)
Redemption (purchase) of marketable securities 14,548 3,955 (8,731)
Capital expenditures (13,514) (17,241) (11,284)
Acquisition of programming rights (6,189) (2,079) (4,347)
Additions to notes receivable (5,163) - -
Investment in and advances to unconsolidated affiliates (2,073) (923) (3,855)
(Increase) decrease in other assets (2,444) 437 (47)
- --------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (15,347) (16,753) (30,894)
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings 56,000 - -
Principal payments of long-term debt (26,104) (728) (815)
Proceeds from issuance of common stock 1,349 - 513
Repurchase of common stock (58,939) (4,606) (11,781)
- --------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (27,694) (5,334) (12,083)
- --------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (9,837) 6,980 (17,720)
Cash and cash equivalents, beginning of year 13,984 7,004 24,724
- --------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $4,147 $13,984 $7,004
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BET HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
In thousands of dollars, except share information
=========================================================================================================================
Common Stock Additional Cost of
------------ Paid-In Retained Treasury
Years ended July 31, 1996, 1995 and 1994 Class A Class B Class C Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT JULY 31, 1993 $ 254 $ 67 $ 96 $ 37,626 $ 41,456 $ (1,708) $ 77,791
- -------------------------------------------------------------------------------------------------------------------------
Purchase of 757,900 Class A common
shares held in treasury - - - - - (11,781) (11,781)
Exercise of 36,305 Class A common stock
options 1 - - 512 - - 513
Income tax benefit from exercise of
common stock options - - - 79 - -
Net income for the year - - - - 14,776 - 14,776
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT JULY 31, 1994 255 67 96 38,217 56,232 (13,489) 81,378
- -------------------------------------------------------------------------------------------------------------------------
Purchase of 301,800 Class A common
shares held in treasury - - - - - (4,606) (4,606)
Net income for the year - - - - 19,912 - 19,912
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT JULY 31, 1995 255 67 96 38,217 76,144 (18,095) 96,684
- -------------------------------------------------------------------------------------------------------------------------
Purchase of 1,518,500 Class A common
shares and 1,518,300 Class B common
shares held in treasury - - - 5,280 - (58,939) (53,659)
Exercise of 86,900 Class A common stock
options 2 - - 1,347 - - 1,349
Income tax benefit from exercise of
common stock options - - - 312 - 312
Net income for the year - - - - 22,063 - 22,063
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT JULY 31, 1996 $ 257 $ 67 $ 96 $ 45,156 $ 98,207 $(77,034) $ 66,749
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BET HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BET Holdings, Inc. (the Company) is an entertainment and media company
operating in two business segments: cable television programming and magazine
publishing. Cable television programming operations are conducted through the
Company's Entertainment Group, which includes Black Entertainment Television
(BET), BET on Jazz: The Cable Jazz Channel (BET on Jazz) and Action Pay-Per-
View (Action). Ancillary Entertainment Group businesses established to leverage
and expand the BET brand name include BET Direct, which sells the Color Code (C)
line of skin care products and musical recordings on compact discs and
cassettes. Magazine publishing operations involve the publication of Emerge and
Young Sisters and Brothers (YSB) magazines. The Company has equity ownership
interests in certain affiliated companies which are accounted for under the
equity method, including BET Film Productions and BET Pictures, which produce
low-budget feature length motion pictures and a joint venture with the New York
Daily News which publishes BET Weekend, a Sunday newspaper supplement.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated in consolidation.
CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with original
maturities of 90 days or less.
MARKETABLE SECURITIES
At July 31, 1996 and 1995 all marketable securities were classified as
available for sale and the estimated fair value of each marketable security
approximated its amortized cost. No unrealized holding gains or losses were
recognized during the years ended July 31, 1996 and 1995.
