<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 8, 1997
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
JAMES CABLE PARTNERS, L.P.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4841 38-2778219
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
710 NORTH WOODWARD AVENUE, SUITE 180, BLOOMFIELD HILLS, MICHIGAN 48304, (248)
647-1080
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
JAMES CABLE FINANCE CORP.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MICHIGAN 4841 38-3182724
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
710 NORTH WOODWARD AVENUE, SUITE 180, BLOOMFIELD HILLS, MICHIGAN 48304, (248)
647-1080
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
As to both Registrants:
WILLIAM R. JAMES
710 NORTH WOODWARD AVENUE, SUITE 180
BLOOMFIELD HILLS, MICHIGAN 48304
(248) 647-1080
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
KENT E. SHAFER, ESQ.
MILLER, CANFIELD, PADDOCK AND STONE, P.L.C.
150 WEST JEFFERSON AVENUE
DETROIT, MICHIGAN 48226
(313) 963-6420
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the Exchange Offer referred to herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ______________________
If this form is a post-effective amendment pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER NOTE(1) PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 3/4% Series B Senior Notes due
2004................................. $100,000,000 102% $102,000,000 $30,909.09
====================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(1) based on the average of the bid and asked prices for the
Notes on September 3, 1997.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 8, 1997
OFFER TO EXCHANGE
ALL OUTSTANDING
10 3/4% SENIOR NOTES DUE 2004
($100,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 3/4% SERIES B SENIOR NOTES DUE 2004
($100,000,000 PRINCIPAL AMOUNT)
OF
JAMES CABLE PARTNERS, L.P.
JAMES CABLE FINANCE CORP.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1997, UNLESS EXTENDED.
------------------------
James Cable Partners, L.P., a Delaware limited partnership (the "Company"),
and James Cable Finance Corp., a Michigan corporation and a wholly-owned
subsidiary of the Company ("Finance Corp." and, together with the Company, the
"Issuers"), hereby offer (the "Exchange Offer"), upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange up to an aggregate
principal amount of $100,000,000 of their 10 3/4% Series B Senior Notes due 2004
(the "Exchange Notes") for an equal principal amount of their outstanding
10 3/4% Senior Notes due 2004 (the "Notes"), in integral multiples of $1,000.
The Exchange Notes will be substantially identical (including principal amount,
interest rate, maturity and redemption rights) to the Notes for which they may
be exchanged pursuant to the Exchange Offer, except that (i) the offer and sale
of the Exchange Notes will have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and (ii) holders of Exchange Notes will
not be entitled to certain rights of holders of the Notes under the Registration
Rights Agreement of the Issuers dated as of August 15, 1997 (the "Registration
Rights Agreement"). The Notes have been, and the Exchange Notes will be, issued
under an indenture (the "Indenture") dated as of August 15, 1997 among the
Issuers and United States Trust Company of New York, as trustee (the "Trustee").
See "Description of the Exchange Notes." There will be no proceeds to the
Issuers from this offering; however, pursuant to the Registration Rights
Agreement, the Issuers will bear certain offering expenses. The Exchange Notes
are the joint and several obligations of the Issuers. Finance Corp. has nominal
assets and does not conduct any operations.
The Exchange Notes will be general senior unsecured obligations of the
Issuers ranking pari passu in right of payment with all other existing and
future unsubordinated Indebtedness (as defined herein) of the Issuers and senior
in right of payment to any Subordinated Obligations (as defined herein) of the
Issuers. The Exchange Notes will be effectively subordinated in right of payment
to all secured Indebtedness of the Issuers. Concurrently with the issuance of
the Notes, the Company used proceeds of the Notes to repay certain of its
existing indebtedness (the "Refinancing") and entered into the New Bank Credit
Facility (as defined herein). As of June 30, 1997, after giving effect to the
Refinancing, the Issuers would have had no Indebtedness outstanding (other than
the Notes), and subject to the terms of the New Bank Credit Facility and the
Company's Partnership Agreement, the ability to incur up to $20 million of
secured Indebtedness (with an option to increase the amount to $30 million)
under the New Bank Credit Facility. The Notes and the Exchange Notes will rank
pari passu with one another.
(Cover text continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER NOTES IN THE EXCHANGE
OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1997.
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JAMES CABLE MAP
<PAGE> 4
The Issuers will accept for exchange any and all validly tendered Notes on
or prior to 5:00 p.m., New York City time, on , 1997 (the
"Expiration Date"), unless the Exchange Offer is extended. Tenders of Notes may
be withdrawn at any time prior to 5:00 p.m. on the Expiration Date; otherwise,
such tenders are irrevocable. United States Trust Company of New York will act
as exchange agent (in such capacity, the "Exchange Agent") in connection with
the Exchange Offer. The Exchange Offer is not conditioned on any minimum
principal amount of Notes being tendered for exchange but is subject to certain
other customary conditions.
The Notes were sold by the Issuers on August 15, 1997 (the "Offering") in
transactions not registered under the Securities Act in reliance upon the
exemption provided in Section 4(2) of the Securities Act. The Notes were
subsequently resold to qualified institutional buyers in reliance upon Rule 144A
under the Securities Act and to a limited number of institutional accredited
investors in a manner exempt from registration under the Securities Act.
Accordingly, the Notes may not be reoffered, resold or otherwise transferred in
the United States unless registered under the Securities Act or unless an
applicable exemption from the registration requirements of the Securities Act is
available. The Exchange Notes are being offered in order to satisfy certain
obligations of the Issuers under the Registration Rights Agreement. See "The
Exchange Offer."
The Exchange Notes will bear interest from August 15, 1997 (the date of
issuance of the Notes that are tendered in exchange for the Exchange Notes), or
from the most recent interest payment date to which interest on the Notes has
been paid, at a rate equal to 10 3/4% per annum. Interest on the Exchange Notes
will be payable in cash semi-annually on each February 15 and August 15,
commencing February 15, 1998.
The Exchange Notes will be redeemable at the option of the Issuers, in
whole or in part, on or after August 15, 2001, at the redemption prices set
forth herein, plus accrued and unpaid interest thereon to the date of
redemption. In addition, the Issuers may redeem an amount of Notes and Exchange
Notes equal to up to 35% of the aggregate principal amount of the Notes
originally issued in the Offering on or prior to August 15, 2000 at a redemption
price equal to 110.750% of the aggregate principal amount thereof, plus accrued
and unpaid interest thereon to the redemption date, with the Net Cash Proceeds
(as defined herein) of one or more Public Equity Offerings (as defined herein),
provided that at least $65.0 million aggregate principal amount of the Notes and
Exchange Notes remains outstanding and that any such redemption occurs within 60
days following the closing of any such Public Equity Offering.
Upon a Change of Control (as defined herein), each holder of the Exchange
Notes will be entitled to require the Issuers to purchase such holder's Exchange
Notes at 101% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of purchase. See "Description of the Exchange Notes" and
"Risk Factors -- Change of Control."
The Exchange Offer is being made in reliance on certain no-action positions
that have been published by the staff of the Securities and Exchange Commission
(the "Commission") which require each tendering noteholder to represent that it
is acquiring the Exchange Notes in the ordinary course of its business and that
such holder does not intend to participate and has no arrangement or
understanding with any person to participate in a distribution of the Exchange
Notes. In some cases, certain broker-dealers may be required to deliver a
prospectus in connection with the resale of Exchange Notes that they receive in
the Exchange Offer. See "The Exchange Offer."
There has not previously been any public market for the Exchange Notes. The
Issuers do not intend to list the Exchange Notes on any securities exchange or
to seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the Exchange Notes will develop. To
the extent that an active market for the Exchange Notes does develop, the market
value of the Exchange Notes will depend on market conditions (such as yields on
alternative investments), general economic conditions, the Company's financial
condition and other factors. Such conditions might cause the Exchange Notes, to
the extent that they are actively traded, to trade at a significant discount
from face value. See "Risk Factors -- Lack of Public Market for Exchange Notes."
i
<PAGE> 5
ANY NOTES NOT TENDERED AND ACCEPTED IN THE EXCHANGE OFFER WILL REMAIN
OUTSTANDING. TO THE EXTENT ANY NOTES ARE TENDERED AND ACCEPTED IN THE EXCHANGE
OFFER, A HOLDER'S ABILITY TO SELL UNTENDERED NOTES COULD BE ADVERSELY AFFECTED.
FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER, THE HOLDERS OF NOTES WILL CONTINUE
TO BE SUBJECT TO THE EXISTING RESTRICTIONS ON TRANSFER THEREOF. HOLDERS WHO DO
NOT TENDER THEIR NOTES GENERALLY WILL NOT HAVE ANY FURTHER REGISTRATION RIGHTS
UNDER THE REGISTRATION RIGHTS AGREEMENT OR OTHERWISE. SEE "THE EXCHANGE OFFER --
CONSEQUENCES OF FAILURE TO EXCHANGE."
The Exchange Notes generally will be issued in the form of Global Exchange
Notes (as defined herein), which will be deposited with, or on behalf of, The
Depository Trust Company ("DTC") and registered in its name or in the name of
Cede & Co., its nominee. Beneficial interests in the Global Exchange Notes
representing the Exchange Notes will be shown on, and transfers thereof will be
effected through, records maintained by DTC and its participants.
Notwithstanding the foregoing, Notes held in certificated form will be exchanged
solely for Exchange Notes in certificated form. After the initial issuance of
the Global Exchange Notes, Exchange Notes in certificated form will be issued in
exchange for the Global Exchange Notes only on the terms set forth in the
Indenture. See "Description of the Exchange Notes -- Book-Entry, Delivery and
Form."
------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
EXCHANGE NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE EXCHANGE NOTES TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 199 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE
OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
ii
<PAGE> 6
AVAILABLE INFORMATION
As a result of the Exchange Offer, the Issuers will become subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, in accordance therewith, will file
reports and other information with the Commission. The Issuers have filed
with the Commission a Registration Statement on Form S-4 under the
Securities Act for the registration of the Exchange Notes offered hereby
(the "Registration Statement"). This Prospectus, which constitutes a part
of the Registration Statement, does not contain all the information set
forth in the Registration Statement, certain items of which are contained
in exhibits and schedules to the Registration Statement as permitted by the
rules and regulations of the Commission. For further information about the
Issuers and the Exchange Notes offered hereby, reference is made to the
Registration Statement, including the exhibits and financial statement
schedules thereto, which may be inspected without charge at the public
reference facility maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of which may be obtained from the
Commission at prescribed rates. Statements made in this Prospectus
concerning the contents of any documents referred to herein are not
necessarily complete. With respect to each such document filed with the
Commission as an exhibit to the Registration Statement, reference is made
to the exhibit for a more complete description of the matter involved, and
each such statement is qualified in its entirety by such reference.
Such documents and other information filed by the Issuers can be
inspected and copied at the public reference facilities of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 and the regional offices
of the Commission located at 7 World Trade Center, New York, New York 10048
and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of
such materials may be obtained from the Public Reference Section of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at its public reference facilities in New York, New York and Chicago,
Illinois at prescribed rates. The Issuers make their filings with the
Commission electronically. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically, which information can be
accessed at http://www.sec.gov.
Finance Corp.'s obligations under the informational reporting
requirements of the Exchange Act will be fulfilled by including information
regarding Finance Corp. in the Company's periodic reports.
So long as the Issuers are subject to the periodic reporting
requirements of the Exchange Act, they are required to furnish the
information required to be filed with the Commission to the Trustee and the
holders of the Notes and the Exchange Notes. The Company has agreed that,
even if it is not required under the Exchange Act to furnish such
information to the Commission, it will nonetheless continue to furnish
information that would be required to be furnished by the Company under
Section 13 or 15(d) of the Exchange Act to the Commission, the Trustee and
the holders of the Notes or Exchange Notes as if it were subject to such
periodic reporting requirements. The annual reports so furnished to holders
of Notes or Exchange Notes will contain financial information that has been
examined and reported upon, with an opinion expressed, by independent
auditors.
In addition, the Issuers have agreed that, until two years from the
later of (i) the date any Note or Exchange Note (or any predecessor note)
was acquired from the Issuers (i.e., August 15, 1997) or (ii) the date any
Note or Exchange Note (or any predecessor note) was last acquired from an
"affiliate" of the Issuers within the meaning of Rule 144 under the
Securities Act, they will, upon request, provide to any holder of such Note
or Exchange Note or any prospective transferee of any such holder any
information concerning the Issuers (including financial statements)
necessary in order to permit such holder to sell or transfer such Note or
Exchange Note in compliance with Rule 144A under the Securities Act.
iii
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the related notes, appearing elsewhere in this Prospectus.
THE COMPANY
The Company owns, operates and develops cable television systems serving
rural communities in seven geographically and economically diverse clusters. The
Company's cable television systems are operated under the name "CommuniComm
Services" and are located in Oklahoma, Texas, Georgia, Louisiana, Colorado,
Wyoming, Tennessee, Alabama and Florida (the "Systems"). As of June 30, 1997,
the Systems passed an estimated 129,291 homes and served 78,337 basic
subscribers, representing a basic penetration of 60.6%. The Company's goal is to
maintain its position as the preferred provider of video services and become the
single hard wire broadband provider of enhanced digital video services, advanced
telecommunications services and telephony in the markets that it serves.
During the five-year period ended December 31, 1996, the Company's revenues
and EBITDA consistently increased, with revenues and EBITDA growing at compound
annual growth rates of 5.9% and 6.9%, respectively. System operating cash flow
and EBITDA margins for the six months ended June 30, 1997, were 52.3% and 45.3%,
respectively. The Company also achieved average monthly total revenues per
subscriber of $37.85 for the six months ended June 30, 1997, and annualized
system operating cash flow per subscriber of $238, both of which the Company
believes compare favorably with cable industry averages. Primarily as a result
of increased marketing spending, EBITDA was slightly lower during the first half
of 1997 as compared to the first half of 1996.
The Company believes that there are competitive and economic advantages to
owning and operating cable television systems in rural markets. Due to lower
population densities and higher per household plant installation costs, rural
markets are more likely than larger urban and suburban markets to have a single
hard wire broadband video and telecommunications service provider. In addition,
cable television systems in rural markets are typically characterized by lower
churn rates and greater penetration than larger urban and suburban markets. In
rural markets, cable service often is required for adequate reception of a full
range of over-the-air television stations. Moreover, fewer entertainment
alternatives are available, and cable television provides a major source of
entertainment.
The Company focuses on maintaining and improving system operating results.
The Company has implemented extensive management, operational and technical
changes designed to improve operating efficiencies, enhance operating cash flow
and reduce overhead through economies of scale. To this end, the Company has
"clustered" its Systems in concentrated geographic areas, which allows fixed
costs to be spread over an expanded subscriber base. In an effort to further
enhance its operational and financial performance, the Company from time to time
considers opportunities to acquire or exchange its assets for cable television
systems located near its existing markets.
The Company's senior management team has 64 years of collective experience
in the cable industry. The founder and Chief Executive Officer of the Company,
William R. James, has been a cable industry executive since 1979. Prior to
founding the Company, he organized and developed two other cable television
operations, including the cable television division of Capital Cities
Communications (which became Capital Cities/ABC). Mr. James built the Capital
Cities cable television operations from a start-up company to the 16th largest
multiple system operator ("MSO") in the United States in 1986, with 380,000
subscribers served by 55 systems located in 16 states. The other three key
individuals responsible for the management of the Company, C. Timothy Trenary,
Daniel K. Shoemaker and Scott A. Madison, have been involved in the
construction, acquisition, ownership, management and operation of rural cable
television systems for at least a decade.
1
<PAGE> 8
The Company was initially capitalized with equity contributions of $79
million from management and certain initial equity investors. For information
concerning significant current equity owners, see "Partnership Interests of
Certain Beneficial Owners and Management."
BUSINESS STRATEGY
Management intends to solidify the Company's position as the preferred
provider of video services and become the single hard wire broadband provider of
advanced telecommunications services and telephony in the communities that it
serves. The Company's business strategy is to (i) selectively upgrade the
Company's Systems, (ii) provide enhanced digital video, (iii) deliver advanced
telecommunications services, including Internet access, and (iv) pursue
strategic acquisitions.
- SELECTIVELY UPGRADE SYSTEMS. The Company is upgrading certain of its
cable television systems to further strengthen the Company's position as
the preferred provider of video services in the communities it serves.
These upgrades, which employ fiber optic technology, increase the
bandwidth of the Company's cable plant generally to 750 MHz, thereby
increasing channel capacity, enhancing signal quality and improving
technical reliability. The Company believes the upgrades will enable it
to offer comparable or superior video service and quality at attractive
pricing levels relative to its competitors, such as direct broadcast
satellite ("DBS"). The Company also believes that the upgrades will
provide the technical platform necessary for the development and delivery
of advanced telecommunications services and telephony.
The Company recently completed the upgrade of its Durant, Oklahoma System
(the "Durant System") to 750 MHz. The upgrade improved picture quality and
reliability and enabled the Company to increase the number of channels
offered by the Durant System from 40 to 55, with the potential for future
expansion to 100 channels (or more using digital technology). Prior to
this upgrade, the Durant System had experienced modest subscriber loss in
connection with the elimination of a low-priced broadcast-station-only
level of service and the increasing penetration of DBS. Following this
upgrade, the Company began marketing a three month service trial targeted
at homes that did not subscribe to cable. While this effort is still in
progress and the Company cannot predict the final outcome, as of July 31,
1997, year-over-year basic subscribers have increased over 5%.
By the end of 1997, the Company will have expended nearly $9 million to
upgrade its cable plant serving approximately 18,000 subscribers. The
Company expects to expend approximately $10 million in each of 1998 and
1999 to upgrade its cable plant serving an additional 32,000 subscribers.
- PROVIDE ENHANCED DIGITAL VIDEO. The Company intends to provide enhanced
digital video in the upgraded and certain other Systems using Headend In
The Sky(R) ("HITS"), a digital compression service developed by National
Digital Television Center, Inc., a subsidiary of Telecommunications, Inc.
HITS will enable the Company to deliver video services such as
pay-per-view programming and a tier or multiple tiers of niche satellite
programming. The Company believes that these enhanced digital video
services (which it will introduce initially in its Durant System) will
allow it to provide a service comparable to DBS at a lower cost.
- DELIVER ADVANCED TELECOMMUNICATIONS SERVICES, INCLUDING INTERNET
ACCESS. The Company believes that advanced telecommunications services
will provide additional revenue opportunities with relatively small
incremental capital investment. The Company further believes that
upgraded cable infrastructure will provide the fastest, most
cost-effective delivery mechanism for Internet access, inter- and intra-
network data services and telephony. These advanced services enable
subscribers to receive the Internet at a peak data transmission speed up
to 300 times faster than typical dial-up connections. As part of its
efforts in this area, the Company has recently entered into a strategic
alliance with a local Internet service provider ("ISP") in Durant,
Oklahoma. Under this arrangement, the Company provides broadband service
capability for the delivery of high speed Internet service and the ISP
provides technical and customer support services.
2
<PAGE> 9
In anticipation of providing telephony, the Company is seeking switching
capabilities. The Company has entered into discussions with two
independent local exchange carriers (each, an "ILEC") located near its
Systems to gain access to their switching capability. In Durant, the
Company is in the process of installing the required switch interface
equipment and plans to install customer premises equipment at selected
sites and begin testing during the fourth quarter.
- PURSUE STRATEGIC ACQUISITIONS. The Company intends to consider
opportunities to acquire cable television systems. Because it is more
cost effective to provide advanced telecommunications services over an
expanded subscriber base within a concentrated geographic area, the
Company will generally seek to acquire cable television systems, or
groups of systems, in close proximity to its existing Systems and
markets. The Company may also consider acquisitions in other geographic
areas where consistent with its business strategy. Furthermore, the
Company intends to divest itself, through asset exchanges or outright
sales, of cable television systems that do not readily lend themselves to
the Company's business strategy. Factors likely to be considered by the
Company in evaluating the desirability of a potential acquisition or
asset exchange opportunity include price and terms, subscriber densities,
growth potential (in terms of both market and cash flow) and whether the
target system can be readily integrated into the Company's operations.
The Company's principal executive offices are located at 710 North Woodward
Avenue, Suite 180, Bloomfield Hills, Michigan 48304, and its telephone number is
(248) 647-1080.
3
<PAGE> 10
THE NOTES OFFERING
The Notes.................. The Notes were sold by the Issuers in the Offering
on August 15, 1997 and were subsequently resold to
qualified institutional buyers pursuant to Rule
144A under the Securities Act and to a limited
number of institutional accredited investors in a
manner exempt from registration under the
Securities Act.
Registration Rights
Agreement.................. In connection with the Offering, the Issuers
entered into the Registration Rights Agreement,
which grants holders ("Holders") of the Notes
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such exchange
and registration rights, which generally terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered......... Up to $100,000,000 aggregate principal amount of
10 3/4% Series B Senior Notes due 2004.
The Exchange Offer......... $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of Notes.
As of the date hereof, $100,000,000 aggregate
principal amount of Notes are outstanding. The
Issuers will issue the Exchange Notes to Holders on
or promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Issuers believe that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Notes may be offered for resale,
resold and otherwise transferred by any owner
thereof (other than any such owner which is an
"affiliate" of the Issuers within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the
ordinary course of such owner's business and that
such owner does not intend to participate and has
no arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes.
Each broker-dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales
of Exchange Notes received in exchange for Notes
where such Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities. The Issuers
have agreed that for a period of 180 days after the
Expiration Date they will make this Prospectus
available to any broker-dealer for use in
connection with any such resale.
Any owner of Notes who tenders in the Exchange
Offer with the intention to participate, or for the
purpose of participating, in a distribution of the
Exchange Notes could not rely on the position of
the staff of the Commission enunciated in Exxon
Capital Corporation (April 13,
4
<PAGE> 11
1988) and Morgan Stanley & Co., Incorporated (June
5, 1991), or similar no-action letters and, in the
absence of an exemption therefrom, must comply with
the registration and prospectus delivery
requirements of the Securities Act in connection
with the resale of the Exchange Notes. Failure to
comply with such requirements in such instance may
result in such owner incurring liability under the
Securities Act for which the owner is not
indemnified by the Issuers.
In any state where the Exchange Offer does not fall
under a statutory exemption to such state's blue
sky laws, the Issuers by the date the Exchange
Offer commences will have filed the appropriate
registrations and notices and will have made the
appropriate requests to permit the Exchange Offer
to be made in such state.
Expiration Date............ 5:00 p.m., New York City time, on ,
1997, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended.
Interest on the
Exchange Notes............. The Exchange Notes will bear interest from August
15, 1997, the date of issuance of the Notes that
are tendered in exchange for the Exchange Notes (or
the most recent interest payment date to which
interest on such Notes has been paid). Accordingly,
Holders of Notes that are accepted for exchange
will not receive interest on the Notes that is
accrued but unpaid at the time of tender, but such
interest will be payable on the first interest
payment date after the Expiration Date.
Conditions to the
Exchange Offer............. The Exchange Offer is subject to certain customary
conditions, which may be waived by the Issuers. See
"The Exchange Offer -- Conditions." No federal or
state regulatory requirements (other than
securities laws) must be complied with and no
approvals must be obtained in connection with the
Exchange Offer.