INVENTORY
Inventories are stated at cost, which does not exceed market. Inventory
costs are determined on the first-in, first-out method. Substantially all
inventories at July 31, 1996 were finished goods, substantially all of which
were Color Code (C) products.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and equipment under capital
leases is recorded at the present value of future minimum lease payments at the
inception of the lease. Maintenance and repair expenditures are charged to
expense as incurred and expenditures for modifications and improvements which
increase the expected useful lives of assets are capitalized. Depreciation is
provided using the straight-line method over the estimated useful lives of the
assets. The principal useful lives are: buildings and improvements, 40 years;
broadcasting and other equipment, three to 15 years; and satellite transponders,
12 years. Amortization of leasehold improvements is provided using the
straight-line method over the lesser of the useful life of the improvements or
the lease term.
PROGRAMMING RIGHTS
Programming rights acquired under license agreements are recorded at cost
and are amortized using the straight-line method over the period during which
the programming is broadcast, which generally ranges from one to two years and
approximates amortization that would be provided on a program-by-program basis.
Unamortized programming rights expected to be amortized within one year and
programming rights license fees payable within one year are classified as
current assets and current liabilities, respectively. Accumulated amortization
of programming rights was $3.2 million and $4.4 million at July 31, 1996 and
1995, respectively.
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates are recorded at
cost and adjusted for the Company's equity in earnings and losses in accordance
with the equity method of accounting.
GOODWILL AND OTHER INTANGIBLES
Goodwill is amortized using the straight-line method over 15 years. The
Company assesses the recoverability of goodwill on an ongoing basis by
evaluating whether goodwill can be recovered through undiscounted cash flows
over the remaining amortization period. Accumulated amortization of goodwill
and other intangibles was $4.3 million and $3 million at July 31, 1996 and 1995,
respectively.
REVENUE RECOGNITION
Advertising revenues, net of agency commissions, are recognized in the
period during which underlying advertisements are broadcast or published.
<PAGE>
Broadcast subscriber revenues are recognized in the period during which
programming is provided, pursuant to affiliation agreements. Magazine
subscription revenues are recognized ratably over the annual subscription term
in which the magazine is published.
In addition to revenues earned from related parties (Note 9), during fiscal
years 1996, 1995 and 1994, the Company earned advertising revenues aggregating
$15.3 million, $12 million, and $11.1 million, respectively, from a single cable
infomercial advertiser representing 12%, 10% and 11% of operating revenues,
respectively.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic
value based method prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees". Subsequent to the year ending July 31, 1996, the Company
will provide pro-forma disclosure of the effects of applying the fair value
based method of accounting for stock-based compensation prescribed under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation", to all applicable stock options granted.
INCOME TAXES
Income taxes are determined based on income before taxes with deferred tax
provisions for the effect of temporary differences in the recognition of
revenues and expenses for income tax and financial reporting purposes provided
for under the liability method.
EARNINGS PER COMMON SHARE
The computation of earnings per common share for the year ended July 31,
1996 is based upon the weighted average number of outstanding common shares
during the year plus common stock equivalents, consisting of common shares
subject to stock options. Prior to the year ended July 31, 1996, common stock
equivalents were not included in the computation of earnings per common share
since their inclusion was deemed to be immaterial in accordance with APB Opinion
No. 15, "Earnings per Share." The number of shares used in computing earnings
per common share was as follows:
<TABLE>
<CAPTION>
In thousands
- ---------------------------------------------------------------
Year ended July 31, 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Weighted average common
shares outstanding 17,834 19,867 20,490
Common stock equivalents 620 - -
- ---------------------------------------------------------------
Weighted average common and common
equivalent shares outstanding 18,454 19,867 20,490
- ---------------------------------------------------------------
</TABLE>
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from management's estimates and
assumptions.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses, and programming rights
payable approximate fair value because of the short-term maturity of such
financial instruments. The fair value of outstanding borrowings is estimated by
discounting future cash flows under such borrowings using borrowing rates
currently available to the Company.