Procedures for
Tendering Notes............ Each Holder of Notes (or, in the case of interests
in the Global Notes held by DTC, each DTC
participant listed in an official DTC proxy)
wishing to accept the Exchange Offer must complete,
sign and date the accompanying Letter of
Transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein,
and mail or otherwise deliver the Letter of
Transmittal, or such facsimile, together with the
Notes and any other required documentation, to the
Exchange Agent at the address set forth in the
Letter of Transmittal. By executing the Letter of
Transmittal, each Holder or DTC participant will
represent to the Issuers that, among other things,
the Holder or DTC participant or the person
receiving the Exchange Notes, whether or not such
person is the Holder or DTC participant, is
acquiring the Exchange Notes in the ordinary course
of business and neither the Holder or DTC
participant nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes. In lieu of physical delivery of the
certificates representing Notes, tendering DTC
participants may transfer Notes pursuant to the
procedure for book-entry transfer as set forth
under "The Exchange Offer -- Book-Entry Transfer;
ATOP."
5
<PAGE> 12
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Notes are held through a
broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should
contact such nominee and instruct such nominee to
tender on such beneficial owner's behalf. Such
instructions should be given in sufficient time to
ensure that the nominee will be able to take the
necessary steps to tender such Notes before the
Expiration Date.
Guaranteed
Delivery Procedures........ Holders of Notes who wish to tender their Notes and
whose Notes are not immediately available or who
cannot deliver their Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent (or
comply with the procedures for book-entry transfer)
prior to the Expiration Date must tender their
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date
pursuant to the procedures described under "The
Exchange Offer -- Withdrawals of Tenders."
Acceptance of Notes and
Delivery of Exchange
Notes...................... The Issuers will accept for exchange any and all
Notes that are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date. However, the Issuers reserve
the right to make any determination, in their sole
discretion, as to whether or not Notes have been
properly tendered. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer -- Terms of the Exchange Offer."
Federal Income Tax
Consequences............... The issuance of the Exchange Notes to Holders of
the Notes pursuant to the terms set forth in this
Prospectus will not constitute an exchange for
federal income tax purposes. Consequently, no gain
or loss would be recognized by Holders of the Notes
upon receipt of the Exchange Notes. See "Certain
Federal Income Tax Consequences of the Exchange
Offer."
Effect on Holders of
Notes...................... As a result of the making of the Exchange Offer,
the Issuers will have fulfilled certain of their
obligations under the Registration Rights
Agreement, and Holders of Notes who do not tender
their Notes will generally not have any further
registration rights under the Registration Rights
Agreement or otherwise. Such Holders will continue
to hold the untendered Notes and will be entitled
to all the rights and subject to all the
limitations applicable thereto under the Indenture,
except to the extent such rights or limitations by
their terms terminate or cease to have further
effectiveness as a result of the Exchange Offer.
All untendered Notes will continue to be subject to
certain restrictions on transfer. Accordingly, if
any Notes are tendered and accepted in the Exchange
Offer, the trading market for the untendered Notes
could be adversely affected.
Exchange Agent............. United States Trust Company of New York
6
<PAGE> 13
SUMMARY OF TERMS OF EXCHANGE NOTES
The form and terms of the Exchange Notes are the same as the form and terms
of the Notes (which they replace) except that (i) the Exchange Notes have been
registered under the Securities Act and therefore will not bear legends
restricting the transfer thereof, and (ii) the Holders of Exchange Notes
generally will not be entitled to further registration rights under the
Registration Rights Agreement, which rights generally will be satisfied when the
Exchange Offer is consummated. The Exchange Notes will evidence the same debt as
the Notes and will be entitled to the benefits of the Indenture. See
"Description of the Exchange Notes."
Issuers.................... The Exchange Notes will be joint and several
obligations of the Company and Finance Corp.
Securities Offered......... Up to $100,000,000 principal amount of 10 3/4%
Series B Senior Notes due 2004 (the "Exchange
Notes").
Maturity Date.............. August 15, 2004.
Interest Rate.............. The Exchange Notes will bear interest at a rate of
10 3/4% per annum.
Interest Payment Dates..... Interest will accrue on the Exchange Notes from
August 15, 1997, the date of issuance of the Notes
(the "Issue Date"), and will be payable
semi-annually on each February 15 and August 15,
commencing February 15, 1998.
Ranking.................... The Exchange Notes will be general senior unsecured
obligations of the Issuers ranking pari passu to
all existing and future unsubordinated Indebtedness
of the Issuers and senior in right of payment to
all Subordinated Obligations of the Issuers. The
Exchange Notes will be effectively subordinated in
right of payment to all secured Indebtedness of the
Issuers. At June 30, 1997, after giving effect to
the Refinancing, the Issuers would have had no
Indebtedness outstanding (other than the Notes),
and subject to the terms of the New Bank Credit
Facility and the Company's Partnership Agreement,
the ability to borrow up to $20 million (with an
option to increase the amount to $30 million) under
the New Bank Credit Facility. The New Bank Credit
Facility is secured by substantially all of the
Issuers' assets. The Notes and the Exchange Notes
will rank pari passu with one another.
Guarantees by Future
Subsidiaries............... The Exchange Notes will be unconditionally
guaranteed, on a senior unsecured basis, as to the
payment of principal, premium, if any, and
interest, jointly and severally (the "Guarantees"),
by all future direct and indirect Subsidiaries (as
defined herein) of the Issuers having either assets
or net worth in excess of $5,000 (the
"Guarantors"). No Guarantees will be effective on
the date of the issuance of the Exchange Notes. See
"Description of the Exchange Notes -- Certain
Covenants -- Limitation on Creation of
Subsidiaries."
Optional Redemption........ The Exchange Notes will be redeemable at the option
of the Issuers, in whole or in part, at any time on
or after August 15, 2001 at the redemption prices
set forth herein, together with accrued and unpaid
interest thereon to the date of redemption. In
addition, the Issuers, at their option, may redeem
an amount of Notes and Exchange Notes equal to up
to 35% of the aggregate principal amount of the
Notes originally issued in the Offering, at any
time prior to August 15, 2000, at a
7
<PAGE> 14
redemption price equal to 110.750% of the principal
amount thereof plus accrued and unpaid interest
thereon to the redemption date with the Net Cash
Proceeds of one or more Public Equity Offerings;
provided, however, that at least $65 million
aggregate principal amount of the Notes and
Exchange Notes remains outstanding and that such
redemption occurs within 60 days following the
closing of any such Public Equity Offering. See
"Description of the Exchange Notes -- Optional
Redemption."
Change of Control.......... In the event of a Change of Control, the Issuers
will be required to make an offer to purchase all
of the then outstanding Exchange Notes at a price
equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of
purchase. See "Description of the Exchange Notes --
Change of Control Offer."
Certain Covenants.......... The Indenture (as defined herein) contains
covenants for the benefit of the holders of the
Exchange Notes that, among other things, restrict
the ability of the Issuers and their Subsidiaries
to: (i) incur additional Indebtedness; (ii) pay
dividends and make distributions; (iii) issue
preferred stock of subsidiaries; (iv) make certain
investments; (v) repurchase stock; (vi) create
liens; (vii) enter into transactions with
affiliates; (viii) merge or consolidate the Issuers
or any Guarantors; and (ix) transfer or sell
assets. These covenants are subject to a number of
important exceptions. See "Description of the
Exchange Notes -- Certain Covenants."
Exchange Offer;
Registration Rights........ If, prior to consummation of the Exchange Offer,
the Issuers or the Holders of a majority in
aggregate principal amount of the Notes reasonably
determine in good faith that (i) the Exchange Notes
would not be freely transferable by holders which
are not affiliates (within the meaning of the
Securities Act) of the Issuers without restriction
under the Securities Act or (ii) the interests of
the Holders under the Registration Rights Agreement
would be adversely affected by the consummation of
the Exchange Offer, or if the Exchange Offer is not
consummated within 180 days of the Issue Date, the
Registration Rights Agreement provides that the
Issuers will use their best efforts to cause to
become effective a shelf registration statement
with respect to the resale of the Notes and to keep
such shelf registration statement effective until
24 months after the Issue Date or such shorter
period ending when all the Notes have been sold
thereunder. The interest rate on the Notes is
subject to increase under certain circumstances if
the Issuers are not in compliance with their
obligations under the Registration Rights
Agreement. See "Exchange Offer and Registration
Rights."
8
<PAGE> 15
RISK FACTORS
Holders of the Notes should carefully consider the information set forth
under the caption "Risk Factors," and all other information set forth in this
Prospectus, in evaluating an investment in the Exchange Notes.
9
<PAGE> 16
SUMMARY FINANCIAL DATA
The following table sets forth certain historical financial data for the
Company for each of the years in the five-year period ended December 31, 1996
and for the six-month periods ended June 30, 1996 and 1997. It also sets forth
certain adjusted financial data for the year ended December 31, 1996 and the
six-month period ended June 30, 1997 that reflect the effects of the
Refinancing. The financial data for the years ended December 31, 1992 to 1996
were derived from the financial statements of the Company which (other than as
of and for the six-month periods ended June 30, 1996 and 1997) have been audited
by Deloitte & Touche LLP, independent auditors. The financial statements of the
Company at December 31, 1995 and 1996 and for each of the years in the
three-year period ended December 31, 1996, together with the report of Deloitte
& Touche LLP thereon, appear elsewhere in this Prospectus. In the opinion of the
Company, the unaudited data presented for the six-month periods ended June 30,
1996 and 1997 reflect all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of such data. Results for the
six-month periods ended June 30, 1996 and 1997 are not necessarily indicative of
the results to be expected for any other interim period or the year as a whole.
This information should be read in conjunction with "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's financial statements and the notes thereto
appearing elsewhere in this Prospectus.
10
<PAGE> 17
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SUBSCRIBER DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $ 28,029 $ 30,025 $30,864 $33,305 $35,213 $ 17,561 $ 17,806
System operating expenses(1).... 13,486 14,129 14,408 15,073 16,249 7,939 8,494
Non-system operating
expenses(2)................... 1,901 2,251 2,136 2,280 2,480 1,267 1,240
Restructuring costs(3).......... 1,494 -- -- -- -- -- --
Depreciation and amortization... 18,686 16,915 14,102 12,214 9,272 4,636 3,594
-------- -------- ------- ------- ------- -------- --------
Operating (loss) income......... (7,538) (3,270) 218 3,738 7,212 3,719 4,478
Interest expense, net........... 11,870 8,174 8,416 9,659 8,852 4,584 4,265
Other expenses, net............. 8 58 607 141 254 160 186
-------- -------- ------- ------- ------- -------- --------
(Loss) income before
extraordinary item............ (19,416) (11,502) (8,805) (6,062) (1,894) (1,025) 27
Extraordinary loss due to debt
refinancing................... -- -- -- 548 -- -- --
-------- -------- ------- ------- ------- -------- --------
Net (loss) income............... $(19,416) $(11,502) $(8,805) $(6,610) $(1,894) $ (1,025) $ 27
======== ======== ======= ======= ======= ======== ========
OTHER DATA:
EBITDA(4)....................... $ 12,642 $ 13,645 $14,320 $15,952 $16,484 $ 8,355 $ 8,072
System operating cash flow(5)... 14,543 15,896 16,456 18,232 18,964 9,622 9,312
Capital expenditures............ 1,007 1,041 1,391 2,405 3,942 1,307 3,643
EBITDA margin(6)................ 45.1% 45.4% 46.4% 47.9% 46.8% 47.6% 45.3%
Ratio of earnings to fixed
charges(7).................... -- -- -- -- -- -- 1.0x
SUMMARY SUBSCRIBER DATA:
Homes passed(8)................. 127,215 127,863 127,943 128,908 129,291 129,162 129,291
Basic subscribers(9)............ 79,208 79,414 80,529 80,190 78,449 79,429 78,337
Basic penetration(10)........... 62.3% 62.1% 62.9% 62.2% 60.7% 61.5% 60.6%
Premium subscriptions(11)....... 29,213 28,064 28,765 28,900 25,652 27,589 25,365
Premium penetration(12)......... 36.9% 35.3% 35.7% 36.0% 32.7% 34.7% 32.4%
Average monthly total revenues
per subscriber(13)............ $ 29.69 $ 31.49 $ 32.17 $ 34.56 $ 36.89 $ 36.51 $ 37.85
System operating cash flow per
subscriber(14)................ $ 185 $ 200 $ 206 $ 227 $ 238 $ 240 $ 238
EBITDA per subscriber(15)....... $ 161 $ 172 $ 179 $ 199 $ 207 $ 208 $ 206
ADJUSTED DATA:
Adjusted cash interest expense(16)............................................ $10,750 $ 5,375
Ratio of adjusted total debt to annualized EBITDA............................. 6.1x 6.2x
Ratio of EBITDA to adjusted cash interest expense............................. 1.5x 1.5x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30, 1997
----------------------------------------------------- ------------------------
1992 1993 1994 1995 1996 HISTORICAL AS ADJUSTED
---- ---- ---- ---- ---- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....... $ 1,589 $ 1,309 $ 404 $ 1,056 $ 101 $ 249 $ 7,469
Total assets.................... 78,891 61,845 46,746 39,727 32,844 32,581 41,822
Total debt...................... 100,500 95,000 88,284 88,573 82,494 82,994 100,044
Partners' deficit............... (26,111) (37,613) (47,022) (54,452) (56,346) (56,320) (64,007)
</TABLE>
(see footnotes on the following page)
11
<PAGE> 18
NOTES TO SUMMARY FINANCIAL DATA
(1) System operating expenses exclude depreciation and amortization.
(2) Non-system operating expenses consist primarily of management fees payable
to the General Partner of the Company. See "Management Discussion and
Analysis of Financial Condition and Results of Operations" and "Management
-- Executive Compensation."
(3) Restructuring costs include expenses related to the 1991 Chapter 11
Proceeding. See "Risk Factors -- 1991 Chapter 11 Proceedings."
(4) EBITDA represents operating (loss) income before restructuring costs,
depreciation and amortization. The Company has included EBITDA data (which
are not a measure of financial performance under generally accepted
accounting principles ("GAAP")) because it understands such data are used
by certain investors to determine a company's historical ability to service
its indebtedness. EBITDA should not be considered as an alternative to net
income as an indicator of the Company's performance or as an alternative to
cash flow as a measure of liquidity as determined in accordance with GAAP.
(5) System operating cash flow represents revenues less system operating
expenses. System operating cash flow should not be considered as an
alternative to net income as an indicator of the Company's performance or
as an alternative to cash flow as a measure of liquidity as determined in
accordance with GAAP.
(6) EBITDA margin represents EBITDA divided by revenues.
(7) For purposes of calculating the ratio of earnings to fixed charges,
earnings include (loss) income before extraordinary items plus interest
expense (which includes amortization of debt issuance costs). Fixed charges
consist of interest expense incurred (including amortization of debt
issuance costs) and the estimated interest component of rent expense.
Earnings were inadequate to cover fixed charges by $19.4 million, $11.5
million, $8.8 million, $6.1 million and $1.9 million for the years ended
December 31, 1992, 1993, 1994, 1995 and 1996, respectively, and by $1.0
million in the six months ended June 30, 1996.
(8) Homes passed refers to estimates by the Company of the number of dwelling
units in a particular community that can be connected to the distribution
system without any further extension of principal transmission lines. Such
estimates are based upon a variety of sources, including billing records,
house counts, city directories and other local sources.
(9) For purposes of all information presented in this Prospectus, unless
otherwise indicated, the number of basic subscribers for the Systems has
been computed by adding the actual number of subscribers for all non-bulk
accounts and the equivalent subscribers for all bulk accounts. The number
of such equivalent subscribers has been calculated by dividing aggregate
basic service revenues for bulk accounts by the full basic service rate for
the community in which the account is located.
(10) Basic subscribers as a percentage of homes passed.
(11) A customer may purchase more than one premium service, each of which is
counted as a separate premium subscription.
(12) Premium subscriptions as a percentage of basic subscribers.
(13) The average of the monthly total revenues divided by the number of basic
subscribers at the end of such month during the twelve-month periods ended
December 31 for each year presented and the six-month periods ended June
30, 1996 and 1997.
(14) System operating cash flow divided by the average number of basic
subscribers for the period. The amount was annualized for the periods ended
June 30, 1996 and 1997.
(15) EBITDA divided by the average number of basic subscribers for the period.
The amount was annualized for the periods ended June 30, 1996 and 1997.
(16) Reflects the interest rate on the Notes of 10.75%.
12
<PAGE> 19
RISK FACTORS
Prior to tendering their Notes in the Exchange Offer, prospective investors
in the Exchange Notes should consider carefully the following factors in
addition to the other information contained in this Prospectus. This Prospectus
contains forward-looking statements, within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, which are inherently
uncertain. Actual results and events may differ significantly from those
discussed in such forward-looking statements. In addition to the other
information set forth in this Prospectus, factors that might cause or contribute
to such differences include, but are not limited to, the risk factors that
follow:
SIGNIFICANT LEVERAGE AND DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
At June 30, 1997, after giving effect to the Refinancing, the Company's
indebtedness would have been $100.0 million, its total assets would have been
$41.8 million, and its partners' deficit would have been $64.0 million. The
Company's high degree of leverage could have important consequences to the
holders of the Exchange Notes, including (but not limited to) the following: (i)
a substantial portion of the Company's cash flow from operations will be
committed to the payment of the Company's interest expense and will not be
available for other purposes; (ii) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions
or other purposes may be limited; and (iii) the Company will be more highly
leveraged than many cable television companies and certain DBS and telephone
companies, which may limit the Company's flexibility in reacting to changes in
its business. Subject to the terms of the New Bank Credit Facility and the
Company's Partnership Agreement, the Company will have the ability to borrow up
to $20 million (with an option to increase the amount to $30 million) under the
New Bank Credit Facility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
After giving effect to the Refinancing as if it had occurred at the
beginning of the applicable periods, the Company's earnings would have been
insufficient to cover its fixed charges by $4.4 million and $1.4 million for the
year ended December 31, 1996 and for the six months ended June 30, 1997,
respectively. However, such amounts include noncash charges for depreciation and
amortization totaling $9.3 million and $3.6 million, respectively, and the
Company believes that it will continue to generate cash or obtain financing
sufficient to meet its requirements for debt service, working capital and
capital expenditures contemplated in the near term. If the Company were unable
to meet its debt service obligations, the Company would have to consider
refinancing its indebtedness or obtaining new financing subject to the
limitations contained in the Indenture. There can be no assurance that the
Company would be able to do so or that, if the Company were able to do so, the
terms available would be favorable to the Company. In the event that the Company
were unable to refinance its indebtedness or obtain new financing, the Company
would have to consider various options to meet its required debt service such as
the sale of certain assets (subject to the limitations contained in the
Indenture), negotiation with its lenders to restructure applicable indebtedness
or other options available to it under applicable law. See "Selected Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
COMPETITION AND LOSS OF SUBSCRIBERS
Beginning in 1995, the Company has experienced a loss of subscribers to its
Systems, due primarily to increased competition from new technologies such as
wireless cable services and DBS services. Total subscribers decreased by
approximately 2.6% between December 31, 1994 and December 31, 1996. While the
Company believes its strategy of upgrading certain Systems (so as to provide
enhanced video programming, Internet access and telephony and other advanced
telecommunications services) will be successful in reversing this trend, there
can be no assurance that this will be the case. Many of the providers of DBS
services and other new technologies are supported by corporate parents with
significant financial resources.
In addition to competition from wireless cable services providers and DBS
systems, the Company faces potential competition from telephone companies, which
generally have significantly greater financial resources than the Company. The
Telecommunications Act of 1996 (the "1996 Telecom Act") eliminated earlier
statutory barriers that had prohibited most telephone companies from providing
video services, including cable
13
<PAGE> 20
service, within their telephone service areas. Therefore, in addition to
upgrading their own facilities to provide services similar to those offered by
the Company, telephone companies are now able to purchase existing video
distribution systems, including in some limited instances cable systems, and
enter into business relationships with existing video programming distributors.
See "Business -- Competition" and "Legislation and Regulation."
NEW LINES OF BUSINESS
Providing Internet access and telephony will be new lines of business for
the Company. The Company recently launched commercial Internet service in its
Durant System and is scheduled to launch a test of telephony services by year
end. Cable delivered Internet and telephony were first introduced commercially
by some cable operators only in the past 18 months, and neither the Company nor
any other cable operator has extensive experience with either line of business.
Some of the uncertainties associated with offering Internet access through
cable are: (1) customer acceptance of cable as an alternative to traditional
dial-up Internet access; (2) the competitive response of traditional ISPs,
online services (such as Microsoft Network, CompuServe and America Online) and
long distance inter-exchange carriers (such as AT&T Corp., MCI Communications
Corporation and Sprint Corporation), all of which currently offer Internet
access on a large scale; and (3) the possibility that new technologies may be
developed which offer improved performance or other desirable features.
Entering the telephone business will require, among other things, access to
switching capability (which the Company hopes to accomplish through arrangements
with telephone companies in neighboring communities), appropriate governmental
certifications and successful marketing of its services to existing telephone
company customers.
While the Company is optimistic about the prospects for these new lines of
business, there can be no assurance that it will be able to enter them
successfully or generate additional cash flow. See "Business -- Business
Strategy" and "Business -- Competition."
SUBSTANTIAL REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive governmental
regulation on the federal, state and local levels (but principally by the
Federal Communications Commission (the "FCC") and by local franchising
authorities). Many aspects of such regulation have recently been extensively
revised and are currently the subject of judicial proceedings and administrative
rulemakings, which are potentially significant to the Company. In this regard,
the Company believes that the regulation of cable television systems, including
the rates charged for cable services, remains a matter of interest to Congress,
the FCC and local regulatory officials. Accordingly, no assurance can be given
as to what future actions such parties or the courts may take or the effect
thereof on the Company. See "Legislation and Regulation."
The principal federal statute governing cable television is the
Communications Act of 1934, as amended (the "Communications Act"). Amendments to
the Communications Act in 1984 and 1992 and amendments in 1996 (codified as the
1996 Telecom Act) have had particular impact on the way in which cable systems
are regulated. The 1984 and 1992 amendments added materially to the regulatory
burdens of cable operators, particularly in the areas of (i) cable system rates
for both basic and certain nonbasic services; (ii) programming access and
exclusivity arrangements; (iii) access to cable channels by unaffiliated
programming services; (iv) leased access terms and conditions; (v) horizontal
and vertical ownership of cable systems; (vi) customer service requirements;
(vii) franchise renewals; (viii) television broadcast signal carriage and
retransmission consent; (ix) technical standards; (x) customer privacy; (xi)
consumer protection issues; (xii) cable equipment compatibility; (xiii) obscene
or indecent programming; and (xiv) requiring subscribers to subscribe to tiers
of service other than basic service as a condition of purchasing premium
services. The 1996 Telecom Act substantially amended the Communications Act by,
among other things, removing barriers to competition in the cable television and
telephone markets and reducing the regulation of cable television rates.
Under the FCC's rate regulations, most cable systems were required to
reduce their basic service and cable programming service tier ("CPST") rates in
1993 and 1994, and have since had their rate increases
14
<PAGE> 21
governed by a complicated price cap scheme. Operators also have the opportunity
of bypassing this "benchmark" regulatory scheme in favor of traditional "cost of
service" in cases where the latter methodology appears favorable. The FCC also
established a vastly simplified cost of service methodology for small cable
companies.