NOTE 2: MARKETABLE SECURITIES
The amortized cost of marketable securities, which approximated their fair
value, was as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- ------------------------------------------------------------
July 31, 1996 1995
- ------------------------------------------------------------
<S> <C> <C>
Marketable equity securities $ - $ 7,750
Tax exempt municipal bonds:
Due within one year - 1,150
Due after one year through five years - 5,648
Due after five years through ten years 100 100
- ------------------------------------------------------------
Total $ 100 $ 14,648
- ------------------------------------------------------------
<CAPTION>
NOTE 3: PROPERTY AND EQUIPMENT
Assets recorded under capital leases included in property and equipment
consisted of:
In thousands of dollars
- ------------------------------------------------------------
July 31, 1996 1995
- ------------------------------------------------------------
<S> <C> <C>
Satellite transponders $10,001 $ 24,211
Less: accumulated depreciation (1,748) (1,800)
- ------------------------------------------------------------
Net $ 8,253 $ 22,411
- ------------------------------------------------------------
</TABLE>
During December 1995, the Company purchased a satellite transponder it
previously leased under a capital lease agreement. The difference between the
purchase price of the satellite transponder and the outstanding capitalized
lease obligation at the date of purchase was accounted for as a reduction to the
cost of the satellite transponder.
<PAGE>
Amortization of assets under capital leases charged to expense during the years
ended July 31, 1996 and 1995 was $1.2 million and $1.8 million, respectively.
Interest capitalized in connection with qualifying construction projects
aggregated $ .4 million, $1.1 million and $.8 million during the years ended
July 31, 1996, 1995 and 1994, respectively.
NOTE 4: INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
The Company has equity ownership interests ranging from 33% to 55% in
several entities, the more significant of which are BET Film Productions and BET
Pictures, which produce low-budget motion pictures, and United Image
Entertainment, a film production company. The Company's interest in equity
investees was not material to its financial position as of July 31, 1996 and
1995 or its results of operations for each of the three years in the period
ended July 31, 1996.
NOTE 5: LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
In thousand of dollars
- ---------------------------------------------------------------
July 31, 1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
Revolving senior credit facility $ 40,000 $ -
10.55% senior secured notes due January
15, 2001, interest payable
semi-annually 11,000 12,000
Capital lease obligations 9,358 23,576
Other 202 299
- ---------------------------------------------------------------
Total 60,560 35,875
Less: current portion (2,067) (1,888)
- ---------------------------------------------------------------
Non-current portion $ 58,493 $ 33,987
- ---------------------------------------------------------------
</TABLE>
During December 1995, the Company obtained a five-year $75 million
unsecured revolving senior credit facility which expires December 31, 2000.
Advances under the facility bear interest at either the London Interbank Offered
rate plus a margin ranging from .375% to .75%, depending upon certain financial
ratios, or the prime lending rate, at the Company's option. At July 31, 1996,
interest rates for outstanding advances ranged from 5.9375% to 6.3125%. A
commitment fee based on the amount of the unused facility is payable quarterly
at rates ranging from .1875% to .3% per annum, based upon certain financial
ratios.
The senior secured notes are secured by one of the Company's satellite
transponders. The loan agreements underlying the revolving senior credit
facility and the senior secured notes include several restrictive financial
covenants, one of which limits the amount of cash available for dividend
distributions. At July 31, 1996, $95.3 million was available for dividend
distribution.
Capital lease obligations are stated at the present value of future minimum
lease payments (Note 10) based on the Company's incremental borrowing rate at
the inception of each lease.
Long-term debt at July 31, 1996 matures $2.1 million in fiscal year 1997,
$2.6 million in fiscal year 1998, $3.1 million in fiscal year 1999, $3.3 million
in fiscal year 2000, $43.3 million in fiscal year 2001, and $6.2 million
thereafter.
The carrying amount of advances under the revolving senior credit facility
approximate fair value at July 31, 1996 because interest rates are periodically
reset. The Company estimates the fair value of its senior secured notes to be
$12.1 million at July 31, 1996.
Cash paid for interest, including interest capitalized, totaled $4.2
million, $3.8 million and $1.3 million during fiscal years 1996, 1995 and 1994
respectively.
NOTE 6: CAPITAL STOCK
The characteristics of the Company's Class A, Class B, and Class C common
stock are substantially identical except for voting and conversion rights.
Class A shareholders are entitled to one vote per share, while Class B and Class
C shareholders are entitled to ten votes per share. All classes vote together
as a single class except in the election of directors and as otherwise required
by law. Class A shareholders are entitled to elect 25% of the directors, and
Class B and Class C shareholders, voting together as a class, are entitled to
elect 75% of the directors. Each share of Class B common stock is convertible
at any time and from time to time into one share of Class A common stock, and
each share of Class C common stock similarly is convertible into one share of
Class B common stock or Class A common stock.
During December 1995, the Company repurchased 1,518,300 shares of its
outstanding Class A common stock and 1,518,300 shares of its outstanding Class B
common stock beneficially owned by Time Warner, Inc. for $58.9 million. In
connection with this transaction, the Company and Time Warner, Inc. entered into
an agreement restricting for three years Time Warner, Inc.'s ability to initiate
or acquire a basic cable television network targeted at African-American viewers
resulting in a $5.3 million benefit for income tax reporting purposes, which has
been credited to additional paid-in capital for financial reporting purposes.
In addition to the shares repurchased from Time Warner, Inc., the Company
repurchased 301,800 and 757,900 shares of its Class A common stock at an
aggregate cost of $4.6 million and $11.8 million during the years ended July 31,
1995 and 1994, respectively.
<PAGE>
Under the 1991 Executive Stock Option Plan (the Option Plan), three million
shares of the Company's Class A common stock are reserved for grant to key
employees as options to purchase shares of Class A common stock (Options) or
stock appreciation rights (SARs). SARs permit optionees to surrender
exercisable Options for an amount equal to the excess of the fair value of the
Company's common stock over the Option exercise price when the right is
exercised. Options granted may be either incentive stock options, as defined by
the Internal Revenue Code, or non-qualified stock options. Options and SARs may
vest and become exercisable over varying periods, which generally range from
immediately upon grant to five years. Outstanding Options and SARs remain
exercisable no longer than ten years subsequent to the grant date.
No SARs were issued or outstanding during fiscal years 1996, 1995 or 1994.
A summary of Option activity during fiscal years 1996, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Shares Per Share Option Price Aggregate
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at July 31, 1993 722,500 $13.125 to $17.000 $10,044,375
Exercised (36,305) $13.125 to $16.125 (512,503)
Granted 245,000 $12.800 3,136,000
- -------------------------------------------------------------------------------
Outstanding at July 31, 1994 931,195 $12.800 to $17.000 12,667,872
Granted 1,032,500 $ 17.75 18,326,875
- -------------------------------------------------------------------------------
Outstanding at July 31, 1995 1,963,695 $12.800 to $ 17.75 30,994,747
Exercised (86,900) $12.800 to $ 17.75 (1,347,404)
Canceled (21,700) $ 17.75 (385,175)
- -------------------------------------------------------------------------------
Outstanding at July 31, 1996 1,855,095 $12.800 to $17.750 $29,262,168
- -------------------------------------------------------------------------------
</TABLE>
Outstanding options totaling 1,007,995 and 864,000 were exercisable at July
31, 1996 and 1995, respectively. Class A common shares reserved for future grant
totaled 1,021,700 and 1,032,500 at July 31, 1996 and 1994, respectively. No
shares were reserved for future grant at July 31, 1995.