The Company, which qualifies as a small cable company under FCC rules, has
elected to rely on the cost-of-service rules as and when the Systems are
required to justify their rates for regulated services and, therefore, has not
implemented the rate reductions that would otherwise have been required if it
were subject to the FCC's benchmarks. Under the cost-of-service rules applicable
to small cable companies, eligible systems can establish permitted rates under a
simple formula that considers total operating expenses (including amortization
expenses), net rate base, rate of return, channel count and subscribers. If the
per channel rate resulting from these inputs for a cable system is no more than
$1.24, the cable system's rates will be presumed reasonable. If the
formula-generated rate exceeds the $1.24, the burden is on the cable operator to
establish the reasonableness of its calculations.
Substantially all of the Company's rates are currently under the $1.24 per
channel level, and the Company believes that all of its rates in excess of the
$1.24 per channel level are reasonable using the formula described above.
However, FCC rules permit local franchise authorities to review basic service
rates, and under certain circumstances, challenge CPST rates at the FCC. An
adverse ruling in any such proceeding could require the Company to reduce its
rates and pay refunds. A reduction in the rates it charges for regulated
services or the requirement that it pay refunds could have a material adverse
effect on the Company. Once the maximum permitted rate allowed by FCC rules is
being charged by the Company in regulated communities, future rate increases may
not exceed an inflation-indexed amount, plus increases in certain costs beyond
the cable operator's control, such as taxes, franchise fees and increased
programming costs. It is to be noted, however, that under the 1996 Telecom Act,
FCC regulation of the CPST expires for all cable systems on March 31, 1999.
In addition, other provisions of the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act") could in the future have a
material adverse effect on the Company's business. In particular, the 1992 Cable
Act conveyed to broadcasters the right generally to elect either to require (i)
the local cable operator to carry their signal or (ii) that such operator obtain
the broadcaster's consent before doing so. To date, compliance with these
provisions has not had a material effect on the Company, although this result
may change in the future depending on such factors as market conditions, channel
capacity and similar matters when such arrangements are renegotiated. See
"Legislation and Regulation."
NON-EXCLUSIVE FRANCHISES; NON-RENEWAL OR TERMINATION OF FRANCHISES
Cable television companies operate under franchises granted by local
authorities which are subject to renewal and renegotiation from time to time.
The Company's business is dependent upon the retention and renewal of its local
franchises. A franchise is generally granted for a fixed term ranging from five
to 15 years but in many cases is terminable if the franchisee fails to comply
with the material provisions thereof. The Company's franchises typically impose
conditions relating to the use and operation of the cable television system,
including requirements relating to the payment of fees, system bandwidth
capacity, customer service requirements, franchise renewal and termination. The
Company has 14 franchises (representing 11.3% of the Company's basic
subscribers) expiring prior to 2000 and 46 franchises (representing 39.3% of its
basic subscribers) expiring between 2000 and 2004.
The 1992 Cable Act prohibits franchising authorities from granting
exclusive cable television franchises and from unreasonably refusing to award
additional competitive franchises; it also permits municipal authorities to
operate cable television systems in their communities without franchises. The
Cable Communications Policy Act of 1984 (the "1984 Cable Act"), provides, among
other things, for an orderly franchise renewal process in which franchise
renewal will not be unreasonably withheld or, if renewal is denied and the
franchising authority acquires ownership of the system or effects a transfer of
the system to another person, the operator generally is entitled to the "fair
market value" for the system covered by such franchise. Although the Company
believes that it generally has good relationships with its franchising
authorities, no assurance can be given that the Company will be able to retain
or renew such franchises or that the terms of any such renewals will be on terms
as favorable to the Company as the Company's existing franchises. The
non-renewal or
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termination of franchises relating to a significant portion of the Company's
subscribers could have a material adverse effect on the Company's results of
operations. See "Business -- Franchises" and "Legislation and Regulation."
NO ASSURANCE OF SUCCESSFUL ACQUISITIONS
An element of the Company's business strategy is to achieve operational
efficiencies by providing advanced telecommunications services and video
services over an expanded subscriber base within a concentrated geographic area.
Consequently, the Company intends to consider potential opportunities to acquire
or trade cable television systems. Any acquisition or trade could have an
adverse effect upon the Company's results of operations or cash flow,
particularly acquisitions of new systems which must be integrated with the
Company's existing operations. There can be no assurance that the Company will
be able to integrate successfully any acquired systems with its existing
operations or realize any efficiencies from any acquisition or trade. There can
also be no assurance that any acquisition or trade, if consummated, will improve
operating results or that the Company will be able to obtain any financing that
may be necessary to fund any acquisition or trade in the future. In addition,
any acquisition or trade will be subject to, among other things, the
satisfaction of customary closing conditions and the receipt of certain
third-party or governmental approvals, including the consent of franchising
authorities. See "Business -- Business Strategy."
REDUCTION IN INSURANCE
On the advice of its insurance agent, to avoid the expense of being "over
insured," in 1994, the Company reduced its casualty insurance coverage (which
covers losses due to damage to its facilities and related business interruption)
from $15 million per occurrence to $10 million per occurrence for each of its
Systems (other than those in Florida and Louisiana). Because of the
industry-wide casualty insurance reductions that resulted from insurers' loss
experience with several hurricanes in the southeastern portion of the United
States, the Company's casualty insurance in Florida and Louisiana was ultimately
reduced to $1 million per occurrence. All of the Company's casualty insurance
coverage is subject to deductibles ranging between $10,000 and $100,000 per
occurrence. The Company believes that its Systems in Florida and Louisiana are
located in areas that are not subject to a high degree of risk from hurricanes,
or from ice storms (which do pose a significant risk for its Systems in other
areas), and that losses in excess of its existing coverage would be unlikely. If
the Company is unable to maintain adequate casualty insurance it will be subject
to a potential reduction in cash flow in the event of a loss in excess of its
policy limits, and if a significant loss were to occur, it could have a material
adverse effect on the Company's financial condition and results of operations.
See "Business -- Insurance."
1991 CHAPTER 11 PROCEEDINGS
In June 1991, the Company voluntarily filed for protection under Chapter 11
of the United States Bankruptcy Code. The bankruptcy filing was due to
acceleration of its then existing bank debt following disagreements among
members of the bank group that resulted in one member's failure to execute an
amendment to the Company's credit agreement which the Company believed had been
approved and would be executed. The Company's plan of reorganization was
confirmed by the bankruptcy court in August 1992 and was consummated in
September 1992. Other than the restructuring of the bank group debt, no changes
to the Company's financial statements, operations or management occurred as a
result of the bankruptcy. "Fresh start" accounting was not required and,
pursuant to the plan, the Company repaid all of its bank lenders and unsecured
creditors in full.
EFFECTIVE SUBORDINATION TO SECURED DEBT
The payment of the principal of, premium, if any, and interest on and any
other amounts owing in respect of the Exchange Notes will be effectively
subordinated in right of payment to all existing and future secured indebtedness
of the Company. Upon any distribution of assets pursuant to any liquidation,
insolvency, dissolution, reorganization or similar proceeding, the holders of
secured indebtedness will be entitled to receive payment in full from the
proceeds of their collateral (which will include substantially all of the
Company's assets) before the holders of the Exchange Notes will be entitled to
receive any payment with respect thereto. As a result, holders of the Exchange
Notes may recover ratably less than holders of secured indebtedness of
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the Company. In addition, if any default exists with respect to secured
indebtedness and certain other conditions are satisfied, the Company may not
make any payments on the Exchange Notes for a designated period of time. At June
30, 1997, after giving effect to the Refinancing, the Company would have had no
Indebtedness outstanding (other than the Notes), and subject to the terms of the
New Bank Credit Facility and the Company's Partnership Agreement, the ability to
borrow up to $20 million (with an option to increase the amount to $30 million)
under the New Bank Credit Facility. The New Bank Credit Facility is secured by
substantially all of the Issuers' assets. See "Description of the Exchange
Notes."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture and the New Bank Credit Facility impose restrictions that,
among other things, limit the amount of additional indebtedness that may be
incurred by the Company and impose limitations on, among other things,
investments, loans and other payments, certain transactions with affiliates and
certain mergers and acquisitions. The New Bank Credit Facility also requires the
Company to maintain specified financial ratios and meet certain financial tests.
The ability of the Company to comply with such covenants and restrictions can be
affected by events beyond its control, and there can be no assurance that the
Company will achieve operating results that would permit compliance with such
provisions. The breach of any of the provisions of the New Bank Credit Facility
would, under certain circumstances, result in defaults thereunder, permitting
the lenders under the New Bank Credit Facility to accelerate the indebtedness
under the New Bank Credit Facility. If the Company were unable to pay the
amounts due in respect of the New Bank Credit Facility, the lenders thereunder
could foreclose upon the assets pledged to secure such payment. In such event,
the holders of the Exchange Notes might not be able to receive any payments, if
ever, until the payment default was cured or waived, any such acceleration was
rescinded or the indebtedness under the New Bank Credit Facility was discharged
or paid in full. Any of such events would adversely affect the Company's ability
to service the Exchange Notes.
CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all of the outstanding Notes and Exchange Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of
repurchase. The Company's ability to pay cash to holders of the Notes and
Exchange Notes upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that, in the event of a Change of
Control, the Company will have, or will have access to, sufficient funds or will
be contractually permitted under the terms of other outstanding indebtedness and
obligations, including the New Bank Credit Facility, to pay the required
purchase price for all of the Notes and Exchange Notes tendered by holders
thereof upon the occurrence of a Change of Control. The exercise by the holders
of the Notes and Exchange Notes of their right to require the Issuers to
repurchase the Notes and Exchange Notes upon the occurrence of a Change of
Control could also cause a default under other indebtedness of the Company, even
if the Change of Control itself does not, because of the financial effect of
such repurchase on the Company. In connection with a Change of Control, the
General Partner may be entitled to be paid an incentive compensation fee of up
to 2% of the equity value of the Company's Systems. Any incentive fee earned by
the General Partner in connection with a Change of Control would be permitted to
be paid to the General Partner following the payment by the Company of all Notes
and Exchange Notes properly tendered for payment under a Change of Control
Offer.
FRAUDULENT TRANSFER STATUTES
The incurrence by the Company of indebtedness such as the Notes and
Exchange Notes may be subject to review under relevant state and federal
fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on
behalf of unpaid creditors of the Company. Under these laws, if a court were to
find that, after giving effect to the sale of the Notes and Exchange Notes and
the application of the net proceeds from the Notes, either (a) the Company
incurred such indebtedness with the intent of hindering, delaying or defrauding
creditors or (b) the Company received less than reasonably equivalent value or
consideration for incurring such indebtedness and (i) was insolvent or was
rendered insolvent by reason of such transactions, (ii) was engaged in a
business or transaction for which the assets remaining with the Company
constituted unreasonably small capital, or (iii) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they matured,
such court may subordinate such indebtedness to presently existing and future
indebtedness of the Company, as the case may be, avoid the issuance of such
indebtedness and direct the
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repayment of any amounts paid thereunder to the Company's creditors or take
other action detrimental to the holders of such indebtedness.
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, were greater than the value of all its property at a fair
valuation, or if the present fair saleable value of the debtor's assets were
less than the amount required to repay its probable liabilities on its debts,
including contingent liabilities, as they become absolute and matured.
The Company believes that it received equivalent value at the time the
indebtedness under the Notes was incurred. In addition, the Company does not
believe that it, after giving effect to the Refinancing, (i) was insolvent or
rendered insolvent, (ii) was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital, or (iii) intended to
incur, or believed that it would incur, debts beyond its ability to pay such
debts as they mature. These beliefs are based on the Company's operating history
and analysis of internal cash flow projections and estimated values of assets
and liabilities of the Company at the time of the Offering of the Notes. There
can be no assurance, however, that a court passing on these issues would make
the same determination.
RELIANCE ON MANAGEMENT
The Company relies significantly on the services of James Communication
Partners, a Michigan co-partnership and the sole general partner of the Company
(the "General Partner"), and the personnel employed by or on behalf of the
General Partner. The Company maintains $5 million of key-man life insurance on
Mr. William R. James, who effectively controls the General Partner. The Company
could be adversely affected, however, if Mr. James or any of Messrs. Trenary,
Shoemaker and Madison were unwilling or unable to continue to make their
services available to the Company. See "Management."
LACK OF PUBLIC MARKET FOR EXCHANGE NOTES
The Notes are currently owned by a relatively small number of beneficial
owners. The Notes have not been registered under the Securities Act or any state
securities laws and, unless so registered and to the extent not exchanged for
the Exchange Notes, may not be offered or sold except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws.
The Exchange Notes will constitute a new class of securities with no
established trading market. Although the Exchange Notes will generally be
permitted to be resold or otherwise transferred by nonaffiliates of the Issuers
without compliance with the registration requirements of the Securities Act, the
Issuers do not intend to list the Exchange Notes on any national securities
exchange or to seek admission thereof to trading in the Nasdaq National Market.
CIBC Wood Gundy Securities Corp. and First Chicago Capital Markets, Inc. (the
"Initial Purchasers") have advised the Issuers that they currently intend to
make a market in the Exchange Notes. The Initial Purchasers are not obligated to
do so, however, and any market-making with respect to the Exchange Notes may be
discontinued at any time without notice. In addition, such market-making may be
limited during the Exchange Offer and the pendency of any shelf registration
statement. Therefore, there can be no assurance as to the liquidity of any
trading market for the Exchange Notes or that an active public market for the
Exchange Notes will develop. If such a market were to develop, the Exchange
Notes could trade at prices that may be lower than the initial offering price
depending on many factors, including prevailing interest rates, the Company's
operating results and the market for similar securities.
NO PERSONAL LIABILITY OF CERTAIN PERSONS
No director, officer, employee, partner, interestholder or shareholder, as
such, of either Issuer or of the General Partner or of any corporate partner of
the General Partner will have any liability for any obligations of the Issuers
under the Exchange Notes. Each holder of the Exchange Notes by purchasing an
Exchange Note waives and releases all such liability. Absent such waiver and
release, under the Delaware Revised Uniform
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Limited Partnership Act, as amended, the holders of the Exchange Notes would be
able to proceed against the General Partner (and against the limited partners in
very limited circumstances) in the event of nonpayment of the Exchange Notes.
See "Description of the Exchange Notes -- No Personal Liability of Certain
Persons."
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for Notes pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
such Notes, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, owners of the Notes desiring to tender such
Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. The Issuers are under no duty to give notification of defects
or irregularities with respect to the tenders of Notes for exchange. Notes that
are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions on transfer thereof, and on consummation of the Exchange Offer, the
registration rights under the Registration Rights Agreement generally will
terminate. In addition, any owner of Notes who tenders in the Exchange Offer for
the purpose of participating in a distribution of the Exchange Notes, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes. Each broker-dealer that receives Exchange Notes
for its own account in exchange for Notes, where such Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes. To the extent that Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Notes could be adversely affected. See "The Exchange Offer."
RESTRICTIONS ON TRANSFER
The Notes were offered and sold by the Issuers in a private offering exempt
from registration under to the Securities Act and have been resold pursuant to
Rule 144A under the Securities Act and to a limited number of other
institutional "accredited investors" (as defined in Rule 501(a) (1), (2), (3) or
(7) under the Securities Act). As a result, the Notes may not be reoffered or
resold by purchasers except pursuant to an effective registration statement
under the Securities Act or pursuant to an applicable exemption from the
requirement for such registration, and the Notes bear legends reflecting those
restrictions. Each owner of Notes (other than any owner who is an affiliate of
the Issuers) who duly exchanges Notes for Exchange Notes in the Exchange Offer
will receive Exchange Notes that are freely transferable under the Securities
Act. Owners of Notes who participate in the Exchange Offer should be aware,
however, that if they accept the Exchange Offer for the purpose of engaging in a
distribution, the Exchange Notes may not be publicly reoffered or resold without
complying with the registration and prospectus delivery requirements of the
Securities Act. As a result, each owner of Notes accepting the Exchange Offer
will be deemed to have represented, by its acceptance of the Exchange Offer,
that it acquired the Exchange Notes in the ordinary course of business and that
it is not engaged in, and does not intend to engage in, a distribution of the
Exchange Notes.
The Notes currently may be sold pursuant to the restrictions set forth in
Rule 144A under the Securities Act or pursuant to another available exemption
under the Securities Act without registration under the Securities Act. To the
extent that Notes are tendered and accepted in the Exchange Offer, the trading
market for the untendered and tendered but unaccepted Notes could be adversely
affected.
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THE EXCHANGE OFFER
The following discussion sets forth or summarizes what the Company believes
to be the material terms of the Exchange Offer, including those set forth in the
Letter of Transmittal distributed with this Prospectus. This summary is
qualified in its entirety by reference to the full text of the documents
underlying the Exchange Offer, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part and are incorporated
herein by reference.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Notes were sold by the Issuers on the Issue Date and were subsequently
resold to qualified institutional buyers pursuant to Rule 144A under the
Securities Act and to institutional investors that are accredited investors in a
manner exempt from registration under the Securities Act. In connection with the
Offering, the Issuers entered into the Registration Rights Agreement, which
requires, among other things, that promptly following the Issue Date the Issuers
(i) file with the Commission a registration statement under the Securities Act
with respect to an issue of new notes of the Issuers identical in all material
respects (other than transfer restrictions) to the Notes (which obligation has
been satisfied by the filing of the Registration Statement), (ii) use their best
efforts to cause such registration statement to become effective under the
Securities Act and (iii) upon the effectiveness of that registration statement,
offer to the Holders of the Notes the opportunity to exchange their Notes for a
like principal amount of Exchange Notes, which would be issued without a
restrictive legend and may be reoffered and resold by the holder without
restrictions or limitations under the Securities Act (other than any such holder
that is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act). A copy of the Registration Rights Agreement has been filed as
an exhibit to the Registration Statement. The term "Holder" with respect to the
Exchange Offer means any person in whose name the Notes are registered on the
books of the Issuers or any other person who has obtained a properly completed
bond power from the registered holder.
Any Notes tendered and exchanged in the Exchange Offer will reduce the
principal amount of Notes outstanding. Following the consummation of the
Exchange Offer, Holders of the Notes who did not tender their Notes generally
will not have any further registration rights under the Registration Rights
Agreement, and such Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Notes could be
adversely affected. The Notes are currently eligible for sale pursuant to Rule
144A through the PORTAL System of the National Association of Securities
Dealers, Inc. Because the Issuers anticipate that most Holders of Notes will
elect to exchange such Notes for Exchange Notes due to the absence of
restrictions on the resale of Exchange Notes under the Securities Act, the
Issuers anticipate that the liquidity of the market for any Notes remaining
after the consummation of the Exchange Offer may be substantially limited.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Notes
validly tendered and not withdrawn prior to 5:00 p.m. New York City time on the
Expiration Date. The Issuers will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Notes accepted
in the Exchange Offer. Holders may tender some or all of their Notes pursuant to
the Exchange Offer. However, Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Notes except that (i) the Exchange Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof
and (ii) the holders of the Exchange Notes generally will not be entitled to
certain rights under the Registration Rights Agreement, which rights generally
will terminate upon consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Notes and will be entitled to the benefits of the
Indenture.
Holders of Notes do not have any appraisal or dissenters' rights under the
Delaware Uniform Limited Partnership Act, the Michigan Business Corporation Act
or the Indenture in connection with the Exchange
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Offer. The Issuers intend to conduct the Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of the
Commission thereunder, including Rule 14e-1 thereunder.
The Issuers will be deemed to have accepted validly tendered Notes when, as
and if the Issuers have given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering Holders for the
purpose of receiving the Exchange Notes from the Issuers.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering Holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Notes pursuant to
the Exchange Offer. The Issuers will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange Offer.
See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on the
expiration date for the Exchange Offer set forth on the cover page of this
Prospectus unless the Issuers, in their sole discretion, extend the Exchange
Offer, in which case the term "Expiration Date" will mean the latest date and
time to which the Exchange Offer is extended.
To extend the Exchange Offer, the Issuers will notify the Exchange Agent of
any extension by oral or written notice, followed by a public announcement
thereof no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
The Issuers reserve the right, in their reasonable judgment, (i) to delay
accepting any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "-- Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a public announcement
thereof. If the Exchange Offer is amended in a manner determined by the Issuers
to constitute a material change, the Issuers will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered Holders, and depending upon the significance of the amendment and the
manner of disclosure to the registered Holders, the Issuers will extend the
Exchange Offer for a period of five to ten business days if the Exchange Offer
would otherwise expire during such five to ten business-day period.
If the Issuers do not consummate the Exchange Offer or, in lieu thereof,
the Issuers do not file and cause to become effective a resale shelf
registration for the Notes within the time periods set forth herein, additional
interest will accrue and be payable on the Notes either temporarily or
permanently. See "Exchange Offer and Registration Rights."
Without limiting the manner in which the Issuers may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Issuers shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON EXCHANGE NOTES
The Exchange Notes will bear interest from the Issue Date (or the most
recent interest payment date to which interest on the Notes has been paid).
Accordingly, holders of Notes that are accepted for exchange will not receive
interest that is accrued but unpaid on the Notes at the time of tender, but such
interest will be
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payable on the first interest payment date after the Expiration Date. Interest
on the Exchange Notes will be payable semiannually on each February 15 and
August 15, commencing on February 15, 1998.
PROCEDURES FOR TENDERING
Only a Holder of Notes (or, in the case of interests in the Global Notes
held by DTC, a DTC participant listed in an official DTC proxy) may tender such
Notes in the Exchange Offer. To tender in the Exchange Offer, a Holder or DTC
participant must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, have the signatures thereon guaranteed if required by the
Letter of Transmittal and mail or otherwise deliver such Letter of Transmittal
or such facsimile, together with the Notes and any other required documents, to
the Exchange Agent so as to be received by the Exchange Agent at the address set
forth below prior to 5:00 p.m., New York City time, on the Expiration Date.
Delivery of the Notes may be made by book-entry transfer in accordance with the
procedures described below. Confirmation of such book-entry transfer must be
received by the Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each Holder or DTC participant will
make to the Issuers the representation set forth below in the second paragraph
under the heading "-- Resale of Exchange Notes."
The tender by a Holder or DTC participant and the acceptance thereof by the
Issuers will constitute an agreement between such Holder or DTC participant and
the Issuers in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER OR DTC PARTICIPANT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
HOLDERS AND DTC PARTICIPANTS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE
SENT TO THE ISSUERS. BENEFICIAL OWNERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH BENEFICIAL OWNERS.
Any beneficial owner whose Notes are held through a broker, dealer,
commercial bank, trust company or other nominee and who wishes to tender should
contact such nominee Holder and instruct such nominee to tender on such
beneficial owner's behalf. Such instructions should be given in sufficient time
to ensure that the nominee will be able to take the necessary steps to tender
such Notes before the Expiration Date.