NOTE 7: INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
In thousands of dollars
- -----------------------------------------------------------------------
Year ended July 31, 1996 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT PROVISION
Federal $ 11,339 $ 11,273 $ 8,917
State 2,540 2,704 2,061
- -----------------------------------------------------------------------
Total current provision 13,879 13,977 10,978
- -----------------------------------------------------------------------
DEFERRED PROVISION
Federal 1,258 1,038 778
State 170 211 39
- -----------------------------------------------------------------------
Total deferred provision 1,428 1,249 817
- -----------------------------------------------------------------------
Total provision $ 15,307 $ 15,226 $11,795
- -----------------------------------------------------------------------
</TABLE>
The consolidated effective income tax rates differed from the Federal
statutory income tax rate as a result of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Year ended July 31, 1996 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
State income taxes net of federal tax 4.7 5.4 5.1
benefit
Operating loss of Emerge not includible
for income tax purposes - .5 2.4
Amortization of goodwill not deductible
for income tax purposes 1.1 1.1 1.3
Other, net .2 1.3 .6
- -----------------------------------------------------------------------
Effective income tax rate 41.0% 43.3% 44.4%
- -----------------------------------------------------------------------
</TABLE>
<PAGE>
Deferred income tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- --------------------------------------------------------------------------
July 31, 1996 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation and amortization $ (2,372) $ (5,949) $ (3,831)
Other (578) (330) (581)
- --------------------------------------------------------------------------
Gross deferred tax liabilities (2,950) (6,279) (4,412)
- --------------------------------------------------------------------------
Deferred tax assets:
Accrued compensation 212 600 445
Sales allowances 613 536 331
Accrued liabilities 276 276 -
Net operating loss carryforwards 3,893 3,893 -
Other 1,120 491 509
- --------------------------------------------------------------------------
Gross deferred tax assets 6,114 5,796 1,285
- --------------------------------------------------------------------------
Deferred tax assets valuation allowance (3,893) (3,893) -
- --------------------------------------------------------------------------
Net deferred tax liabilities $ (729) $ (4,376) $ (3,127)
- --------------------------------------------------------------------------
</TABLE>
The deferred tax assets valuation allowance at July 31, 1996 and 1995
relates to the uncertainty of realizing $9.9 million of net operating loss
carryforwards for income tax reporting purposes acquired by the Company in
connection with business combinations, which expire at various dates through
2009.
Cash paid for income taxes totaled $12.8 million, $16.8 million and $8.6
million during fiscal years 1996, 1995 and 1994, respectively.
NOTE 8: EMPLOYEE BENEFITS
The Company sponsors a defined contribution employee savings plan under
which substantially all employees with at least six months of service are
eligible to participate. The Company matches one-half of voluntary participant
contributions to the savings plan, which range from 2% to 10% of eligible
participants' annual compensation. The Company also sponsors a discretionary
profit sharing bonus plan under which substantially all employees are eligible
to participate. Participants in the bonus plan are awarded annual bonuses, at
the discretion of the Company's management. Aggregate accrued contributions to
the savings and bonus plans totaled $1.4 million, $1.6 million and $.7 million
during fiscal years 1996, 1995 and 1994, respectively.
Under the Company's executive incentive plan, its executive officers are
eligible to be awarded annual bonuses of up to 60% of their base salary upon the
achievement of certain individual and corporate performance goals. The Company
accrued $1.3 million, $.7 million and $.5 million related to the award of the
bonuses during fiscal years 1996, 1995 and 1994.