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Notes tendered pursuant thereto are tendered (i) by a registered
Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and unless waived by the Issuers, evidence satisfactory
to the Issuers of their authority to so act must be submitted with the Letter of
Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Issuers in their sole discretion, which determination will be
final and binding. The Issuers reserve the absolute right to reject any and all
Notes not properly tendered or any Notes the Issuers' acceptance of which would,
in the opinion of counsel for the
22
<PAGE> 29
Issuers, be unlawful. The Issuers also reserve the right to waive any defects,
irregularities or conditions of tender as to particular Notes. The Issuers'
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Notes must be cured within such time as the Issuers determine. Although the
Issuers intend to notify Holders of defects or irregularities with respect to
tenders of Notes, none of the Issuers, the Exchange Agent or any other person
will incur any liability for failure to give such notification. Tenders of Notes
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering Holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
BOOK-ENTRY TRANSFER; ATOP
The Issuers understand that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Notes at DTC for the purpose of facilitating the Exchange Offer, and subject to
the establishment thereof, any financial institution that is a participant in
DTC may make book-entry delivery of the Notes by causing DTC to transfer such
Notes into the Exchange Agent's account with respect to the Notes in accordance
with DTC's procedures for such transfer. Although delivery of the Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC, a
Letter of Transmittal properly completed and duly executed with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures. Delivery of documents to DTC does not constitute
delivery to the Exchange Agent.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the Book-Entry Facility Automated Tender Offer Program ("ATOP").
Accordingly, DTC participants listed on an official DTC proxy may electronically
transmit their acceptance of the Exchange Offer by causing DTC to Transfer Notes
to the Exchange Agent in accordance with DTC's ATOP procedures for transfer. DTC
will then send an Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the confirmation of a book-entry
transfer, which states that DTC has received an express acknowledgement from the
participant in DTC tendering Notes which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Issuers may enforce such
agreement against the participant. In the case of an Agent's Message relating to
guaranteed delivery, the term means a message transmitted by DTC and received by
the Exchange Agent which states that DTC has received an express acknowledgement
from the participant in DTC tendering Notes that such participant has received
and agrees to be bound by the Notice of Guaranteed Delivery.
Each DTC participant transmitting an acceptance of the Exchange Offer
through the ATOP procedures will be deemed to have agreed to be bound by the
terms of the Letter of Transmittal. Nevertheless, in order for such acceptance
to constitute a valid tender of the DTC participant's Notes, such participant
must complete and sign a Letter of Transmittal and deliver it to the Exchange
Agent before the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent
23
<PAGE> 30
or (iii) who cannot complete the procedures for book-entry transfer, prior to
the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Notes and the principal amount of Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof), together with the certificate(s)
representing the Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at DTC) and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Notes into the Exchange Agent's account at DTC) and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at the
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes or, in the case of Notes transferred by
book-entry transfer, the name and number of the account at DTC to be credited),
(iii) be signed by the Holder or DTC participant in the same manner as the
original signature on the Letter of Transmittal by which such Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee register the transfer of
such Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Notes are to be registered, if different from that of
the Depositor. All questions as to the validity, form and eligibility (including
time or receipt) of such notices will be determined by the Issuers, whose
determination will be final and binding on all parties. Any Notes so withdrawn
will be deemed not to have been validly tendered for purposes of the Exchange
Offer, and no Exchange Notes will be issued with respect thereto unless the
Notes so withdrawn are validly retendered. Any Notes which have been tendered
but which are not accepted for exchange will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers will not
be required to accept for exchange, or to exchange Exchange Notes for, any
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Notes, if:
(a) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted which, in the reasonable
judgment of the Issuers, might materially impair the ability
24
<PAGE> 31
of the Issuers to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Issuers; or
(b) any governmental approval has not been obtained, which approval
the Issuers, in their reasonable judgment, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Issuers determine in their reasonable judgment that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any Notes and
return all tendered Notes to the tendering Holders, (ii) extend the Exchange
Offer and retain all Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of Holders to withdraw such Notes (see
"-- Withdrawals of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Notes which have
not been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Issuers will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and depending
upon the significance of the waiver and the manner of disclosure to the
registered Holders, the Issuers will extend the Exchange Offer for a period of
five to ten business days if the Exchange Offer would otherwise expire during
such five to ten business-day period.
EXCHANGE AGENT
United States Trust Company of New York will act as Exchange Agent for the
Exchange Offer with respect to the Notes.
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal for the Notes and requests for
copies of Notice of Guaranteed Delivery should be directed to the Exchange
Agent, addressed as follows:
By registered or certified mail, overnight mail or courier service or in
person by hand:
<TABLE>
<CAPTION>
By Overnight Courier: By Hand: By Registered or Certified Mail
<C> <C> <C>
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway P.O. Box 844
New York, New York 10003 Lower Level Attn: Corporate Trust Services
Attn: Corporate Trust Services Attn: Corporate Trust Services Cooper Station
New York, New York 10006 New York, New York 10276-0844
</TABLE>
By facsimile:
(212) 420-6152
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telephone, facsimile or in person by employees of the Company and
its affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers or other persons
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith and pay
other registration expenses, including fees and expenses of the Trustee, filing
fees, blue sky fees and printing and distribution expenses.
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of the Notes pursuant to the Exchange Offer. If, however, certificates
representing the Exchange Notes or the Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Notes tendered, or if
tendered Notes are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason
25
<PAGE> 32
other than the exchange of the Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered Holder or
any other person) will be payable by the tendering Holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Notes, which is the aggregate principal amount of the Notes, as reflected in the
Company's accounting records on the date of exchange. Accordingly, no gain or
loss for accounting purposes will be recognized in connection with the Exchange
Offer. The expenses of the Exchange Offer will be amortized over the term of the
Exchange Notes.
RESALE OF EXCHANGE NOTES
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Issuers believe that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Notes may be offered
for resale, resold and otherwise transferred by any owner of such Exchange Notes
(other than any such owner which is an "affiliate" of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such owner's
business and such owner does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of such
Exchange Notes. Any owner of Notes who tenders in the Exchange Offer with the
intention to participate, or for the purpose of participating, in a distribution
of the Exchange Notes may not rely on the position of the staff of the SEC
enunciated in Exxon Capital Holdings Corporation (April 13, 1988) and Morgan
Stanley & Co., Incorporated (June 5, 1991) or similar no-action letters but
rather must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. In addition, any
such resale transaction should be covered by an effective registration statement
containing the selling security holders information required by Item 507 of
Regulation S-K of the Securities Act. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Notes, where such Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
By tendering in the Exchange Offer, each Holder (or DTC participant, in the
case of tenders of interests in the Global Notes held by DTC) will represent to
the Issuers that, among other things, (i) the Exchange Notes acquired pursuant
to the Exchange Offer are being obtained in the ordinary course of business of
the person receiving such Exchange Notes, whether or not such person is the
registered Holder or DTC participant, (ii) neither the Holder or DTC participant
nor any such other person has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and (iii) the Holder or
DTC participant and such other person acknowledge that if they participate in
the Exchange Offer for the purpose of distributing the Exchange Notes (a) they
must, in the absence of an exemption therefrom, comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on the no-action letters referenced
above and (b) failure to comply with such requirements in such instance could
result in such Holder or DTC participant or such other person incurring
liability under the Securities Act for which such Holder or DTC participant or
such other person is not indemnified by the Issuers. Further, by tendering in
the Exchange Offer, each Holder or DTC participant and such other person that
may be deemed an "affiliate" (as defined under Rule 405 of the Securities Act)
of the Issuers will represent to the Issuers that such Holder or DTC participant
and such other person understand and acknowledge that the Exchange Notes may not
be offered for resale, resold or otherwise transferred by that Holder or DTC
participant or such other person without registration under the Securities Act
or an exemption therefrom.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of the making of this Exchange Offer, the Issuers will have
fulfilled one of their obligations under the Registration Rights Agreement, and
Holders of Notes who do not tender their Notes generally will not have any
further registration rights under the Registration Rights Agreement or
otherwise. Accordingly,
26
<PAGE> 33
any Holder of Notes that does not exchange that Holder's Notes for Exchange
Notes will continue to hold the untendered Notes and will be entitled to all the
rights and limitations applicable thereto under the Indenture, except to the
extent that such rights or limitations, by their terms, terminate or cease to
have further effectiveness as a result of the Exchange Offer.
The Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Notes may be
resold only (i) to the Issuers (upon redemption thereof or otherwise), (ii)
pursuant to an effective registration statement under the Securities Act, (iii)
so long as the Notes are eligible for resale pursuant to Rule 144A under the
Securities Act, to a qualified institutional buyer within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A, (iv) outside the
United States to a foreign person pursuant to the exemption from the
registration requirements of the Securities Act provided by Regulation S
thereunder, (v) pursuant to an exemption from registration under the Securities
Act provided by Rule 144 thereunder (if available) or (vi) to an institutional
accredited investor in a transaction exempt from the registration requirements
of the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States or other jurisdiction. See "Risk Factors
- --Restrictions on Transfer."
OTHER
Participation in the Exchange Offer is voluntary, and holders should
carefully consider whether to accept. Holders and beneficial owners of the Notes
are urged to consult their financial and tax advisors in making their own
decision on what action to take.
The Company may in the future seek to acquire untendered Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Company has no present plans to acquire any Notes that are not
tendered in the Exchange Offer or to file a registration statement to permit
resales of any untendered Notes.
In any state where the Exchange Offer does not fall under a statutory
exemption to the blue sky rules, the Issuers by the date the Exchange Offer
commences will have filed the appropriate registrations and notices and will
have made the appropriate requests to permit the Exchange Offer to be made in
such state.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE EXCHANGE OFFER
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "IRS") will not take a contrary view, and
no ruling from the IRS has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to Holders. Certain Holders of the Notes (including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. Each Holder of a
Note should consult its own tax advisor as to the particular tax consequences of
exchanging such Holder's Notes for Exchange Notes, including the applicability
and effect of any state, local or foreign tax laws.
The issuance of the Exchange Notes to Holders of the Notes pursuant to the
terms set forth in this Prospectus will not constitute an exchange for United
States federal income tax purposes. Consequently, no gain or loss would be
recognized by Holders of the Notes upon receipt of the Exchange Notes, and
ownership of the Exchange Notes will be considered a continuation of ownership
of the Notes. For purposes of determining gain or loss on the subsequent sale or
exchange of the Exchange Notes, a Holder's basis in the Exchange Notes should be
the same as such Holder's basis in the Notes exchanged therefor. A Holder's
holding period for the Exchange Notes should include the Holder's holding period
for the Notes exchanged therefor. The issue price, original issue discount
inclusion and other tax characteristics of the Exchange Notes should be
identical to the issue price, original issue discount inclusion and other tax
characteristics of the Notes exchanged therefor.
27
<PAGE> 34
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1997 and as adjusted to give effect to the Refinancing as if it had occurred
on June 30, 1997. This table should be read in conjunction with "Selected
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's financial statements and the notes
thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT JUNE 30, 1997
----------------------
AS
ACTUAL ADJUSTED
------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total debt:
Prior bank credit facility................................ $ 66,393 $ --
New Bank Credit Facility(1)............................... -- --
Notes..................................................... -- 100,000
Subordinated debt......................................... 16,557 --
Other debt................................................ 44 44
-------- --------
Total debt............................................. 82,994 100,044
Partners' deficit(2)........................................ (56,320) (64,007)
-------- --------
Total capitalization................................... $ 26,674 $ 36,037
======== ========
</TABLE>
- -------------------------
(1) The Company did not borrow under the New Bank Credit Facility in connection
with the Refinancing. The New Bank Credit Facility is secured by
substantially all of the Issuers' assets. See "Description of Other
Indebtedness."
(2) Adjusted for the write-off of $2.0 million of unamortized deferred financing
costs, the payment of $1.3 million of additional interest paid to the
holders of the subordinated debt and the repurchase of the related warrants
at a price of $4.4 million.
28
<PAGE> 35
SELECTED FINANCIAL DATA
The following table sets forth certain historical financial data for the
Company for each of the years in the five-year period ended December 31, 1996
and for the six-month periods ended June 30, 1996 and 1997. It also sets forth
certain adjusted financial data for the year ended December 31, 1996 and the
six-month period ended June 30, 1997 that reflect the effects of the
Refinancing. The financial data for the years ended December 31, 1992 to 1996
were derived from the financial statements of the Company which (other than as
of and for the six-month periods ended June 30, 1996 and 1997) have been audited
by Deloitte & Touche LLP, independent auditors. The financial statements of the
Company at December 31, 1995 and 1996 and for each of the years in the
three-year period ended December 31, 1996, together with the report of Deloitte
& Touche LLP thereon, appear elsewhere in this Prospectus. In the opinion of the
Company, the unaudited data presented for the six-month periods ended June 30,
1996 and 1997 reflect all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of such data. Results for the
six-month periods ended June 30, 1996 and 1997 are not necessarily indicative of
the results to be expected for any other interim period or the year as a whole.
This information should be read in conjunction with "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's financial statements and the notes thereto
appearing elsewhere in this Prospectus.
29
<PAGE> 36
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SUBSCRIBER DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $ 28,029 $ 30,025 $30,864 $33,305 $35,213 $ 17,561 $ 17,806
System operating expenses(1).... 13,486 14,129 14,408 15,073 16,249 7,939 8,494
Non-system operating
expenses(2)................... 1,901 2,251 2,136 2,280 2,480 1,267 1,240
Restructuring costs(3).......... 1,494 -- -- -- -- -- --
Depreciation and amortization... 18,686 16,915 14,102 12,214 9,272 4,636 3,594
-------- -------- ------- ------- ------- -------- --------
Operating (loss) income......... (7,538) (3,270) 218 3,738 7,212 3,719 4,478
Interest expense, net........... 11,870 8,174 8,416 9,659 8,852 4,584 4,265
Other expenses, net............. 8 58 607 141 254 160 186
-------- -------- ------- ------- ------- -------- --------
(Loss) income before
extraordinary item............ (19,416) (11,502) (8,805) (6,062) (1,894) (1,025) 27
Extraordinary loss due to debt
refinancing................... -- -- -- 548 -- -- --
-------- -------- ------- ------- ------- -------- --------
Net (loss) income............... $(19,416) $(11,502) $(8,805) $(6,610) $(1,894) $ (1,025) $ 27
======== ======== ======= ======= ======= ======== ========
OTHER DATA:
EBITDA(4)....................... $ 12,642 $ 13,645 $14,320 $15,952 $16,484 $ 8,355 $ 8,072
System operating cash flow(5)... 14,543 15,896 16,456 18,232 18,964 9,622 9,312
Capital expenditures............ 1,007 1,041 1,391 2,405 3,942 1,307 3,643
EBITDA margin(6)................ 45.1% 45.4% 46.4% 47.9% 46.8% 47.6% 45.3%
Ratio of earnings to fixed
charges(7).................... -- -- -- -- -- -- 1.0x
SUMMARY SUBSCRIBER DATA:
Homes passed(8)................. 127,215 127,863 127,943 128,908 129,291 129,162 129,291
Basic subscribers(9)............ 79,208 79,414 80,529 80,190 78,449 79,429 78,337
Basic penetration(10)........... 62.3% 62.1% 62.9% 62.2% 60.7% 61.5% 60.6%
Premium subscriptions(11)....... 29,213 28,064 28,765 28,900 25,652 27,589 25,365
Premium penetration(12)......... 36.9% 35.3% 35.7% 36.0% 32.7% 34.7% 32.4%
Average monthly total revenues
per subscriber(13)............ $ 29.69 $ 31.49 $ 32.17 $ 34.56 $ 36.89 $ 36.51 $ 37.85
System operating cash flow per
subscriber(14)................ $ 185 $ 200 $ 206 $ 227 $ 238 $ 240 $ 238
EBITDA per subscriber(15)....... $ 161 $ 172 $ 179 $ 199 $ 207 $ 208 $ 206
ADJUSTED DATA:
Adjusted cash interest expense(16)............................................ $10,750 $ 5,375
Ratio of adjusted total debt to annualized EBITDA............................. 6.1x 6.2x
Ratio of EBITDA to adjusted cash interest expense............................. 1.5x 1.5x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30, 1997
---------------------------------------------------- ------------------------
1992 1993 1994 1995 1996 HISTORICAL AS ADJUSTED
---- ---- ---- ---- ---- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 1,589 $ 1,309 $ 404 $ 1,056 $ 101 $ 249 $ 7,469
Total assets..................... 78,891 61,845 46,746 39,727 32,844 32,581 41,822
Total debt....................... 100,500 95,000 88,284 88,573 82,494 82,994 100,044
Partners' deficit................ (26,111) (37,613) (47,022) (54,452) (56,346) (56,320) (64,007)
</TABLE>
(see footnotes on the following page)
30
<PAGE> 37
NOTES TO SELECTED FINANCIAL DATA
(1) System operating expenses exclude depreciation and amortization.
(2) Non-system operating expenses consist primarily of management fees payable
to the General Partner of the Company. See "Management Discussion and
Analysis of Financial Condition and Results of Operations" and "Management
-- Executive Compensation."
(3) Restructuring costs include expenses related to the 1991 Chapter 11
Proceeding. See "Risk Factors -- 1991 Chapter 11 Proceedings."
(4) EBITDA represents operating (loss) income before restructuring costs,
depreciation and amortization. The Company has included EBITDA data (which
are not a measure of financial performance under GAAP) because it
understands such data are used by certain investors to determine a
company's historical ability to service its indebtedness. EBITDA should not
be considered as an alternative to net income as an indicator of the
Company's performance or as an alternative to cash flow as a measure of
liquidity as determined in accordance with GAAP.
(5) System operating cash flow represents revenues less system operating
expenses. System operating cash flow should not be considered as an
alternative to net income as an indicator of the Company's performance or
as an alternative to cash flow as a measure of liquidity as determined in
accordance with GAAP.
(6) EBITDA margin represents EBITDA divided by revenues.
(7) For purposes of calculating the ratio of earnings to fixed charges,
earnings include (loss) income before extraordinary items plus interest
expense (which includes amortization of debt issuance costs). Fixed charges
consist of interest expense incurred (including amortization of debt
issuance costs) and the estimated interest component of rent expense.
Earnings were inadequate to cover fixed charges by $19.4 million, $11.5
million, $8.8 million, $6.1 million and $1.9 million for the years ended
December 31, 1992, 1993, 1994, 1995 and 1996, respectively, and by $1.0
million in the six months ended June 30, 1996.
(8) Homes passed refers to estimates by the Company of the number of dwelling
units in a particular community that can be connected to the distribution
system without any further extension of principal transmission lines. Such
estimates are based upon a variety of sources, including billing records,
house counts, city directories and other local sources.
(9) For purposes of all information presented in this Prospectus, unless
otherwise indicated, the number of basic subscribers for the Systems has
been computed by adding the actual number of subscribers for all non-bulk
accounts and the equivalent subscribers for all bulk accounts. The number
of such equivalent subscribers has been calculated by dividing aggregate
basic service revenues for bulk accounts by the full basic service rate for
the community in which the account is located.
(10) Basic subscribers as a percentage of homes passed.
(11) A customer may purchase more than one premium service, each of which is
counted as a separate premium subscription.
(12) Premium subscriptions as a percentage of basic subscribers.
(13) The average of the monthly total revenues divided by the number of basic
subscribers at the end of such month during the twelve-month periods ended
December 31 for each year presented and the six-month periods ended June
30, 1996 and 1997.
(14) System operating cash flow divided by the average number of basic
subscribers for the period. The amount was annualized for the periods ended
June 30, 1996 and 1997.
(15) EBITDA divided by the average number of basic subscribers for the period.
The amount was annualized for the periods ended June 30, 1996 and 1997.
(16) Reflects the interest rate on the Notes of 10.75%.
31
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides additional information regarding the
financial condition and results of operations of the Company for the six month
periods ended June 30, 1996 and 1997 and for each of the years ended December
31, 1994, 1995 and 1996. This discussion should be read in conjunction with
"Selected Financial Data" and the Company's financial statements and the notes
thereto appearing elsewhere in this Prospectus.
OVERVIEW
Revenues. The Company's revenues are primarily attributable to subscription
fees charged to subscribers to the Company's basic and premium cable television
programming services. Basic revenues consist of monthly subscription fees for
all services (other than premium programming) as well as monthly charges for
customer equipment rental. Premium revenues consist of monthly subscription fees
for programming provided on a per-channel basis. In addition, other revenues are
derived from installation and reconnection fees charged to subscribers to
commence or discontinue service, late payment fees, franchise fees, advertising
revenues and commissions related to the sale of goods by home shopping services.
At June 30, 1997, the Company had 78,337 basic subscribers and 25,365 premium
subscriptions, representing basic penetration of 60.6% and premium penetration
of 32.4%. The table below sets forth for the periods indicated the percentage of
the Company's total revenues attributable to the various sources:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- ----------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Basic................................. 81.3% 80.8% 82.6% 82.4% 83.8%
Premium............................... 11.5 11.2 10.0 10.2 9.2
Other................................. 7.2 8.0 7.4 7.4 7.0
----- ----- ----- ----- -----
Total revenues................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
System Operating Expenses. System operating expenses are comprised of
variable operating expenses and fixed selling, service and administrative
expenses directly attributable to the Systems. Variable operating expenses
consist of costs directly attributable to providing cable services to customers
and therefore generally vary directly with revenues. Variable operating expenses
include programming fees paid to suppliers of programming the Company includes
in its basic and premium cable television services, as well as expenses related
to copyright fees, franchise operating fees and bad debt expenses. Satellite
programming fees have historically increased at rates in excess of inflation due
in part to improvements in the quality of programming. Selling, service and
administrative expenses directly attributable to the Systems include the
salaries and wages of the field and office personnel, plant operating expenses,
office and administrative expenses and sales costs.
Non-System Operating Expenses. Non-system operating expenses consist
primarily of general overhead expenses which are not directly attributable to
any one System. These expenses include all legal, audit and tax fees, an
incentive bonus pool accrual for the General Managers of the Systems and amounts
paid to the General Partner for management expenses.
32
<PAGE> 39
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship that the various
items bear to revenues for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- ----------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
System operating expenses............. 46.7 45.3 46.1 45.2 47.7
Non-system operating expenses......... 6.9 6.8 7.0 7.2 7.0
Depreciation and amortization......... 45.7 36.7 26.3 26.4 20.2
----- ----- ----- ----- -----
Operating income...................... 0.7 11.2 20.6 21.2 25.1
Interest expense, net................. 27.3 29.0 25.1 26.1 24.0
Other expenses........................ 2.0 0.4 0.7 0.9 1.0
----- ----- ----- ----- -----
(Loss) income before extraordinary
item................................ (28.6) (18.2) (5.2) (5.8) 0.1
Extraordinary loss due to debt
refinancing......................... -- 1.6 -- -- --
----- ----- ----- ----- -----
Net (loss) income..................... (28.6%) (19.8%) (5.2%) (5.8%) 0.1%
===== ===== ===== ===== =====
EBITDA margin......................... 46.4% 47.9% 46.8% 47.6% 45.3%
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1996
Revenues. Revenues in the first six months of 1997 were $17.8 million, an
improvement of $245,000 over revenues in the first six months of 1996. Basic
revenues during the first half of 1997 improved by $454,000, or 3.1%, and
average basic revenues per subscriber per month increased from $30.08 to $31.71,
or 5.4%, over the same period in 1996. This improvement was due to increases in
subscription rates in certain Systems beginning in the fourth quarter of 1996.
The Company has historically increased subscription rates in the majority of the
Systems during the fourth quarter in order to offset increases in its operating
costs. Revenue growth was diminished by a reduction in the number of basic
subscribers (1,092 subscribers or 1.4%) for the period ending June 30, 1997,
compared to the same time last year. The Company believes this reduction in
subscribers is due to the increased availability and affordability of
competitive video services and generally reflects the cable industry's
experience as a whole with respect to increased competition from DBS and
wireless cable services. The Company has responded with certain strategic
capital improvement projects, along with an increased and more concentrated
marketing emphasis in each of its Systems. See "Business -- Business Strategy."