NOTE 9: RELATED PARTY TRANSACTIONS
A stockholder and a former stockholder, including their subsidiaries and
affiliates, subscribe to BET Cable Network. Additionally, said former
stockholder and its subsidiaries and affiliates purchase advertising time from
the Company. Subscriber and advertising fees charged by the Company to
stockholders and their affiliates are substantially equivalent to fees charged
to unrelated parties. A summary of related party transactions follows:
<TABLE>
<CAPTION>
In thousands of dollars
- -------------------------------------------------------------------
Year ended July 31, 1996 1995 1994
- -------------------------------------------------------------------
<S> <C> <C> <C>
Subscriber and advertising revenues
earned from stockholders and
their affiliates $17,077 $21,042 $16,530
Accounts receivable from stockholders
and their affiliates $ 2,094 $ 4,965 $ 3,290
- --------------------------------------------------------------------
</TABLE>
During December 1995, the Company entered into a loan agreement with R&S
PCS, Inc., an entity wholly owned by the Company's Chairman and Chief Executive
Officer, Robert L. Johnson, whereby the Company agreed to loan R&S PCS, Inc. up
to $10 million on a revolving basis. Loan advances bear interest at the prime
lending rate plus 2% and are secured by 40,000 shares of the Company's common
stock owned by Mr. Johnson. At July 31, 1996, advances aggregating $3.3 million
were outstanding. Substantially all loan advances were used by R&S, PCS, Inc. to
establish eligibility to participate in the Broadband PCS C Block Auction, in
which R&S PCS, Inc. was a successful bidder. The Company is currently engaged in
negotiations to acquire an equity interest in R&S PCS, Inc.
During May 1996, the Company purchased certain promissory notes in the
aggregate principal amount of $2.2 million from Mr. Johnson. The notes bear
interest at the prime lending rate plus 2% and mature at varying dates through
October 31, 2001. Repayment of the notes has been guaranteed by Mr. Johnson.
NOTE 10: COMMITMENTS AND CONTINGENCIES
The Company is a lessee under noncancelable operating leases for office
space, land and a satellite transponder which expire at various dates through
the year 2013. Total rent expense for fiscal years 1996, 1995 and 1994 was $2.1
million, $1.8 million and $4.1 million, respectively.
Minimum future lease payments under operating leases at July 31, 1996 were
as follows:
<PAGE>
<TABLE>
<CAPTION>
In thousands of dollars
- -------------------------------------------------
Year ending July 31,
- -------------------------------------------------
<S> <C>
1997 $ 1,516
1998 1,349
1999 1,319
2000 1,200
2001 1,061
Thereafter 1,459
- -------------------------------------------------
Total $ 7,904
- -------------------------------------------------
Minimum future payments under capital leases (Note 5) at July 31, 1996 were
as follows:
<CAPTION>
In thousands of dollars
- -------------------------------------------------
Year ending July 31,
- -------------------------------------------------
<S> <C>
1997 $ 1,293
1998 1,320
1999 1,320
2000 1,422
2001 1,440
Thereafter 7,801
- -------------------------------------------------
Total 14,596
Less: Amount representing interest (5,238)
- -------------------------------------------------
Present value of minimum lease payments $ 9,358
- -------------------------------------------------
</TABLE>
The Company is engaged in various legal proceedings incidental to its
normal business activities. In the opinion of the Company's management, the
outcome of such proceedings will not have a material adverse effect on the
Company's financial position or results of operations.
NOTE 11: SEGMENT INFORMATION
The Company principally operates in two business segments (Note 1).