System Operating Expenses. System operating expenses in the first six
months of 1997 were $8.5 million, an increase of $555,000, or 7.0%, over the
first six months of 1996. As a percentage of revenues, system operating expenses
increased 2.5 percentage points from 45.2% in 1996 to 47.7% in 1997. The
majority of this increase relates directly to increased spending associated with
the Company's new marketing initiative. The remaining variance is primarily due
to variable cost increases associated with higher programming rates and new
programming launched primarily in conjunction with rate increases in the fall of
1996.
Non-System Operating Expenses. Non-system operating expenses, which consist
primarily of amounts paid to the General Partner for management expenses,
decreased $27,000, or 2.2%, from $1.3 million in the first six months of 1996 to
$1.2 million in the first six months of 1997. Non-system operating expenses were
higher in 1996 due to certain non-recurring costs aggregating nearly $40,000.
EBITDA. As a result of the foregoing, EBITDA in the first six months of
1997 was $8.1 million, a decrease of 3.4% from EBITDA in the first six months of
1996 of $8.4 million.
Depreciation and Amortization. Depreciation and amortization decreased
22.5% from $4.6 million in the six months ended June 30, 1996 to $3.6 million in
the six months ended June 30, 1997 primarily due to certain assets becoming
fully depreciated.
33
<PAGE> 40
Interest Expense, Net. Interest expense, net, including the effects of
interest rate hedging instruments, decreased 7.0% from $4.6 million in the first
six months of 1996 to $4.3 million in the first six months of 1997. This was a
result of a decrease in the Company's average outstanding borrowings subsequent
to the first six months of 1996 as well as a decrease in average interest rates
on such borrowings.
Net (Loss)/Income. As a result of the foregoing factors, the Company had
net income of $27,000 for the period ended June 30, 1997 as compared to a net
loss of $1.0 million for the period ended June 30, 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Revenues. Revenues in 1996 were $35.2 million, an improvement of $1.9
million, or 5.7%, over revenues of $33.3 million in 1995. In 1996, basic
revenues increased by $2.2 million or 8.1%, primarily due to increases in
subscription rates. This increase in revenues was partially offset by a decline
of 1,741 subscribers, or 2.2%, compared to 1995. Average basic revenues per
subscriber per month increased from $27.93 to $30.47, or 9.1%, between 1996 and
1995. The Company believes this reduction in subscriptions is due to the
increased availability and affordability of competitive video services and
generally reflects the cable industry's experience as a whole with respect to
increased competition from satellite dishes and wireless cable services. The
Company has responded with an increased and more concentrated marketing emphasis
in each of its Systems, along with certain strategic capital improvement
projects. See "Business -- Business Strategy."
System Operating Expenses. System operating expenses increased 7.8% from
$15.1 million in 1995 to $16.2 million in 1996. This increase was primarily due
to $218,000 of variable cost increases associated with higher programming fees
from $5.7 million in 1995 to $6.0 million in 1996. In addition, selling, service
and administrative expenses of the Systems increased 7.3% from $8.2 million in
1995 to $8.8 million in 1996 due to increased fixed costs (including
approximately $140,000 of additional marketing costs related to the
implementation of the Company's new marketing initiative).
Non-System Operating Expenses. Non-system operating expenses, which consist
primarily of amounts paid to the General Partner for management expenses,
increased 8.8%, to $2.5 million in 1996 from $2.3 million in 1995, primarily due
to increased management expense and legal expenses relating to the modification
of the Company's current loan agreement and certain potential acquisitions.
EBITDA. As a result of the foregoing, EBITDA in 1996 was $16.5 million, an
increase of 3.3% over EBITDA in 1995 of $16.0 million.
Depreciation and Amortization. Depreciation and amortization decreased
24.1% from $12.2 million in 1995 to $9.3 million in 1996 primarily due to
certain assets becoming fully depreciated.
Interest Expense, Net. Interest expense, net, including the effects of
interest rate hedging instruments, decreased to $8.9 million in 1996 from $9.7
million in 1995. This was a result of a decrease in the Company's average
outstanding borrowings during 1996 versus 1995.
Net Loss. As a result of the foregoing factors, the Company's net loss
decreased by $4.7 million, or 71.3%, from $6.6 million in 1995 to $1.9 million
in 1996.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Revenues. Revenues in 1995 were $33.3 million, an improvement of $2.4
million, or 7.9%, over revenues of $30.9 million in 1994. This increase was
primarily due to increases in subscription rates. In 1995, basic revenues
increased by $1.8 million or 7.2%, over basic revenues of $25.1 million in 1994.
Average basic revenues per subscriber per month increased from $26.16 to $27.93,
or 6.8%, between 1994 and 1995. The number of subscribers remained relatively
constant from 1994 to 1995.
System Operating Expenses. System operating expenses increased 4.6% from
$14.4 million in 1994 to $15.1 million in 1995. Nearly half of this increase was
associated with higher programming rates and new programming launched in
conjunction with rate increases taken during the year.
34
<PAGE> 41
Non-System Operating Expenses. Non-system operating expenses, which consist
primarily of amounts paid to the General Partner for management expenses,
increased 6.8% to $2.3 million in 1995 from $2.1 million in 1994 primarily due
to increased management expenses.
EBITDA. As a result of the foregoing, EBITDA in 1995 was $16.0 million, an
increase of 11.4% over EBITDA in 1994 of $14.3 million.
Depreciation and Amortization. Depreciation and amortization decreased
13.4% from $14.1 million in 1994 to $12.2 million in 1995 primarily due to
certain assets becoming fully depreciated.
Interest Expense, Net. Interest expense, net, including the effects of
interest rate hedging instruments, increased to $9.7 million in 1995 from $8.4
million in 1994. This was a result of an increase in the Company's average
outstanding borrowings during 1995 versus 1994.
Net Loss. Notwithstanding an extraordinary loss in 1995 of $548,000
associated with the write-off of previously deferred financing costs incurred in
connection with the establishment of the Existing Bank Credit Facility, the
Company's net loss decreased 24.9%, or $2.2 million, from $8.8 million in 1994
to $6.6 million in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow from operating activities was $3.3 million for the six months
ended June 30, 1997 as compared to $5.2 million for the six months ended June
30, 1996. Net cash flow from operating activities was $9.1 million for 1996,
$6.9 million for 1995 and $7.8 million for 1994.
Net cash from financing activities was $0.5 million for the six months
ended June 30, 1997 as compared to $4.2 million used for the six months ended
June 30, 1996. This change was primarily attributable to a larger net repayment
of bank debt during the first half of 1996. Net cash used in financing
activities (primarily for the repayment of secured debt) was $6.1 million for
1996, $3.8 million for 1995 and $7.6 million for 1994.
Net cash used in investing activities was $3.7 million for the six months
ended June 30, 1997 as compared to $1.3 million for the six months ended June
30, 1996. This increase was primarily due to capital expenditures associated
with the upgrading of several Systems in 1997. Net cash used in investing
activities (consisting primarily of capital expenditures) was $3.9 million for
1996, $2.4 million for 1995 and $1.1 million for 1994. Capital expenditures
included expansion and improvements of existing cable properties, plant and
equipment, as well as cable line drops, line plant extensions and installations
to service new subscribers.
The Company is selectively upgrading certain of its Systems to 750 MHz. The
Company spent $4.4 million during 1996 and the first six months of 1997 in these
upgrades and plans to expend an additional $4.5 million by the end of 1997 to
upgrade its cable plant serving approximately 18,000 subscribers. The Company
expects to expend approximately $10 million in each of 1998 and 1999 to upgrade
its cable plant serving an additional 32,000 subscribers. The Company intends to
finance these capital expenditures through operating cash flow, the net proceeds
of the Offering and borrowings under the New Bank Credit Facility.
Concurrently with the closing of the Offering, the Company repaid all of
its existing indebtedness under its prior bank credit facility and its then
outstanding subordinated debt and entered into the New Bank Credit Facility. The
Refinancing is expected to provide the Company with greater flexibility by
extending the maturities of its long-term debt and imposing less restrictive
covenants. As no borrowings under the New Bank Credit Facility were necessary to
complete the Refinancing, upon completion of the Refinancing (and subject to the
terms of the New Bank Credit Facility and the Company's Partnership Agreement)
the Company had the ability to borrow up to $20 million (with an option to
increase the amount to $30 million) under the New Bank Credit Facility. As of
June 30, 1997, after giving effect to the Refinancing, the covenants contained
in the New Bank Credit Facility would have limited the Company's maximum
borrowings thereunder to approximately $13 million. The New Bank Credit Facility
is secured by a first priority lien on and security interest in substantially
all of the assets of the Issuers. The New Bank Credit Facility contains certain
covenants and provides for certain events of default customarily contained in
facilities of a similar type. See "Business -- Business Strategy" and
"Description of Other Indebtedness."
35
<PAGE> 42
The Company believes that it will continue to generate cash or obtain
financing sufficient to meet its requirements for debt service, working capital
and capital expenditures contemplated in the near term and through the maturity
date of the Notes. However, the ability of the Company to satisfy its
obligations will be primarily dependent on its future financial and operating
performance and upon its ability to renew or refinance borrowings or to raise
additional equity capital if necessary. See "Risk Factors."
INFLATION AND CHANGING PRICES
The Company's costs and expenses are subject to inflation and price
fluctuations. However, because changes in costs are generally passed through to
subscribers, such changes historically have not had, and in the future are not
expected to have, a material effect on the Company's results of operations.
36
<PAGE> 43
BUSINESS
OVERVIEW
The Company owns, operates and develops cable television systems serving
rural communities in seven geographically and economically diverse clusters. The
Company's Systems are operated under the name "CommuniComm Services" and are
located in Oklahoma, Texas, Georgia, Louisiana, Colorado, Wyoming, Tennessee,
Alabama and Florida. As of June 30, 1997, the Systems passed an estimated
129,291 homes and served 78,337 basic subscribers, representing a basic
penetration of 60.6%. The Company's goal is to maintain its position as the
preferred provider of video services and become the single hard wire broadband
provider of enhanced video services, advanced telecommunication services and
telephony in the markets that it serves.
During the five-year period ended December 31, 1996, the Company's revenues
and EBITDA consistently increased, with revenues and EBITDA growing at compound
annual growth rates of 5.9% and 6.9%, respectively. System operating cash flow
and EBITDA margins for the six months ended June 30, 1997, were 52.3% and 45.3%,
respectively. The Company also achieved average monthly total revenues per
subscriber of $37.85 for the six months ended June 30, 1997, and annualized
system operating cash flow per subscriber of $238, both of which the Company
believes compare favorably with cable industry averages. Primarily as a result
of increased marketing spending, EBITDA was slightly lower during the first half
of 1997 as compared to the first half of 1996.
The Company believes that there are competitive and economic advantages to
owning and operating cable television systems in rural markets. Due to lower
population densities and higher per household plant installation costs, rural
markets are more likely than larger urban and suburban markets to have a single
hard wire broadband video and telecommunications service provider. In addition,
cable television systems in rural markets are typically characterized by lower
churn rates and greater penetration than larger urban and suburban markets. In
rural markets, cable service often is required for adequate reception of a full
range of over-the-air television stations. Moreover, fewer entertainment
alternatives are available, and cable television provides a major source of
entertainment.
The Company focuses on maintaining and improving system operating results.
The Company has implemented extensive management, operational and technical
changes designed to improve operating efficiencies, enhance operating cash flow
and reduce overhead through economies of scale. To this end, the Company has
"clustered" its Systems in concentrated geographic areas, which allows fixed
costs to be spread over an expanded subscriber base. In an effort to further
enhance its operational and financial performance, the Company from time to time
considers opportunities to acquire or exchange its assets for cable television
systems located near its existing markets.
The Company's senior management team has 64 years of collective experience
in the cable industry. The founder and Chief Executive Officer of the Company,
William R. James, has been a cable industry executive since 1979. Prior to
founding the Company, he organized and developed two other cable television
operations, including the cable television division of Capital Cities
Communications (which became Capital Cities/ABC). Mr. James built the Capital
Cities cable television operations from a start-up company to the 16th largest
MSO in the United States in 1986, with 380,000 subscribers served by 55 systems
located in 16 states. The other three key individuals responsible for the
management of the Company, C. Timothy Trenary, Daniel K. Shoemaker and Scott A.
Madison, have been involved in the construction, acquisition, ownership,
management and operation of rural cable television systems for at least a
decade.
The Company was initially capitalized with equity contributions of $79
million from management and certain initial equity investors. For information
concerning significant current equity owners, see "Partnership Interests of
Certain Beneficial Owners and Management."
BUSINESS STRATEGY
Management intends to solidify the Company's position as the preferred
provider of video services and to become the single hard wire broadband provider
of advanced telecommunications services and telephony in the communities that it
serves. The Company's business strategy is to (i) selectively upgrade the
Company's
37
<PAGE> 44
Systems, (ii) provide enhanced digital video, (iii) deliver advanced
telecommunications services, including Internet access, and (iv) pursue
strategic acquisitions.
- SELECTIVELY UPGRADE SYSTEMS. The Company is upgrading certain of its
cable television systems to further strengthen the Company's position as
the preferred provider of video services in the communities it serves.
These upgrades, which employ fiber optic technology, increase the
bandwidth of the Company's cable plant generally to 750 MHz, thereby
increasing channel capacity, enhancing signal quality and improving
technical reliability. The Company believes the upgrades will enable it
to offer comparable or superior video service and quality at attractive
pricing levels relative to its competitors, such as DBS. The Company also
believes that the upgrade will provide the technical platform necessary
for the development and delivery of advanced telecommunications services
and telephony.
The Company recently completed the upgrade of its Durant System to 750
MHz. The upgrade improved picture quantity and reliability and enabled the
Company to increase the number of channels offered by the Durant System
from 40 to 55, with the potential for future expansion to 100 channels (or
more using digital technology). Prior to this upgrade, the Durant System
had experienced modest subscriber loss in connection with the elimination
of a low-priced broadcast-station-only level of service and the increasing
penetration of DBS. Following this upgrade, the Company began marketing a
three month service trial targeted at homes that did not subscribe to
cable. While this effort is still in progress and the Company cannot
predict the final outcome, as of July 31, 1997, year-over-year basic
subscribers have increased over 5%.
In addition, the Company has near-term plans to upgrade the cable plant in
a number of its other Systems. The Company is nearing the completion of
the 750 MHz upgrade of its cable plant serving approximately 2,500
subscribers in Hawkinsville and Cochran, Georgia, and has begun the 750
MHz upgrade of its cable plant serving approximately 5,800 subscribers in
Douglas, Torrington, Wheatland and Lingle, Wyoming. Mapping and
preliminary engineering are underway to upgrade cable plants serving an
additional 4,000 subscribers in Georgia and 2,100 subscribers in Alabama.
By the end of 1997, the Company will have expended nearly $9 million to
upgrade its cable plant serving approximately 18,000 subscribers. The
Company expects to expend approximately $10 million in each of 1998 and
1999 to upgrade its cable plant serving an additional 32,000 subscribers.
- PROVIDE ENHANCED DIGITAL VIDEO. The Company intends to provide enhanced
digital video in the upgraded and certain other Systems using Headend In
The Sky(R), a digital compression service developed by National Digital
Television Center, Inc., a subsidiary of Telecommunications, Inc. HITS
will enable the Company to deliver video services such as pay-per-view
programming and a tier or multiple tiers of niche satellite programming.
The Company believes that these enhanced digital video services (which it
will introduce initially in its Durant System) will allow it to provide a
system comparable to DBS at a lower cost.
- DELIVER ADVANCED TELECOMMUNICATIONS SERVICES, INCLUDING INTERNET
ACCESS. The Company believes that upgraded advanced telecommunications
services will provide additional revenue opportunities with relatively
small incremental capital investment. The Company further believes that
cable infrastructure will provide the fastest, most cost-effective
delivery mechanism for Internet access, inter- and intra-network data
services and telephony. These advanced services enable subscribers to
receive the Internet at a peak data transmission speed up to 300 times
faster than typical dial-up connections.
As part of its efforts in this area, the Company has entered into a
strategic alliance with a local ISP in Durant, Oklahoma. Under this
arrangement, the Company provides broadband service capability for the
delivery of high speed Internet service and the ISP provides technical
and customer support services. The Company has successfully completed
field testing and recently began marketing this service on a commercial
basis. For this greatly improved service, the Company charges a price
which it believes is approximately the same as the combined cost of
Internet access through a typical dial-up account and a second telephone
line. The Company also plans to provide intranetwork data services to its
Internet customers. Since the Company's share of the variable operating
costs of providing this service are expected to be modest, the Company
anticipates enhanced revenues with minimal related
38
<PAGE> 45
operating expense and may seek similar strategic alliances with ISPs in
other communities as its upgrading program progresses (or, alternatively,
it may elect to provide the technical support services itself).
In anticipation of providing telephony, the Company is seeking switching
capabilities. The Company has entered into discussions with two ILECs
located near its Systems to gain access to their switching capability. In
Durant, the Company is in the process of installing the required switch
interface equipment and plans to install customer premises equipment at
selected sites in the Durant System and begin testing during the fourth
quarter. Although the Company does not currently have the certification
necessary to provide telephone service in Oklahoma and must be certified
by the Oklahoma Corporation Commission prior to doing so, the Company
believes that it can obtain the necessary certification. However, there
can be no assurance as to if or when such certification will be obtained.
- PURSUE STRATEGIC ACQUISITIONS. The Company intends to consider
opportunities to acquire cable television systems. Because it is more
cost effective to provide advanced telecommunications services over an
expanded subscriber base within a concentrated geographic area, the
Company will generally seek to acquire cable television systems, or
groups of systems, in close proximity to its existing Systems and
markets. The Company may also consider acquisitions in other geographic
areas where consistent with its business strategy. Furthermore, the
Company intends to divest itself, through asset exchanges or outright
sales, of cable television systems that do not readily lend themselves to
the Company's business strategy. Factors likely to be considered by the
Company in evaluating the desirability of a potential acquisition or
asset exchange opportunity include price and terms, subscriber densities,
growth potential (in terms of both market and cash flow) and whether the
target system can be readily integrated into the Company's operations.
INDUSTRY OVERVIEW
A cable television system receives television, radio and data signals at
the system's "headend" site by means of off-air antennas, microwave relay
systems and satellite earth stations. These signals are then modulated,
amplified and distributed, primarily through coaxial and fiber optic
distribution systems, to deliver a wide variety of channels of television
programming, primarily entertainment and informational video programming, to the
homes of subscribers who pay fees for this service, generally on a monthly
basis. A cable television system may also originate its own television
programming and other information services for distribution through the system.
Cable television systems generally are constructed and operated pursuant to
non-exclusive franchises or similar licenses granted by local governmental
authorities for a specified period of time.
The cable television industry developed in the United States in the late
1940s and early 1950s in response to the needs of residents in predominantly
rural and mountainous areas of the country where the quality of off-air
television reception was inadequate due to factors such as topography and
remoteness from television broadcast towers. In the 1960's, cable systems also
developed in small and medium-sized cities and suburban areas that had a limited
availability of clear off-air television station signals. All of these markets
are regarded within the cable industry as "classic" cable television system
markets. In more recent years, cable television systems have been constructed in
large urban cities and nearby suburban areas, where good off-air reception from
multiple television stations usually is already available, in order to offer
customers the numerous satellite-delivered channels typically carried by cable
systems that are not otherwise available through broadcast television reception.
Cable television systems offer customers various levels (or "tiers") of
cable services consisting of broadcast television signals of local network
affiliates, independent and educational television stations, a limited number of
television signals from so-called "super stations" originating from distant
cities (such as WTBS and WGN), various satellite-delivered, non-broadcast
channels (such as Cable News Network ("CNN"), MTV: Music Television ("MTV"), the
USA Network ("USA"), ESPN and Turner Network Television ("TNT")), programming
originated locally by the cable television system (such as public, governmental
and educational access programs) and informational displays featuring news,
weather and
39
<PAGE> 46
public service announcements. For an extra monthly charge, cable television
systems also offer "premium" television services to customers on a per-channel
basis. These services (such as Home Box Office ("HBO"), Showtime, The Disney
Channel and selected regional sports networks) are satellite channels that
consist principally of feature films, live sporting events, concerts and other
special entertainment features, usually presented without commercial
interruption.
A customer generally pays an initial installation charge and fixed monthly
fees for basic and premium television services and for other services (such as
the rental of converters and remote control devices). Such monthly service fees
constitute the primary source of revenues for cable television systems. In
addition to customer revenues, cable television systems also frequently offer to
their customers home shopping services, which pay such systems a share of
revenues from products sold in the systems' service areas. Some cable television
systems also receive revenue from the sale of available spots on
advertiser-supported programming.
THE SYSTEMS
The following table sets forth certain operating statistics for the Systems
for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Homes passed(1).................. 127,215 127,863 127,943 128,908 129,291 129,162 129,291
Basic subscribers(2)............. 79,208 79,414 80,529 80,190 78,449 79,429 78,337
Basic penetration(3)............. 62.3% 62.1% 62.9% 62.2% 60.7% 61.5% 60.6%
Basic revenues(4)................ $23,102 $24,693 $25,096 $26,914 $29,087 $14,466 $14,920
Average monthly basic revenues
per subscriber(5).............. $ 24.47 $ 25.90 $ 26.16 $ 27.93 $ 30.47 $ 30.08 $ 31.71
Premium subscriptions(6)......... 29,213 28,064 28,765 28,900 25,652 27,589 25,365
Premium penetration(7)........... 36.9% 35.3% 35.7% 36.0% 32.7% 34.7% 32.4%
Average monthly total revenues
per subscriber(5).............. $ 29.69 $ 31.49 $ 32.17 $ 34.56 $ 36.89 $ 36.51 $ 37.85
Average annual system operating
cash flow per subscriber(8).... $ 185 $ 200 $ 206 $ 227 $ 238 $ 240 $ 238
Average annual EBITDA per
subscriber(9).................. $ 161 $ 172 $ 179 $ 199 $ 207 $ 208 $ 206
Miles of plant................... 3,430 3,430 3,430 3,483 3,483 3,483 3,483
</TABLE>
- -------------------------
(1) Homes passed refers to estimates by the Company of the number of dwelling
units in a particular community that can be connected to the distribution
system without any further extension of principal transmission lines. Such
estimates are based upon a variety of sources, including billing records,
house counts, city directories and other local sources.
(2) For purposes of all information presented in this Prospectus, unless
otherwise indicated, the number of basic subscribers for the Systems has
been computed by adding the actual number of subscribers for all non-bulk
accounts and the equivalent subscribers for all bulk accounts. The number of
such equivalent subscribers has been calculated by dividing aggregate basic
service revenues for bulk accounts by the full basic service rate for the
community in which the account is located.
(3) Basic subscribers as a percentage of homes passed.
(4) Basic revenues consist of monthly subscription fees for all services other
than premium programming, as well as monthly charges for customer equipment
rental.
(5) The average of the monthly total revenues divided by the number of basic
subscribers at the end of such month during the twelve-month periods ended
December 31 for each year presented and the six-month periods ended June 30,
1996 and 1997.
(6) A customer may purchase more than one premium service, each of which is
counted as a separate premium subscription.
(7) Premium subscriptions as a percentage of basic subscribers.
(8) System operating cash flow divided by the average number of basic
subscribers for the period. The amount was annualized for the periods ended
June 30, 1996 and 1997.