Financial data for the Company's business segments is as follows:
<TABLE>
<CAPTION>
In thousands of dollars
- -------------------------------------------------------------------------
Year ended July 31, 1996 1995 1994
- -------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C>
Entertainment Group
Advertising $ 64,211 $ 52,865 $ 45,610
Subscriber
Basic Cable 50,613 45,459 38,331
Pay-Per-View 8,775 8,470 6,937
Other 3,289 3,084 1,371
- -------------------------------------------------------------------------
Total Entertainment Group 126,888 109,878 92,249
- -------------------------------------------------------------------------
Publishing Group
Advertising 3,351 3,152 3,006
Subscriber 2,409 2,116 2,241
Other 91 76 14
- ------------------------------------------------------------------------
Total Publishing Group 5,851 5,344 5,261
- -------------------------------------------------------------------------
Total $132,739 $115,222 $ 97,510
- -------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Entertainment Group $ 45,018 $ 41,240 $ 30,467
Publishing Group (3,206) (3,723) (4,057)
- -------------------------------------------------------------------------
Total $ 41,812 $ 37,517 $ 26,410
- -------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Entertainment Group
Amortization of programming rights $ 3,549 $ 2,481 $ 3,222
Depreciation and amortization of
intangibles 7,704 6,372 4,262
Publishing Group
Depreciation and amortization of 398 374 350
intangibles
- -------------------------------------------------------------------------
Total $ 11,651 $ 9,227 $ 7,834
- -------------------------------------------------------------------------
CAPITAL EXPENDITURES
<S> <C> <C> <C>
Entertainment Group $ 13,487 $ 17,150 $ 11,209
Publishing Group 27 91 75
- -------------------------------------------------------------------------
Total $ 13,514 $ 17,241 $ 11,284
- -------------------------------------------------------------------------
IDENTIFIABLE ASSETS
<S> <C> <C> <C>
Entertainment Group $115,162 $122,892 $ 82,377
Publishing Group 3,522 2,481 2,659
Corporate 32,047 32,437 28,832
- -------------------------------------------------------------------------
Total $150,731 $157,810 $113,868
- -------------------------------------------------------------------------
</TABLE>
<PAGE>
BET HOLDINGS, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF BET HOLDINGS, INC.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of changes in shareholders'
equity present fairly, in all material respects, the financial position of BET
Holdings, Inc. and its subsidiaries at July 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended July 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Washington, D.C.
September 20, 1996
<PAGE>
BET HOLDINGS, INC.
UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is a summary of unaudited quarterly results of operations for
the years ended July 31, 1996 and 1995. Net income per common share reported
each quarter is based on the weighted average common and common equivalent
shares outstanding during each quarter. The sum of quarterly net income per
common share may not equal net income per common share reported for each fiscal
year due to change in common and common equivalent shares outstanding.
<TABLE>
<CAPTION>
In thousands of dollars, except per share amounts
- ------------------------------------------------------------------------------------------------------------------
Three Month Periods in Fiscal Year 1996 ended October 31 January 31 April 30 July 31
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues
Advertising $16,668 $16,942 $16,003 $17,949
Subscriber 14,547 15,380 15,752 16,118
Other 1,535 606 527 712
- ------------------------------------------------------------------------------------------------------------------
Total Operating Revenues 32,750 32,928 32,282 34,779
- ------------------------------------------------------------------------------------------------------------------
Operating Expenses
Production and programming 10,248 11,190 11,344 11,934
Marketing 5,216 5,539 5,552 6,185
General and administrative 4,266 3,350 3,805 4,196
Depreciation and amortization of intangibles 1,963 1,833 1,891 2,415
- ------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 21,693 21,912 22,592 24,730
- ------------------------------------------------------------------------------------------------------------------
Income From Operations 11,057 11,016 9,690 10,049
- ------------------------------------------------------------------------------------------------------------------
Net Income $ 5,750 $ 5,779 $ 5,234 $ 5,300
- ------------------------------------------------------------------------------------------------------------------
Net Income Per Common Share $ .29 $ .32 $ .30 $ .30
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
In thousands of dollars, except per share amounts
- ------------------------------------------------------------------------------------------------------------------
Three Month Periods in Fiscal Year 1995 ended October 31 January 31 April 30 July 31
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues
Advertising $14,033 $14,179 $13,282 $14,523
Subscriber 12,932 13,396 14,899 14,818
Other 357 646 1,518 639
- ------------------------------------------------------------------------------------------------------------------
Total Operating Revenues 27,322 28,221 29,699 29,980
- ------------------------------------------------------------------------------------------------------------------
Operating Expenses
Production and programming 8,307 8,818 10,053 9,992
Marketing 4,988 4,502 4,733 5,226
General and administrative 3,773 3,450 3,393 3,724
Depreciation and amortization of intangibles 1,553 1,750 1,996 1,447
- ------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 18,621 18,520 20,175 20,389
- ------------------------------------------------------------------------------------------------------------------
Income From Operations 8,701 9,701 9,524 9,591
- ------------------------------------------------------------------------------------------------------------------
Net Income $ 4,617 $ 5,459 $ 4,932 $ 4,904
- ------------------------------------------------------------------------------------------------------------------
Net Income Per Common Share $ .23 $ .27 $ .25 $ .25
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PRICE RANGE OF COMMON STOCK
BET Holdings, Inc. Class A Common Stock has traded since October 30, 1991 on the
New York Stock Exchange ("NYSE") under the symbol BTV. The approximate number of
holders of record of Class A Common stock as of October 28, 1996 was 614.