(9) EBITDA divided by the average number of basic subscribers for the period.
The amount was annualized for the periods ended June 30, 1996 and 1997.
40
<PAGE> 47
The Company's Systems are divided into seven geographic groups
("Clusters"). The following table summarizes certain operating data at and for
the six months ended June 30, 1997 for the individual Clusters.
<TABLE>
<CAPTION>
PERCENT OF AVERAGE
ALL MONTHLY
SYSTEMS TOTAL
HOMES BASIC BASIC BASIC PREMIUM PREMIUM REVENUE PER
CLUSTER PASSED SUBSCRIBERS SUBSCRIBERS PENETRATION SUBSCRIPTIONS PENETRATION SUBSCRIBER
------- ------ ----------- ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Oklahoma/Texas.......... 33,413 17,126 21.8% 51.3% 3,862 22.6% $36.92
Georgia................. 19,586 14,150 18.0 72.2 5,328 37.7 38.24
Louisiana............... 22,451 12,510 16.0 55.7 4,346 34.7 38.71
Colorado/Wyoming........ 15,000 10,152 13.0 67.7 3,722 36.7 36.79
Tennessee............... 14,470 9,607 12.3 66.4 2,846 29.6 37.75
Alabama................. 13,955 8,452 10.8 60.6 2,442 28.9 36.36
Florida................. 10,416 6,340 8.1 60.9 2,819 44.5 41.58
------- ------ ----- ------
Totals.............. 129,291 78,337 100.0% 60.6% 25,365 32.4% $37.85
======= ====== ===== ======
<CAPTION>
ANNUALIZED
SYSTEM
OPERATING SYSTEM
CASH FLOW OPERATING
PER CASH FLOW
CLUSTER SUBSCRIBER MARGIN
------- ---------- ---------
<S> <C> <C>
Oklahoma/Texas.......... $213 48.0%
Georgia................. 251 54.8
Louisiana............... 241 52.0
Colorado/Wyoming........ 223 50.5
Tennessee............... 265 58.4
Alabama................. 240 54.9
Florida................. 245 49.0
Totals.............. $238 52.3%
</TABLE>
The Oklahoma/Texas Cluster. The Oklahoma/Texas Cluster is comprised of
Systems, acquired in 1988 and 1989, serving rural communities in southeastern
Oklahoma north of Dallas, Texas and in northern Texas northwest of Fort Worth.
Since 1988, the Company has made $10.0 million in capital expenditures improving
the plant and operations, including upgrading many of the Systems to 450 MHz
60-channel capacity plant, installing three microwave complexes, eliminating the
need for eight separate headends and most recently upgrading the Durant System
to a 750 MHz hybrid fiber optic-backbone/coaxial ("HFC") cable system.
The Company recently completed the upgrade of its Durant System within this
Cluster to 750 MHz. The upgrade improved picture quality and reliability and
enabled the Company to increase the number of channels offered by the Durant
System from 40 to 55, with the potential for future expansion to 100 channels
(or more using digital technology). Prior to this upgrade, the Durant System had
experienced modest subscriber loss in connection with the elimination of a
low-priced broadcast-station-only level of service and the increasing
penetration of DBS. Following this upgrade, the Company began marketing a three
month service trial targeted at homes that did not subscribe to cable. While
this effort is still in progress and the Company cannot predict the final
outcome, as of July 31, 1997, year-over-year subscribers have increased over 5%.
The Company has consolidated the administrative and customer service
operations for these Systems into one main office located in Durant, Oklahoma.
This office centralizes all customer support, billing, marketing and technical
operations for the Oklahoma/Texas Cluster.
The primary employer in the Oklahoma/Texas Cluster's area is the oil and
gas industry. Small manufacturing companies also provide employment, as does
farming and ranching. At June 30, 1997, the number of homes passed in the
Oklahoma/Texas Cluster was estimated to be 33,413 and the number of basic
subscribers and premium subscriptions were 17,126 and 3,862, respectively.
The Georgia Cluster. The Company acquired the Systems comprising the
Georgia Cluster, which serve rural communities in central Georgia located east
of Atlanta and south of Macon, in three transactions during 1988. Since 1988,
the Company has made $5.3 million in capital improvements to the Georgia
Cluster. Currently, the Company is in the process of upgrading the cable plant
serving Hawkinsville and Cochran, Georgia to a 750 MHz system. Plans to upgrade
other communities in Georgia are currently being developed. See "Business --
Business Strategy."
The Georgia Cluster, as of June 30, 1997, passed an estimated 19,586 homes
and had 14,150 basic subscribers and 5,328 premium subscriptions. The Systems in
this Cluster operate primarily out of one office located in Eatonton, Georgia,
where all customer service, billing, marketing and technical operations are
centralized. These Systems have seen subscriber growth of roughly 20% since
acquisition.
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<PAGE> 48
The economy in the Georgia Cluster's area is not dependent upon any one
industry. There are several large employers in the area including the corporate
headquarters of Applebee's International, Inc., a regional restaurant chain, and
Warner Robbins Air Force Base.
The Louisiana Cluster. The Louisiana Cluster, which serves rural
communities in Louisiana and Texas located near Lake Charles, Louisiana, was
acquired in three transactions during 1988. Since its acquisition of the Systems
in this Cluster, the Company has made $7.3 million in capital expenditures for
this Cluster, upgrading virtually all of these Systems to 450 MHz 60-channel
plants and installing three microwave complexes eliminating the need for eight
headends. At June 30, 1997, the estimated number of homes passed for this
Cluster was 22,451 and the number of basic subscribers and premium subscriptions
was 12,510 and 4,346 respectively.
Since acquiring the Louisiana Cluster, the Company has consolidated all
administrative, customer service, technical and marketing operations into one
central office located in Westlake, Louisiana.
The economy in southwestern Louisiana ranges from the farming and cattle
industry to the petro-chemical industry and gaming. Some of the major employers
in the area include CITGO Petroleum Corporation, PPG Industries, Inc. and
Conoco, Inc. among others in the petro-chemical trade. The recent introduction
of riverboat casinos on Lake Charles has become very popular due to the
proximity to Houston, and companies like Casino America, Inc. and Players
International, Inc. have become major employers in the area.
The Colorado/Wyoming Cluster. The Company acquired the Systems comprising
the Colorado/Wyoming Cluster, which serve rural communities located east of
Denver, Colorado and north and west of Cheyenne, Wyoming, in 1988. This
geographically diverse group of Systems is operated from an administrative
office in Fort Collins, Colorado and the technical operations from a central
location in Wheatland, Wyoming. Since these Systems were acquired, the Company
has made $2.7 million in capital expenditures to improve plant reliability,
reception and service. The Company is currently in the process of upgrading
certain of the Systems in Wyoming to 750 MHz systems. See "Business -- Business
Strategy."
The economy in the Colorado/Wyoming Cluster's area is largely dependent on
ranching and farming as well as the oil and gas industry and mining. At June 30,
1997, the estimated number of homes passed in this Cluster was 15,000 and the
number of basic subscribers and premium subscriptions was 10,152 and 3,722
respectively.
The Tennessee Cluster. The Tennessee Cluster, which serves rural
communities north and west of Knoxville, Tennessee, was acquired by the Company
in July 1988. Since its acquisition of the Systems in this Cluster, the Company
has made $5.0 million in capital expenditures for this Cluster, improving plant
reliability, reception and service as well as providing for the availability of
additional channels. Approximately half of these Systems have been upgraded to
450 MHz 60-channel capacity plants. In addition, the Company has installed a
microwave complex serving over 95% of the subscribers, thereby eliminating the
need for three of the original headends. All customer service, technical,
administrative and marketing services are centralized in one office in Wartburg,
Tennessee.
The economy in the Tennessee Cluster is largely supported by a number of
small manufacturing plants. The Tennessee Valley Authority and the Departments
of Energy and Defense also provide employment in the Tennessee Cluster's
communities. At June 30, 1997, the estimated number of homes passed in this
Cluster was 14,470; the number of basic subscribers and premium subscriptions
was 9,607 and 2,846, respectively.
The Alabama Cluster. The Company acquired the Systems comprising the
Alabama Cluster primarily in four transactions in 1988 and 1989. These Systems
are divided into two groups, one that serves rural communities located on the
western edge of the state west of Birmingham, Alabama, and the other located
south and east of Birmingham, between Birmingham and Atlanta, Georgia. Since its
acquisition of the Systems in this Cluster, the Company has made $3.3 million in
capital expenditures, improving channel capacity in many of these Systems as
well as improving reliability and channel offerings. In the Systems serving
eastern Alabama, six separate headends have been consolidated into one microwave
complex.
42
<PAGE> 49
Additionally, preliminary engineering is underway to upgrade the cable plant
serving Roanoke, Alabama to a 750 MHz system. See "Business -- Business
Strategy."
The operations of the Alabama Cluster are managed from one main office
located in Roanoke, Alabama. All customer service, administrative, technical and
marketing functions have been centralized into the main office. The Alabama
Cluster, as of June 30, 1997, passed an estimated 13,955 homes and had 8,452
basic subscribers and 2,442 premium subscriptions.
The communities served by the Alabama Cluster benefit from a number of
small and large manufacturing companies in the area, including 3M and Wrangler.
In addition, Mercedes-Benz has recently completed a large manufacturing plant in
Tuscaloosa, Alabama, just south of the Company's Systems serving western
Alabama.
The Florida Cluster. The Florida Cluster, which serves several rural
communities located near Gainesville, Florida, was acquired in 1988. Since May
1988, the Company has made $5.2 million in capital expenditures in this Cluster.
The Company has installed a microwave complex, which eliminated the need for
three headends, and has upgraded the majority of its cable television plant in
this Cluster to 450 MHz with 60 channels of capacity. The majority of the
Systems in this Cluster have been consolidated on one microwave complex, which
reduced maintenance and equipment costs.
The Company's Florida Cluster operates from a centralized office in High
Springs, Florida. All administrative, customer service, technical and marketing
functions are coordinated from this location. The Florida Cluster, as of June
30, 1997, passed an estimated 10,416 homes and had 6,340 basic subscribers and
2,819 premium subscriptions.
The University of Florida, located in Gainesville, has contributed to the
economic stability of the Florida Cluster's areas. Other industries providing
employment in the area include agriculture, ranching and tourism.
PROGRAMMING AND SUBSCRIBER RATES
The Company has various contracts to obtain basic, satellite and premium
programming for the Systems from program suppliers, including, in limited
circumstances, some broadcast stations, with compensation generally based on a
fixed fee per customer or a percentage of the gross receipts for the particular
service. Some program suppliers provide volume discount pricing structures
and/or offer marketing support. In addition, the Company is a member of a
programming consortium consisting of small to medium sized MSO's and individual
cable systems serving, in the aggregate, over eight million cable subscribers.
The consortium helps create efficiencies in the areas of securing and
administering programming contracts, as well as to establish more favorable
programming rates and contract terms for small and medium sized cable operators.
The Company does not have long-term programming contracts for the supply of a
substantial amount of its programming, due in part to ongoing negotiations with
a number of its programming suppliers, but also due to the Company's belief that
it is in its best interests to enter into long-term programming contracts only
if additional benefits are derived from the contractual arrangements. In cases
where the Company does have such contracts, they are generally for fixed periods
of time ranging from one to five years and are subject to negotiated renewal.
While management believes that the Company's relations with its programming
suppliers are generally good, the loss of contracts with certain of its
programming suppliers would have a material adverse effect on the Company's
results of operations.
Cable programming costs are expected to continue to increase due to
additional programming being provided to customers, increased costs to purchase
cable programming, inflationary increases and other factors. In 1995, 1996 and
the first six months of 1997, programming costs as a percentage of revenues were
17.2%, 16.9% and 18.2%, respectively. No assurance can be given that the
Company's programming costs will not increase substantially in the near future
or that other materially adverse terms will not be added to its programming
contracts.
The Systems offer their customers programming that includes the local
network, independent and educational television stations, a limited number of
television signals from distant cities, numerous satellite-delivered,
non-broadcast channels (such as CNN, MTV, USA, ESPN and TNT) and in some systems
local
43
<PAGE> 50
information and public access channels. The programming offered by the Company
varies among the Systems depending upon each System's channel capacity and
viewer interests. Primarily for competitive reasons, the Company generally
endeavors to offer a single level of basic service containing all broadcast and
satellite-delivered programming. In a few Systems, however, the Company does
offer up to three tiers of basic cable television programming: a broadcast basic
programming tier (consisting generally of network and public television signals
available over-the-air), a satellite programming tier (consisting generally of
satellite-delivered programming such as CNN, USA, ESPN and TNT) and a super
station tier consisting of the so-called "super stations" (e.g., WTBS and WGN).
The Company also offers premium programming services, both on a per-channel
basis and in many Systems as part of premium service packages designed to
enhance customer perceived value.
Monthly customer rates for services vary from market to market, primarily
according to the amount of programming provided. At June 30, 1997, the Company's
monthly full basic service rates for residential customers ranged from $13.95 to
$35.00 and per-channel premium service rates (not including special promotions)
ranged from $5.95 to $12.95 per service. At June 30, 1997, the weighted average
price for the Company's monthly full basic service was approximately $31.61.
A one-time installation fee, which the Company may wholly or partially
waive during a promotional period, is usually charged to new customers. The
Company charges monthly fees for converters and remote control tuning devices.
The Company also charges administrative fees for delinquent payments for
service. Customers are free to discontinue service at any time without
additional charge but may be charged a reconnection fee to resume service.
Commercial customers, such as hotels, motels and hospitals, are charged a
negotiated, non-recurring fee for installation of service and monthly fees.
Multiple dwelling unit accounts may be offered a bulk rate in exchange for
single-point billing and basic service to all units.
In addition to customer fees, the Company derives a modest amount of
revenue from the sale of local spot advertising time on locally originated and
satellite-delivered programming. The Company also derives modest amounts of
revenues from affiliations with home shopping services (which offer merchandise
for sale to customers and compensate system operators with a percentage of their
sales receipts).
Other potential sources of revenue for cable television systems include the
lease of tower space to cellular telephone, personal communications services
("PCS"), and paging companies and other transmission businesses and the sale of
programming featuring movies and special events to customers on a pay-per-view
basis, which requires the use of addressable technology not presently employed
by the Company. Although the Company does not currently offer pay-per-view
programming, it intends to do so in the future in those Systems where it plans
to launch the HITS service. See "Business -- Business Strategy."
While the Company plans to offer advanced telecommunications services and
telephony in certain of its Systems, it anticipates that monthly customer fees
will continue to constitute the large majority of its total revenues for the
foreseeable future.
CUSTOMER SERVICE AND MARKETING
The Company emphasizes customer service, which it believes is increasingly
important to the successful operation of its business. To meet its objective of
providing high levels of customer service, the Company offers its customers a
full line-up of programming, timely and reliable service (with virtually all
service inquiries responded to within 24 hours) and good picture quality. The
Company's employees receive ongoing training in customer service, sales and
subscriber retention and technical support. Customer service representatives and
technicians are also trained to market upgrades at the point of sale or service.
In addition, the Company has attempted to establish and to maintain a local
presence and visibility within the communities it serves.
As part of its efforts to maximize cash flow, the Company has sought to add
and retain subscribers and increase cash flow per subscriber by aggressively
marketing its basic and premium service offerings. The Company utilizes a number
of coordinated marketing techniques, including (i) direct door to door sales,
(ii) local newspaper and radio advertising and cable system promotional
advertising insertion in certain
44
<PAGE> 51
satellite programs, (iii) direct mail, (iv) telemarketing, primarily for premium
service subscriptions, and (v) monthly billing statement inserts.
TECHNICAL OVERVIEW
The following table sets forth certain information regarding the analog
channel capacities and miles of plant of the Systems:
<TABLE>
<CAPTION>
300 MHZ 330 MHZ 400 MHZ 450 MHZ 750 MHZ
UP TO 36 UP TO 42 UP TO 54 UP TO 62 UP TO 100
CHANNELS CHANNELS CHANNELS CHANNELS CHANNELS TOTAL
-------- -------- -------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Number of headends .... 13 22 2 13 2 52
Number of subscribers
as of June 30,
1997 ................ 14,927 21,947 2,101 32,589 6,773 78,337
% of subscribers ...... 19.1% 28.0% 2.7% 41.6% 8.6% 100.0%
Miles of plant ........ 739 988 46 1,504 206 3,483
% miles of plant ...... 21.2% 28.4% 1.3% 43.2% 5.9% 100.0%
</TABLE>
The Company recently completed the upgrade of its Durant System to 750 MHz.
The upgrade improved picture quality and reliability and enabled the Company to
increase the number of channels offered by the Durant System from 40 to 55, with
the potential for future expansion to 100 channels (or more using digital
technology). In addition, the Company has near-term plans to upgrade the cable
plant in a number of its other Systems. The Company is nearing completion of the
750 MHz upgrade of its cable plant serving approximately 2,500 subscribers in
Hawkinsville and Cochran, Georgia, and has begun the 750 MHz upgrade of its
cable plant serving approximately 5,800 subscribers in Douglas, Torrington,
Wheatland and Lingle, Wyoming. Mapping and preliminary engineering are underway
to upgrade cable plants serving an additional 4,000 subscribers in Georgia and
2,100 subscribers in Alabama. By the end of 1997, the Company will have expended
nearly $9 million to upgrade its cable plant serving approximately 18,000
subscribers. The Company expects to expend approximately $10 million in each of
1998 and 1999 to upgrade its cable plant serving an additional 32,000
subscribers.
The Company's Systems have an average capacity of 54 channels. The Company
currently does not use any addressable technology. The Company utilizes a "trap"
scheme whereby a technician installs filters, or traps, at each cabled home
enabling the technician to configure the programming received by each
subscriber. Upon completion of a System upgrade, the Company will convert
certain of its subscribers to digital addressable technology to take advantage
of the HITS service. That service transmits digitally compressed signals of
niche satellite programming, multiplexed premium services, pay-per-view movies
and music for reception by cable systems, which in turn deliver them to their
subscribers.
The majority of the Company's Systems are wired exclusively with coaxial
cable; the remaining Systems utilize fiber optic cable in conjunction with
coaxial cable. Fiber optic strands are capable of carrying hundreds of video,
data and voice channels over extended distances without the extensive signal
amplification typically required for coaxial cable. The Company plans to use an
HFC design across those portions of its cable plant that serve its highest
subscriber densities to most efficiently upgrade the Systems to 750 MHz.
Additionally, the Company plans to use fiber optic technology to interconnect
headends and install fiber backbones to reduce amplifier cascades, thereby
gaining operational efficiencies and improved picture quality and system
reliability.
FRANCHISES
Cable television systems are generally constructed and operated under
non-exclusive franchises granted by local governmental authorities. These
franchises typically contain many conditions, such as, among others, (i) time
limitations on commencement and completion of construction, (ii) conditions of
service, including number of channels, types of programming and the provision of
free service to schools and certain other public institutions and (iii) the
maintenance of insurance and indemnity bonds. Certain provisions of local
franchises are subject to federal regulation under the 1984 Cable Act, the 1992
Cable Act and the 1996 Telecom Act.
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<PAGE> 52
At June 30, 1997, the Company held 132 franchises. These franchises,
substantially all of which are non-exclusive, generally provide for the payment
of fees to the issuing authority. Annual franchise fees range up to 5% of the
gross revenues generated by a System. For the past three years, franchise fee
payments made by the Company have averaged approximately 2.5% of total gross
System revenues. Franchise fees are generally passed directly through to the
customers on their monthly bills. General business or utility taxes may also be
imposed in various jurisdictions. The 1984 Cable Act prohibits franchising
authorities from imposing franchise fees in excess of 5% of gross revenues and
also permits the cable operator to seek renegotiation and modification of
franchise requirements if warranted by changed circumstances. Most of the
Company's franchises can be terminated prior to their stated expirations for
uncured breaches of material provisions.
The following table sets forth the number of franchises by year of
franchise expiration and the number and percentage of basic subscribers at June
30, 1997:
<TABLE>
<CAPTION>
NUMBER PERCENTAGE NUMBER PERCENTAGE
OF OF TOTAL OF BASIC OF BASIC
YEAR OF FRANCHISE EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS SUBSCRIBERS
---------------------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Prior to 2000............................. 14 9.6% 8,852 11.3%
2000-2004................................. 46 31.7 30,774 39.3
2005-2008................................. 27 18.6 16,785 21.4
2009 and after............................ 41 28.3 16,085 20.5
No expiration............................. 4 2.8 1,394 1.8
--- ----- ------ -----
Subtotal................................ 132 91.0 73,890 94.3
No franchise required..................... 13 9.0 4,447 5.7
--- ----- ------ -----
Total................................... 145 100.0% 78,337 100.0%
=== ===== ====== =====
</TABLE>
The Company believes that it has good relationships with its franchising
authorities. To date, the Company has never had a franchise revoked for any of
its Systems, and no request of the Company for franchise renewals or extensions
has been denied, although such renewed or extended franchises have frequently
resulted in franchise modifications on satisfactory terms.
The 1984 Cable Act provides for, among other things, an orderly franchise
renewal process in which renewal of franchise licenses issued by governmental
authorities will not be unreasonably withheld, or, if renewal is withheld and
the franchise authority chooses to acquire the system or transfer ownership to
another person, such franchise authority or other person must pay the operator
either (i) the "fair market value" (without value assigned to the franchise) for
the system covered by such franchise if the franchise did not exist before the
effective date of the 1984 Cable Act (December 1984) or the franchise was
pre-existing but the franchise agreement did not provide for a buyout or (ii) in
the case of pre-existing franchises with buyout provisions, the price set forth
in such franchise agreements. In addition, the 1984 Cable Act established
comprehensive renewal procedures which require that an incumbent franchisee's
renewal application be assessed on its own merits and not as part of a
comparative process with competing applications. See "Legislation and
Regulation."
The 1984 Cable Act also established buyout rates for franchises which
post-date the existence of the 1984 Cable Act or pre-date the 1984 Cable Act but
the franchise agreement does not contain buyout provisions; in the event the
franchise is terminated "for cause" and the franchise authority desires to
acquire the system, the franchise authority must pay the operator an "equitable"
price. To date, none of the Company's franchises has been terminated.
The Company's franchises for Hawkinsville and Cochran, Georgia expire in
September, 1997. The Company is nearing the completion of its 750 MHz upgrade of
its cable plant serving the approximately 2,500 subscribers in these cities at a
cost of approximately $1.9 million. Generally, the Company undertakes to renew
an expiring franchise before committing to significant capital expenditures.
However, because the plant serving these two communities had a bandwidth of only
300 MHz and the local independent telephone company serving Hawkinsville,
Georgia, which also operates a nearby cable television system, had approached
the cities regarding a franchise to provide cable television service, the
Company decided that it would be prudent to make the upgrades and capital
improvements. This should allow the Company to compete more
46
<PAGE> 53
effectively for its subscribers if a second franchise is awarded to provide
cable television service. Although there can be no assurance that the Company
will be successful in renewing these franchises on terms satisfactory to it, the
Company believes that the renewal negotiations are proceeding satisfactorily.
The 1992 Cable Act prohibits the award of exclusive franchises, prohibits
franchising authorities from unreasonably refusing to award additional
franchises and permits them to operate cable systems themselves without
franchises. The 1996 Telecom Act provides that no state or local laws or
regulations may prohibit or have the effect of prohibiting any entity from
providing any interstate or intrastate telecommunications service. State and
local authorities retain authority to manage the public rights of way and
"competitively neutral" requirements concerning right of way fees, universal
service, public safety and welfare, service quality, and consumer protection are
permitted with respect to telecommunications services. See "Legislation and
Regulation."
COMPETITION
Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment such as off-air television broadcast programming,
DBS services, wireless cable services, newspapers, movie theaters, live sporting
events, online computer services and home video products, including videotape
cassette recorders. The extent to which a cable communications system is
competitive depends, in part, upon the cable system's ability to provide, at a
reasonable price to customers, a greater variety of programming and other
communications services than those which are available off-air or through other
alternative delivery sources and upon superior technical performance and
customer service.
Cable television systems generally operate pursuant to franchises granted
on a nonexclusive basis. The 1992 Cable Act prohibits franchising authorities
from unreasonably denying requests for additional franchises and permits
franchising authorities to operate cable television systems without a franchise.
It is possible that a franchising authority might grant a second franchise to
another company containing terms and conditions more favorable than those
afforded the Company.
Well-financed businesses from outside the cable industry (such as the
public utilities that own the poles to which cable is attached) may become
competitors for franchises or providers of competing services. Congress has
repealed the prohibition against national television networks owning cable
systems, and telephone companies may now enter the cable industry as described
below. In one of the Company's franchise areas, the Company faces direct
competition from another franchised cable television system.
In recent years, the FCC and the Congress have adopted policies providing a
more favorable operating environment for new and existing technologies that
provide, or have the potential to provide, substantial competition to cable
television systems. These technologies include, among others, DBS service,
whereby signals are transmitted by satellite to receiving facilities located on
customer premises. Programming is currently available to the owners of DBS
dishes through conventional, medium and high-powered satellites. DBS systems are
expected to increase channel capacity to 100 or more channels, enabling them to
provide movies, broadcast stations, and other program service comparable to
those of cable television systems. The 1992 Cable Act contains provisions, which
the FCC has implemented with regulations, to enhance the ability of cable
competitors to purchase and make available to home satellite dish owners certain
satellite delivered cable programming at competitive costs. Digital satellite
service ("DSS") offered by DBS systems has certain advantages over cable systems
with respect to programming and digital quality, as well as disadvantages that
include high upfront costs and a lack of local programming, service and
equipment distribution. The Company's strategy of providing pay-per-view and
perhaps satellite niche programming via the HITS application in certain of its
Systems is designed to combat DSS competition. "Bundling" of the Company's video
service with advanced telecommunications services in certain of the Company's
Systems may also be an effective tool for combating DSS competition.
Cable television systems also compete with wireless program distribution
services such as multichannel multipoint distribution service ("MMDS") which
uses low power microwave to transmit video programming over the air to
customers. Additionally, the FCC recently adopted new regulations allocating
frequencies in
47
<PAGE> 54
the 28 GHz band for a new multichannel wireless video service similar to MMDS,
known as Local Multipoint Distribution Service ("LMDS"). LMDS is also suited for
providing wireless data services, including the possibility of Internet access.
Wireless distribution services generally provide many of the programming
services provided by cable systems, and digital compression technology may
increase significantly the channel capacity of the systems. Because MMDS service
requires unobstructed "line of sight" transmission paths, the ability of MMDS
systems to compete may be hampered in some areas by physical terrain and
foliage. Although in the majority of the Company's franchise service areas
prohibitive topography and limited "line of sight" access has limited
competition from MMDS systems, the Company has experienced competition from MMDS
systems in portions of its Systems in Oklahoma, Texas, Louisiana and Florida.
The 1996 Telecom Act eliminated the previous prohibition on the provision
of video programming by local exchange telephone companies ("LECs") in their
telephone service areas. Various LECs currently are seeking to provide video
programming services within their telephone service areas through a variety of
distribution methods, primarily through the deployment of broadband wire
facilities, but also through the use of wireless (MMDS) transmission. Cable
television systems could be placed at a competitive disadvantage if the delivery
of video programming services by LECs becomes widespread, since LECs may not be
required, under certain circumstances, to obtain local franchises to deliver
such video services or to comply with the variety of obligations imposed upon
cable television systems under such franchises. Issues of cross-subsidization by
LECs of video and telephony services also pose strategic disadvantages for cable
operators seeking to compete with LECs that provide video services. The Company
believes, however, that the small markets in which it provides or expects to
provide cable services are unlikely to support competition in the provision of
video and telecommunications broadband services given the lower population
densities and higher costs per subscriber of installing plant.
The 1996 Telecom Act's provisions promoting facilities-based broadband
competition are primarily targeted at larger markets, and its prohibition on buy
outs and joint ventures between incumbent cable operators and LECs exempts small
operators and carriers meeting certain criteria. See "Legislation and
Regulation." The Company believes that significant growth opportunities exist
for the Company by establishing cooperative rather than competitive
relationships with LECs within service areas, to the extent permitted by law.
Other new technologies may become competitive with non-entertainment
services that cable television systems can offer. The FCC has authorized
television broadcast stations to transmit textual and graphic information useful
both to consumers and businesses. The FCC also permits commercial and
noncommercial FM stations to use their subcarrier frequencies to provide
nonbroadcast services including data transmissions. The FCC has established an
over-the-air Interactive Video and Data Service that will permit two-way
interaction with commercial and educational programming along with informational
and data services. The expansion of fiber optic systems by LECs and other common
carriers is providing facilities for the transmission and distribution to homes
and businesses of video services, including interactive computer-based services
like the Internet, data and other nonvideo services. The FCC has held spectrum
auctions for licenses to provide PCS. PCS will enable license holders, including
cable operators, to provide voice and data services.
Advances in communications technology as well as changes in the marketplace
and the regulatory and legislative environments are constantly occurring. Thus,
it is not possible to predict the effect that ongoing or future developments
might have on the cable industry or on the operations of the Company.
EMPLOYEES
At June 30, 1997, the Company had approximately 131 full-time employees and
14 part-time employees. None of the Company's employees is represented by a
labor union. The Company considers its relations with its employees to be good.
PROPERTIES
A cable television system consists of four principal operating components.
The first component, known as the headend, receives television, radio and
information signals by means of special antennas and satellite earth
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<PAGE> 55
stations. The second component, the distribution network, which originates at
the headend and extends throughout the system's service area, consists of
microwave relays, coaxial or fiber optic cables placed on utility poles or
buried underground and associated electronic equipment. The third component of
the system is a "drop cable," which extends from the distribution network into
each customer's home and connects the distribution system to the customer's
television set. The fourth component, a converter, is the home terminal device
that expands channel capacity to permit reception of more than twelve channels
of programming.
The Company's principal physical assets consist of cable television
systems, including signal-receiving, encoding and decoding apparatus, headends,
distribution systems and subscriber house drop equipment for each of its
Systems. The signal receiving apparatus typically includes a tower, antenna,
ancillary electronic equipment and earth stations for reception of satellite
signals. Headends, consisting of associated electronic equipment necessary for
the reception, amplification and modulation of signals, are located near the
receiving devices. The Company's distribution systems consist primarily of
coaxial cable and related electronic equipment. As the upgrades are completed,
the Systems will incorporate fiber optic cable. Subscriber equipment consists of
taps, house drops and converters. The Company owns its distribution systems,
various office fixtures, test equipment and certain service vehicles. The
physical components of the Systems require maintenance and periodic upgrading to
keep pace with technological advances.
The Company's cables generally are attached to utility poles under pole
rental agreements with local public utilities, although in some areas the
distribution cable is buried in underground ducts or trenches. The FCC regulates
most pole attachment rates under the federal Pole Attachment Act.
The Company owns or leases parcels of real property for signal reception
sites (antenna towers and headends), microwave complexes and business offices
(including its principal executive offices). The Company believes that its
properties, both owned and leased, are in good condition and are suitable and
adequate for the Company's business operations as presently conducted.
INSURANCE
The Company has insurance covering risks incurred in the ordinary course of
business, including general liability, property coverage and business
interruption insurance. As is typical in the cable television industry, the
Company does not maintain insurance covering its underground plant. Furthermore,
on the advice of its insurance agent, to avoid the expense of being "over
insured," in 1994 the Company reduced its casualty insurance coverage (which
covers losses due to damage to its facilities and related business interruption)
from $15 million per occurrence to $10 million per occurrence for each of its
Systems (other than those in Florida and Louisiana). Because of the
industry-wide casualty insurance reductions that resulted from insurers' loss
experience with several hurricanes in the southeastern portion of the United
States, the Company's casualty insurance in Florida and Louisiana was ultimately
reduced to $1 million per occurrence. All of the Company's casualty insurance
coverage is subject to deductibles ranging between $10,000 and $100,000 per
occurrence. The Company believes that its Systems in Florida and Louisiana are
located in areas that are not subject to a high degree of risk from hurricanes,
or from ice storms (which do pose a significant risk for its Systems in other
areas), and that losses in excess of its existing coverage would be unlikely. If
the Company is unable to maintain adequate casualty insurance it will be subject
to a potential reduction in cash flow in the event of a loss in excess of its
policy limits, and if a significant loss were to occur, it could have a material
adverse effect on the Company's financial condition and results of operations.
Notwithstanding the foregoing, the Company believes that the amounts and types
of its insurance coverage are commercially reasonable given the nature and types
of the Company's business and properties.
LITIGATION
In January 1992, in an action initiated by the Company, the Chancery Court
for Fentress County, Tennessee ordered the City of Jamestown, Tennessee to cease
the operation of its municipally-owned cable television system (which overbuilt
approximately 700 of the Company's subscribers) for the remaining term of the
Company's exclusive franchise (which runs through 2002), and the City ceased
operation of its system. Subsequently, on the City's motion, the Chancery Court
dissolved its order on the ground that the 1992 Cable
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<PAGE> 56
Act preempted the exclusivity provision of the Company's exclusive franchise,
and the City resumed operation of its system. On April 7, 1993, in an action
commenced by the Company, the United States District Court for the Middle
District of Tennessee entered an order enjoining the City from competing with
the Company. The City appealed to the United States Court of Appeals for the
Sixth Circuit. That Order was affirmed by the United States Court of Appeals for
the Sixth Circuit. The Sixth Circuit Court of Appeals subsequently ruled that
the City is required to correct violations of the National Electric Safety Code
with respect to its cable plant, and remanded the case to the District Court for
further proceedings consistent with the Court of Appeals' decision.
The Company incurred significant legal expenses defending its exclusive
franchise rights in Jamestown, Tennessee, and as a consequence of the
re-regulation of the cable television industry. The Company does not expect such
legal expenses to continue. See "Legislation and Regulation."
In addition, the Company is a party to ordinary and routine litigation
proceedings that are incidental to the Company's business. Management believes
that the outcome of all pending legal proceedings will not, in the aggregate,
have a material adverse effect on the financial condition of the Company.
JAMES CABLE FINANCE CORP.
James Cable Finance Corp. is a wholly-owned subsidiary of the Company that
was incorporated under the laws of the State of Michigan on June 19, 1997 for
the purpose of serving as a co-issuer of the Notes and the Exchange Notes in
order to facilitate the Offering. Finance Corp. will not have substantial
operations or assets and will not have any revenues. Its only assets consist of
$1,000 cash. As a result, Holders should not expect Finance Corp. to participate
in servicing the interest or principal obligations of the Notes or the Exchange
Notes. The Indenture imposes substantial restrictions on the activities of
Finance Corp. Its principal executive offices are located at 710 North Woodward
Avenue, Suite 180, Bloomfield Hills, Michigan 48304, and its telephone number is
(248) 647-1080.
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LEGISLATION AND REGULATION
INTRODUCTION
The operation of cable television systems is extensively regulated by the
FCC, some state governments and most local governments. The Telecommunications
Act of 1996 alters the regulatory structure governing the nation's
telecommunications providers. It removes barriers to competition in both the
cable television market and the local telephone market. Among other things, it
also reduces the scope of cable rate regulation.
The 1996 Telecom Act requires the FCC to undertake a host of implementing
rulemakings, the final outcome of which cannot yet be determined. Moreover,
Congress and the FCC have frequently revisited the subject of cable regulation.
Future legislative and regulatory changes could adversely affect the Company's
operations. This section briefly summarizes key laws and regulations affecting
the operation of the Company's Systems and does not purport to describe all
present, proposed, or possible laws and regulations affecting the Company or its
Systems.
CABLE RATE REGULATION
The 1992 Cable Act imposed an extensive rate regulation regime on the cable
television industry. Under that regime, all cable systems are subject to rate
regulation, unless they face "effective competition" in their local franchise
area. Federal law now defines "effective competition" on a community-specific
basis as requiring either low penetration (less than 30%) by the incumbent cable
operator, appreciable penetration (more than 15%) by competing multichannel
video providers ("MVPs"), or the presence of a competing MVP affiliated with a
local telephone company.
Although the FCC rules control, local government units (commonly referred
to as local franchising authorities or "LFAs") are primarily responsible for
administering the regulation of the lowest level of cable -- the basic service
tier ("BST"), which typically contains local broadcast stations and public,
educational, and government ("PEG") access channels. Before an LFA begins BST
rate regulation, it must certify to the FCC that it will follow applicable
federal rules, and many LFAs have voluntarily declined to exercise this
authority. LFAs also have primary responsibility for regulating cable equipment
rates. Under federal law, charges for various types of cable equipment must be
unbundled from each other and from monthly charges for programming services. The
1996 Telecom Act allows operators to aggregate costs for broad categories of
equipment across geographic and functional lines. This change should facilitate
the introduction of new technology.
The FCC itself directly administers rate regulation of any cable
programming service tiers, which typically contain satellite-delivered
programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only if
an LFA first receives at least two rate complaints from local subscribers and
then files a formal complaint with the FCC. When new CPST rate complaints are
filed, the FCC now considers only whether the incremental increase is justified
and will not reduce the previously established CPST rate.
Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service", regulation in cases where the latter methodology
appears favorable. Premium cable services offered on a per-channel or
per-program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. Federal law requires that the
BST be offered to all cable subscribers, but limits the ability of operators to
require purchase of any CPST before purchasing premium services offered on a
per-channel or per-program basis.
In an effort to ease the regulatory burden on small cable systems, the FCC
has created special rate rules applicable for systems with fewer than 15,000
subscribers owned by an operator with fewer than 400,000 subscribers. The
special rate rules allow for a vastly simplified cost-of-service showing. The
Company is
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eligible for these simplified cost-of-service rules, and has calculated its
rates generally in accordance with those rules. See "Risk Factors -- Substantial
Regulation In The Cable Television Industry." The 1996 Telecom Act provides
additional relief for small cable operators. For franchising units with less
than 50,000 subscribers and owned by an operator with less than one percent of
the nation's cable subscribers (i.e., approximately 600,000 subscribers) that is
not affiliated with any entities with aggregate annual gross revenues exceeding
$250 million, CPST rate regulation is automatically eliminated. The Company does
not now qualify for this additional relief because certain investors in the
Company exceed the annual gross revenue standard and are deemed to be
"affiliates" under current FCC rules. This definition of "affiliate" is under
review by the FCC, and may be modified in the future to qualify the Company as a
small cable operator.
As part of the 1996 Telecom Act, FCC regulation of CPST rates for all
systems (regardless of size) expires on March 31, 1999. It also relaxes existing
uniform rate requirements by specifying that uniform rate requirements do not
apply where the operator faces "effective competition," and by exempting bulk
discounts to multiple dwelling units, although complaints about predatory
pricing still may be made to the FCC.
CABLE ENTRY INTO TELECOMMUNICATIONS
The 1996 Telecom Act provides that no state or local laws or regulations
may prohibit or have the effect of prohibiting any entity from providing any
interstate or intrastate telecommunications service. States are authorized,
however, to impose "competitively neutral" requirements regarding universal
service, public safety and welfare, service quality, and consumer protection.
State and local governments also retain their authority to manage the public
rights-of-way and may require reasonable, competitively neutral compensation for
management of the public rights-of-way when cable operators provide
telecommunications service. The favorable pole attachment rates afforded cable
operators under federal law can be gradually increased by utility companies
owning the poles (beginning in 2001) if the operator provides telecommunications
service, as well as cable service, over its plant.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. Certain aspects of the
FCC's initial interconnection order were stayed by the Eighth Circuit Court of
Appeals in October 1996, on the ground that the states, not the FCC, have
statutory authority to set the prices that incumbent local exchange carriers may
charge for interconnection. On July 18, 1997, the court made that initial ruling
permanent. It is expected that the FCC will seek review by the United States
Supreme Court of the ruling.
TELEPHONE COMPANY ENTRY INTO CABLE TELEVISION
The 1996 Telecom Act allows telephone companies to compete directly with
cable operators by repealing the historic telephone company/cable
cross-ownership ban. Local exchange carriers, including the Bell Operating
Companies, can now compete with cable operators both inside and outside their
telephone service areas. Because of their resources, LECs could be formidable
competitors to traditional cable operators, and certain LECs have begun offering
cable service.
Under the 1996 Telecom Act, a LEC providing video programming to
subscribers will be regulated as a traditional cable operator (subject to local
franchising and federal regulatory requirements), unless the LEC elects to
provide its programming via an "open video system" ("OVS"). To qualify for OVS
status, the LEC must reserve two-thirds of the system's activated channels for
unaffiliated entities.
Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibition remains on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of co-located LEC systems, and joint ventures between
cable operators and LECs in the same market. The 1996 Telecom Act provides a few
limited exceptions to this buyout prohibition, including a carefully
circumscribed "rural exemption." The 1996 Telecom Act also provides the FCC with
the limited authority to grant waivers of the buyout prohibition (subject to LFA
approval).
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ELECTRIC UTILITY ENTRY INTO TELECOMMUNICATIONS/CABLE TELEVISION
The 1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act. Electric
utilities must establish separate subsidiaries, known as "exempt
telecommunications companies" and must apply to the FCC for operating authority.
Again, because of their resources, electric utilities could be formidable
competitors to traditional cable systems.
ADDITIONAL OWNERSHIP RESTRICTIONS
The 1996 Telecom Act eliminates statutory restrictions on broadcast/cable
cross-ownership (including broadcast network/cable restrictions), but leaves in
place existing FCC regulations prohibiting local cross-ownership between
co-located television stations and cable systems. The 1996 Telecom Act also
eliminates the three year holding period required under the 1992 Cable Act's
"anti-trafficking" provision. The 1996 Telecom Act leaves in place existing
restrictions on cable cross-ownership with satellite master antenna television
("SMATV") and MMDS facilities, but lifts those restrictions where the cable
operator is subject to effective competition. FCC regulations permit cable
operators to own and operate SMATV systems within their franchise area, provided
that such operation is consistent with local cable franchise requirements.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national program services. A companion rule establishing
a nationwide ownership cap on any cable operator equal to 30% of all domestic
cable subscribers has been stayed pending further judicial review.
There are no federal restrictions on non-U.S. entities having an ownership
interest in cable television systems or the FCC licenses commonly employed by
such systems.
MUST CARRY/RETRANSMISSION CONSENT
The 1992 Cable Act conveyed to a commercial broadcaster the right generally
to elect every three years either to require (i) the local cable operator to
carry its signals ("must carry") or (ii) that such operator obtain the
broadcaster's retransmission consent before doing so. The Company has been able
to reach agreements with all of the broadcasters who elected retransmission
consent and has not been required by broadcasters to remove any broadcast
stations from the cable television channel line-ups. The Company has, however,
agreed in limited circumstances to the direct payment of nominal fees for
carriage and, again in limited circumstances, to carry satellite-delivered cable
programming which is affiliated with the network carried by such stations. To
date, compliance with the "retransmission consent" and "must carry" provisions
of the 1992 Cable Act has not had a material effect on the Company, although
this result may change in the future depending on such factors as market
conditions, channel capacity and similar matters when such arrangements are
renegotiated.
ACCESS CHANNELS
LFAs can include franchise provisions requiring cable operators to set
aside certain channels for public, educational and governmental access
programming. Federal law also requires cable systems to designate a portion of
their channel capacity (up to 15% in some cases) for commercial leased access by
unaffiliated third parties. The FCC has adopted rules regulating the terms,
conditions and maximum rates a cable operator may charge for use of this
designated channel capacity, but use of commercial leased access channels has
been relatively limited. The leased access rules, which were recently modified
by the FCC, are being appealed to establish lower rates for access. If this
appeal is successful, the Company's control over its channel line-up would be
reduced and the quality of that line-up might decline.
ACCESS TO PROGRAMMING
To spur the development of independent cable programmers and competition to
incumbent cable operators, the 1992 Cable Act imposed restrictions on the
dealings between cable operators and cable
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programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes video programmers affiliated with cable companies from
favoring cable operators over competitors and requires such programmers to sell
their programming to other multichannel video distributors. This provision
limits the ability of vertically integrated cable programmers to offer exclusive
programming arrangements to cable companies.
OTHER FCC REGULATIONS
In addition to the FCC regulations noted above, there are other FCC
regulations covering such areas as equal employment opportunity, subscriber
privacy, programming practices (including, among other things, syndicated
program exclusivity, network program nonduplication, local sports blackouts,
indecent programming, lottery programming, political programming, sponsorship
identification, and children's programming advertisements), registration of
cable systems and facilities licensing, maintenance of various records and
public inspection files, frequency usage, lockbox availability, antenna
structure notification, tower marking and lighting, consumer protection and
customer service standards, technical standards, and consumer electronics
equipment compatibility. The FCC is expected to impose new Emergency Alert
System requirements on cable operators later this year or early next year. The
FCC has the authority to enforce its regulations through the imposition of
substantial fines, the issuance of cease and desist orders and/or the imposition
of other administrative sanctions, such as the revocation of FCC licenses needed
to operate certain transmission facilities used in connection with cable
operations.
Two pending FCC proceedings of particular competitive concern involve
inside wiring and navigational devices. The former rulemaking is considering
ownership of cable wiring located inside multiple dwelling unit complexes. The
FCC has proposed rules that would make it easier for complex owners to terminate
service from the incumbent cable operator in favor of a new entrant. The latter
rulemaking is considering whether cable customers must be allowed to purchase
cable converters from third party vendors. If the FCC concludes that such
distribution is required, and does not make appropriate allowances for signal
piracy concerns, it may become more difficult for cable operators to combat
theft of service.
COPYRIGHT
Cable television systems are subject to federal copyright licensing
covering carriage of television and radio broadcast signals. In exchange for
filing certain reports and contributing a percentage of their revenues to a
federal copyright royalty pool (which varies depending on the size of the system
and the number of distant broadcast television signals carried), cable operators
can obtain blanket permission to retransmit copyrighted material on broadcast
signals. The possible modification or elimination of this compulsory copyright
license is the subject of continuing legislative review and could adversely
affect the Company's ability to obtain desired broadcast programming. In
addition, the cable industry pays music licensing fees to BMI and is negotiating
a similar arrangement with ASCAP. Copyright clearances for nonbroadcast
programming services are arranged through private negotiations.
STATE AND LOCAL REGULATION
Cable television systems generally are operated pursuant to nonexclusive
franchises granted by a municipality or other state or local government entity
in order to cross public rights-of-way. Federal law now prohibits franchise
authorities from granting exclusive franchises or from unreasonably refusing to
award additional franchises. Cable franchises generally are granted for fixed
terms and in many cases include monetary penalties for non-compliance and may be
terminable if the franchisee fails to comply with material provisions.