The following table sets for the high and low per-share sales price for the past
eight quarters ended July 31, 1996.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Quarter Ended 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
October 31 $22.000-$17.625 $18.000-$15.000
January 31 $25.125-$20.000 $16.250-$18.375
April 30 $32.125-$24.750 $18.000-$14.750
July 31 $30.000-$24.500 $18.875-$16.500
- --------------------------------------------------------------------------------
</TABLE>
To date, the Company has not declared, paid, or anticipated paying any dividends
on its Common Stock
<PAGE>
EXHIBIT 21
LIST OF BET HOLDINGS, INC. SUBSIDIARIES
1. Avalon Pictures, Inc. d\b\a Action Pay-Per-View
2. BET Acquisitions Corp.
3. BET Development Company
4. BET Direct, Inc.
5. BET Films, Inc.
6. BET Innovations Publishing, Inc.
7. BET International, Inc.
8. BET Music Soundz, Inc.
9. BET Pictures, Inc.
10. BET Productions, Inc.
11. BET Radio Network, Inc.
12. BET Satellite Services, Inc.
13. Black Entertainment Television, Inc.
14. BrettCo, Inc.
15. Emerge Communications, Inc.
16. Paige Publications, Inc.
<PAGE>
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-67146) and in the Prospectuses constituting part
of the Registration Statements on Forms S-3 (Nos. 33-80006 and 33-68414) of BET
Holdings, Inc. of our report dated September 20, 1996 appearing on page 41 of
the Annual Report to Shareholders which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report on
the Financial Statement Schedule, which appears on page 20 of this report on
Form 10-K.
PRICE WATERHOUSE LLP
Washington, D.C.
October 29, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUL-31-1996 JUL-31-1995
<PERIOD-START> AUG-01-1995 AUG-01-1994
<PERIOD-END> JUL-31-1996 JUL-31-1995
<CASH> 4,147 13,984
<SECURITIES> 100 14,648
<RECEIVABLES> 29,178 23,152
<ALLOWANCES> 1,543 1,363
<INVENTORY> 3,060 141
<CURRENT-ASSETS> 46,052 60,714
<PP&E> 99,928 93,341
<DEPRECIATION> 23,146 16,669
<TOTAL-ASSETS> 150,731 157,810
<CURRENT-LIABILITIES> 21,628 20,367
<BONDS> 58,493 33,987
0 0
0 0
<COMMON> 420 418
<OTHER-SE> 66,329 96,266
<TOTAL-LIABILITY-AND-EQUITY> 150,731 157,810
<SALES> 132,739 115,222
<TOTAL-REVENUES> 132,739 115,222
<CGS> 44,716 37,170
<TOTAL-COSTS> 90,927 77,705
<OTHER-EXPENSES> 280 152
<LOSS-PROVISION> 599 1,265
<INTEREST-EXPENSE> 4,162 2,227
<INCOME-PRETAX> 37,370 35,138
<INCOME-TAX> 15,307 15,226
<INCOME-CONTINUING> 22,063 19,912
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,063 19,912
<EPS-PRIMARY> 1.20 1.00
<EPS-DILUTED> 1.20 1.00
</TABLE>