The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. Each franchise generally contains provisions governing cable
operations, service rates, franchise fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections. Although LFAs have
considerable discretion in establishing franchise terms, there are certain
federal limitations. For example, LFAs cannot insist on franchise fees
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exceeding 5% of the system's gross revenues, cannot dictate the particular
technology used by the system, and cannot specify video programming other than
identifying broad categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises. However, there
can be no assurance that renewal will be granted or that renewals will be made
on similar terms and conditions.
Various proposals have been introduced at the state and local levels with
regard to the regulation of cable television systems, and a number of states
have adopted legislation subjecting cable television systems to the jurisdiction
of state governmental agencies. Tennessee and Florida, states where the Company
operates Systems, have enacted legislation with respect to the regulation of
cable television systems. In addition, a number of communities that the Company
serves have adopted local rate regulation and customer service ordinances.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Since its inception in 1988, the Company's business and affairs have been
managed and controlled by James Communications Partners, a Michigan
co-partnership and the sole general partner of the Company. James Communications
Partners is managed and controlled by its three partners, Jamesco Inc., a
Michigan corporation (of which William R. James is the sole shareholder, sole
executive officer and sole director), Trenary Corp., Ltd., a Michigan
corporation (of which C. Timothy Trenary is the sole shareholder, sole executive
officer and sole director) and DKS Holdings, Inc., a Michigan corporation (of
which Daniel K. Shoemaker is the sole shareholder, sole executive officer and
sole director). By virtue of these arrangements, Messrs. James, Trenary and
Shoemaker (each a "Director") perform functions for the Company which are
similar to those generally performed for a corporation by its board of
directors. The Directors also constitute all of the directors of Finance Corp.
Through the General Partner, the persons named below (collectively, the
"Executive Officers") perform for the Company functions similar to those
generally performed for a corporation by executive officers having the titles
set forth below:
<TABLE>
<CAPTION>
NAME AGE FUNCTIONS PERFORMED
---- --- -------------------
<S> <C> <C>
William R. James............................. 63 President and Chief Executive
Officer
C. Timothy Trenary........................... 41 Chief Operating Officer
Daniel K. Shoemaker.......................... 34 Chief Financial Officer
Scott A. Madison............................. 40 Director of Engineering
</TABLE>
The Executive Officers also constitute all of the executive officers of
Finance Corp.
William R. James has been the sole shareholder and sole director of
Jamesco, and Jamesco has been a partner in the General Partner, since the
Company was formed in 1988. He has performed the functions of President and
Chief Executive Officer for the Company throughout the same period. He is the
President of Finance Corp.
In January 1986, Mr. James founded James Communications, Inc. ("JCI"), a
cable television company. He served as President and Chief Executive Officer of
JCI from its inception until it was sold in December, 1987. From 1979 to 1986,
Mr. James was employed by Capital Cities Communications (which became Capital
Cities/ABC Inc.), during which time he oversaw the development of its cable
division ("Capital Cities Cable"). At the time he left Capital Cities
Communications to found JCI, Mr. James was an Executive Vice President of
Capital Cities Communications and the President of Capital Cities Cable. Prior
to joining Capital Cities Communications, Mr. James was a partner at Touche Ross
& Co. in charge of national manufacturing consulting.
Mr. James is a graduate of Princeton University and graduated from the
Harvard University Business School with distinction.
C. Timothy Trenary was a partner in the General Partner from the formation
of the Company until July 1, 1997, when he contributed his partnership interest
to his wholly-owned corporation, Trenary Corp., Ltd. From 1988 to 1989, Mr.
Trenary performed the functions of Chief Financial Officer for the Company, and,
since 1989, he has performed the functions of its Chief Operating Officer. He is
also a Vice President of Finance Corp. Mr. Trenary was Vice President of Finance
of JCI during 1987. From 1983 to 1986, he was Operations Manager of the Northern
Region of Capital Cities Cable, and from 1981 to 1983, he was Manager of
Financial Controls for Capital Cities Cable. Prior to joining Capital Cities
Cable, Mr. Trenary was an auditor with Arthur Young & Co.
Daniel K. Shoemaker was a partner in the General Partner from 1989 until
July 1, 1997, when he contributed his partnership interest to his wholly-owned
corporation, DKS Holdings, Inc. He has performed the functions of Chief
Financial Officer for the Company since 1993, and from 1988 to 1993, he served
as its Director of Management Information Systems. He is also the Treasurer of
Finance Corp. From 1985 to 1988, Mr. Shoemaker was a systems engineer in a
management consulting group of Electronic Data Systems Corporation.
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Scott A. Madison has served as the Company's Director of Engineering since
1991. From 1988 to 1991 he was Director of Engineering for C4 Media Companies
(cable television operators), and from 1986 to 1988 he was a Regional Engineer
for C4 Media Cable South, L.P.I.
The Directors and Executive Officers served as the Company's officers and
directors throughout the Company's Chapter 11 proceeding. See "Risk Factors --
1991 Chapter 11 Proceedings."
EXECUTIVE COMPENSATION
The Issuers do not pay any compensation to the Directors or Executive
Officers. The Company's First Amended and Restated Agreement of Limited
Partnership dated as of June 30, 1995 (the "Partnership Agreement"), provides
compensation to the General Partner for management services. Under the terms of
the Partnership Agreement, the General Partner is entitled to an annual
management fee equal to 4% of the Company's annual revenues, plus $5 multiplied
by the average aggregate number of subscribers to the systems owned by the
Company during such year. The amount of the management fee was $1,555,000,
$1,734,000 and $1,806,000 in 1994, 1995 and 1996, respectively. See "The
Partnership Agreement -- General Partner Compensation." No other amounts were
paid to the General Partner by the Company in those years.
The General Partner is entitled to be compensated pursuant to the terms of
an Incentive Compensation Agreement adopted by the Company as of December 31,
1994 (the "1994 Incentive Compensation Agreement"). The 1994 Incentive
Compensation Agreement provides that, in the event that all of the Company's
cable television systems are sold, the General Partner will be entitled to a
cash incentive compensation award of up to 2% of the value of the equity as of
the date of sale (the "Incentive Fee"). See "The Partnership Agreement --
General Partner Compensation."
CERTAIN TRANSACTIONS
Certain affiliates of Sandler Media Group, Inc. were, collectively, the
holders of two-thirds in outstanding principal amount of certain subordinated
debt of the Company, together with related warrant interests in the Company,
which subordinated debt was prepaid and warrant interests were redeemed with
approximately $14.9 million out of the net proceeds of the Offering. Michael J.
Marocco, a member of the Company's Partnership Advisory Board, is an officer of
Sandler Media Group, Inc. Affiliates of Sandler Media Group, Inc. continued to
hold their limited partnership interests in the Company after the Refinancing.
Also see "Management -- Executive Compensation."
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PARTNERSHIP INTERESTS OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, at June 30, 1997, the partnership interests
in the Company beneficially owned by: (a) each person known to the Company to
beneficially own 5% or more of the Company's total partnership interests; and
(b) each Director, each Executive Officer, and all Directors and Executive
Officers as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
BENEFICIAL OWNER TYPE OF INTEREST(1) % OF CLASS
------------------- ------------------- ----------
<S> <C> <C>
William R. James(2)......................................... General partnership *
710 North Woodward Avenue, Suite 180 Limited partnership 1.1%
Bloomfield Hills, Michigan 48304
C. Timothy Trenary(3)....................................... General partnership *
710 North Woodward Avenue, Suite 180 Limited partnership *
Bloomfield Hills, Michigan 48304
Daniel K. Shoemaker(4)...................................... General partnership *
710 North Woodward Avenue, Suite 180 Limited partnership *
Bloomfield Hills, Michigan 48304
Scott A. Madison............................................ None
710 North Woodward Avenue, Suite 180
Bloomfield Hills, Michigan 48304
The Prudential Insurance Company of America................. Limited partnership 24.4%
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
State Farm Mutual Automobile Insurance Company.............. Limited partnership 24.4%
One State Farm Plaza
Bloomington, Illinois 61710
Teachers Insurance and Annuity Association of America....... Limited partnership 12.2%
730 Third Avenue
New York, New York 10017
Bessemer Securities Corporation............................. Limited partnership 12.2%
630 Fifth Avenue
New York, New York 10111
The Dysson-Kissner-Moran Corporation........................ Limited partnership 6.1%
230 Park Avenue
New York, New York 10169
Citicorp.................................................... Limited partnership 5.6%
599 Lexington Avenue
New York, New York 10043
All Directors and Executive Officers as a group............. General partnership *
Limited partnership
1.2%
</TABLE>
- -------------------------
* Less than 1.00%.
(1) The general partnership interest represents 0.97% of the Company's total
partnership interest.
(2) Reflects ownership of all of the capital stock of Jamesco Inc., which holds
a 91.5% interest in the General Partner. Mr. James performs the functions of
a Director of the Company. He also performs the functions of Chief Executive
Officer of the Company.
(3) Reflects ownership of all of the capital stock of Trenary Corp., Ltd., which
holds a 7.5% interest in the General Partner. Mr. Trenary performs the
functions of a Director of the Company. He also performs the functions of
Chief Operating Officer of the Company.
(4) Reflects ownership of all of the capital stock of DKS Holdings, Inc., which
holds a 1.0% interest in the General Partner. Mr. Shoemaker performs the
functions of a Director of the Company. He also performs the functions of
Chief Financial Officer of the Company.
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<PAGE> 65
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued pursuant to the same Indenture (the
"Indenture"), dated as of August 15, 1997, between the Issuers and United States
Trust Company of New York, as trustee (the "Trustee"), under which the Notes
were issued. The terms of the Exchange Notes include those stated in the
Indenture and those made part of the Indenture pursuant to the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), as in effect on the date of
the Indenture. The Exchange Notes are subject to all such terms, and Holders of
the Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summary of certain provisions of the Exchange
Notes does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part of the
Indenture by reference to the Trust Indenture Act as in effect on the date of
the Indenture. A copy of the Indenture has been filed as an exhibit to the
Registration Statement. The definitions of certain capitalized terms used in the
following summary are set forth below under "-- Certain Definitions."
Capitalized terms that are used but not otherwise defined herein have the
meanings assigned to them in the Indenture and such definitions are incorporated
herein by reference.
GENERAL
The Exchange Notes will be general senior unsecured, joint and several
obligations of the Issuers and will be limited in aggregate principal amount to
$100,000,000. The Exchange Notes will be unconditionally guaranteed, on a senior
basis, as to payment of principal, premium, if any, and interest, jointly and
severally, by each Subsidiary which guarantees payment of the Exchange Notes
pursuant to the covenant described under "-- Certain Covenants -- Limitation on
Creation of Subsidiaries" (the "Guarantors").
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will mature on August 15, 2004. Interest on the Exchange
Notes will accrue at the rate of 10 3/4% per annum and will be payable
semi-annually in cash in arrears on February 15 and August 15, commencing on
February 15, 1998 to Holders of record on the immediately preceding February 1
and August 1. Interest on the Exchange Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of original issuance. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months. The Exchange Notes will be payable both
as to principal and interest at the office or agency of the Issuers maintained
for such purpose within the City and State of New York or, at the option of the
Issuers, payment of interest may be made by check mailed to the Holders at their
respective addresses set forth in the register of Holders. Until otherwise
designated by the Issuers, the Issuers' office or agency in New York will be the
office of the Trustee maintained for such purpose. The Exchange Notes will be
issued in registered form, without coupons, and in denominations of $1,000 and
integral multiples thereof.
OPTIONAL REDEMPTION
The Exchange Notes will not be redeemable at the Issuers' option prior to
August 15, 2001. Thereafter, the Exchange Notes will be subject to redemption at
the option of the Issuers in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable date of redemption, if redeemed during the twelve-month period
beginning on August 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001................................................. 105.375%
2002................................................. 102.687%
2003 and thereafter.................................. 100.000%
</TABLE>
Notwithstanding the foregoing, until August 15, 2000, the Issuers may
redeem, at their option, up to 35% of the aggregate principal amount of the
Notes and the Exchange Notes, provided that at least $65,000,000 aggregate
principal amount of the Notes and the Exchange Notes remains outstanding
immediately after the
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<PAGE> 66
occurrence of such redemption, at a price equal to 110.750% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
redemption, with the net proceeds from a Public Equity Offering by the Company;
provided that such redemption must occur within 60 days of the date of the
closing of such Public Equity Offering.
MANDATORY REDEMPTION
Except as set forth below under "Change of Control Offer" and "Certain
Asset Sales", the Issuers are not required to make mandatory redemption or
sinking fund payments with respect to the Exchange Notes.
SELECTION AND NOTICE
If less than all of the Exchange Notes are to be redeemed at any time,
selection of Exchange Notes for redemption will be made by the Trustee on a pro
rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate, provided that no Exchange Notes of $1,000 or less shall be redeemed
in part. Notices of redemption shall be mailed by first class mail at least 30
but not more than 60 days before the redemption date to each Holder of the
Exchange Notes to be redeemed at its registered address. If any Exchange Note is
to be redeemed in part only, the notice of redemption that relates to such
Exchange Note shall state the portion of the principal amount thereof to be
redeemed. A new Exchange Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Exchange Note. On and after the redemption date,
interest ceases to accrue on the Exchange Notes or portions thereof called for
redemption.
CHANGE OF CONTROL OFFER
Within 30 days of the occurrence of a Change of Control, the Company shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") the outstanding Exchange Notes at a
purchase price equal to 101% of the principal amount thereof plus any accrued
and unpaid interest thereon to the Change of Control Payment Date (as
hereinafter defined) (such applicable purchase price being hereinafter referred
to as the "Change of Control Purchase Price") in accordance with the procedures
set forth in this covenant.
Within 30 days of the occurrence of a Change of Control, the Company also
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to the Trustee and to
each Holder of the Exchange Notes, at the address appearing in the register
maintained by the Registrar of the Exchange Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Exchange Notes tendered will be accepted for payment,
and otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 20 business days from the date such
notice is mailed (the "Change of Control Payment Date"));
(3) that any Exchange Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Exchange Notes accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the Change
of Control Payment Date;
(5) that Holders accepting the offer to have their Exchange Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Exchange Notes to the Paying Agent at the address specified
in the notice prior to the close of business on the Business Day preceding
the Change of Control Payment Date;
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<PAGE> 67
(6) that Holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Exchange Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have such
Exchange Notes purchased;
(7) that Holders whose Exchange Notes are being purchased only in part
will be issued new Exchange Notes equal in principal amount to the
unpurchased portion of the Exchange Notes surrendered, provided that each
Exchange Note purchased and each such new Exchange Note issued shall be in
an original principal amount in denominations of $1,000 and integral
multiples thereof;
(8) any other procedures that a Holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance;
(9) the name and address of the Paying Agent; and
(10) in the event the Incentive Fee has been earned and is payable to
the General Partner of the Company under the terms of the 1994 Incentive
Compensation Agreement, that the Incentive Fee will be paid to the General
Partner on the Change of Control Payment Date after payment of all Exchange
Notes tendered pursuant to the Change of Control Offer, and the pro forma
effects of such payment on the Company's financial statements, with
differing percentages of Exchange Notes being tendered and offered for
payment.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (i) accept for payment Exchange Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Exchange Notes
or portions thereof so tendered, and (iii) deliver or cause to be delivered to
the Trustee the Exchange Notes so accepted together with an Officers'
Certificate stating the Exchange Notes or portions thereof tendered to the
Company. The Paying Agent will promptly mail to each Holder of Exchange Notes so
accepted the Change of Control Payment for such Exchange Notes, and the Trustee
will promptly authenticate and mail to each Holder a new Exchange Note equal in
principal amount to any unpurchased portion of the Exchange Notes surrendered,
if any; provided that each such new Exchange Note will be in a principal amount
of $1,000 or an integral multiple thereof. In addition, in the event of any
Change of Control, the Issuers will not, and the Company will not permit any of
its Subsidiaries to, purchase or otherwise redeem any Indebtedness ranking
junior to the Exchange Notes pursuant to any analogous provisions, or pay any
Incentive Fee payable to the General Partner of the Company under the terms of
the 1994 Incentive Compensation Agreement, on or prior to the date that all
Exchange Notes tendered pursuant to a Change of Control Offer have been accepted
for payment and the necessary Change of Control Payment has been irrevocably
deposited with the Paying Agent.
The Indenture provides that, (A) if the Company or any Subsidiary thereof
has issued any outstanding (i) indebtedness that is subordinated in right of
payment to the Exchange Notes or (ii) Preferred Stock, and the Company or such
Subsidiary is required to make a Change of Control Offer or to make a
distribution with respect to such subordinated indebtedness or Preferred Stock
in the event of a Change of Control, the Company shall not consummate any such
offer or distribution with respect to such subordinated indebtedness or
Preferred Stock until such time as the Company shall have paid the Change of
Control Purchase Price in full to the holders of Exchange Notes that have
accepted the Company's Change of Control Offer and otherwise have consummated
the Change of Control Offer made to holders of the Exchange Notes and (B) the
Company will not issue Indebtedness that is subordinated in right of payment to
the Exchange Notes or Preferred Stock with change of control provisions
requiring the payment of such Indebtedness or Preferred Stock prior to the
payment of the Exchange Notes in the event of a Change in Control under the
Indenture.
There can be no assurance that the Issuers will have sufficient financial
resources to repurchase Exchange Notes pursuant to a Change of Control Offer. In
the event the Issuers are required to purchase outstanding Exchange Notes
pursuant to a Change of Control Offer, the Issuers expect that they would be
required to seek third-party financing to the extent funds are not available to
meet their purchase obligations. However, there can be no assurance that the
Issuers would be able to obtain such financing.
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<PAGE> 68
In the event that a Change of Control occurs and the Holders of the
Exchange Notes exercise their right to require the Issuers to purchase Exchange
Notes, if such purchase constitutes a "tender offer" for purposes of Rule 14e-1
under the Exchange Act at that time, the Issuers will comply with the
requirements of Rule 14e-1 as then in effect with respect to such purchase.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of Exchange Notes
to require that the Company repurchase or redeem the Exchange Notes in the event
of a takeover, recapitalization or similar restructuring.
CERTAIN ASSET SALES
The Indenture provides that each Issuer shall not, and the Company shall
not permit any of its Subsidiaries to, consummate any Asset Sale unless (i) such
Issuer (or the Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the assets
sold or otherwise disposed of and (ii) at least 75% of the consideration
therefore received by such Issuer or Subsidiary consists of (a) cash or
Temporary Cash Investments or (b) properties and capital assets (including
franchises and licenses required to own and operate such properties) to be used
in the same lines of business being conducted by such Issuer or Subsidiary at
such time, or Equity Interests in one or more Persons which thereby become
Wholly Owned Subsidiaries of the Company whose assets consist primarily of such
properties and capital assets; provided, however, that the amount of (x) any
liabilities (as shown on such Issuer's or such Subsidiary's most recent balance
sheet or in the notes thereto), of such Issuer or any Subsidiary of the Company
(other than liabilities that are by their terms subordinated to the Exchange
Notes or any guarantee thereof) that are assumed by the transferee of any such
assets and (y) any notes or other obligations received by such Issuer or any
such Subsidiary of the Company from such transferee that are immediately
converted by such Issuer or such Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for the purposes of this provision.
Within 365 days after any Asset Sale, such Issuer or the Subsidiary of the
Company, as the case may be, may either (a) apply such Net Cash Proceeds to
permanently reduce outstanding borrowings and related commitments under the New
Bank Credit Facility or (b) commit to apply the Net Cash Proceeds from such
Asset Sale to a Related Business Investment; provided that any Net Cash Proceeds
that are committed to be used pursuant to this clause (b) are so used within 365
days after any Asset Sale. Pending the final application of any such Net Cash
Proceeds, the Issuers may temporarily reduce Indebtedness under the New Bank
Credit Facility or otherwise invest such Net Cash Proceeds in any manner that is
not prohibited by the Indenture. Any Net Cash Proceeds from an Asset Sale that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $3 million, the Issuers shall commence an offer to all
Holders of Notes and Exchange Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes and Exchange Notes that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase, in accordance with the procedures set forth in the Indenture.
Each Asset Sale Offer will be mailed to Holders not more than 30 days after
the date on which the aggregate amount of Excess Proceeds exceeds $3 million,
with a copy to the Trustee, and shall specify the purchase date, which shall be
no earlier than 30 days nor later than 40 days from the date such notice is
mailed, and shall otherwise comply with the procedures set forth in the
Indenture. Upon receiving notice of the Asset Sale Offer, Holders may elect to
tender their Notes and Exchange Notes in whole or in part in integral multiples
of $1,000 principal amount in exchange for cash. If the aggregate principal
amount of the Notes and Exchange Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Issuers shall select the Notes and Exchange
Notes to be purchased on a pro rata basis. The Issuers will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Notes and Exchange Notes
pursuant to an Asset Sale Offer. To the extent that the aggregate amount of
Notes and Exchange Notes tendered pursuant to an Asset Sale Offer is less than
the Excess
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<PAGE> 69
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. Upon completion of any Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero.
Notwithstanding the foregoing, however, the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Issuers will
be governed by the provisions of the Indenture described above under the caption
"Change of Control" and/or the provisions described below under the caption
"Limitation on Merger, Consolidation or Sale of Assets" and not by the
provisions described above.
RANKING
The indebtedness evidenced by the Exchange Notes will be senior obligations
of the Issuers, will rank pari passu in right of payment with all other existing
and future unsubordinated indebtedness of the Issuers and will be senior in
right of payment to all existing and future Subordinated Obligations of the
Issuers. At June 30, 1997, after giving effect to the Refinancing, the Issuers
would have had no indebtedness outstanding (other than the Notes) and, subject
to the terms of the New Bank Credit Facility and the Company's Partnership
Agreement, the ability to borrow up to $20 million (with an option to increase
the amount to $30 million) under the New Bank Credit Facility. The New Bank
Credit Facility is secured by substantially all of the Issuers' assets. The
Notes and the Exchange Notes will rank pari passu with one another.
Although the Indenture limits the incurrence of Indebtedness of the
Issuers, such limitation is subject to a number of significant qualifications.
Moreover, the Indenture does not impose any limitation on the incurrence of
liabilities that are not considered Indebtedness under the Indenture. See "--
Certain Covenants -- Limitation on Incurrence of Indebtedness."
CERTAIN COVENANTS
Limitation on Restricted Payments. The Indenture provides that neither of
the Issuers shall, nor shall the Company permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment unless, at the time of any
such Restricted Payment and after giving effect thereto on a pro forma basis:
a) no Default or Event of Default shall have occurred and be
continuing;
b) the Company would have been permitted to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the
covenant set forth under "-- Limitation on Incurrence of Indebtedness"; and
c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries (the value of
any such payment, if other than cash, being determined by the Board of
Directors of the Company and evidenced by a resolution set forth in an
Officers' Certificate delivered to the Trustee) since the Issue Date is
less than the sum of (a) the difference between (x) 100% of cumulative
Consolidated Cash Flow for the period (taken as one accounting period) from
the end of the first fiscal quarter during which the Issue Date occurs to
the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available and (y) 140% of cumulative
Consolidated Interest Expense for the period (taken as one accounting
period) from the end of the first fiscal quarter during which the Issue
Date occurs to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available, plus (b) 100% of the
aggregate Net Equity Proceeds received by the Company from any Person
(other than a Subsidiary of the Company) subsequent to the Issue Date and
on or prior to the time of such Restricted Payment, from the issuance and
sale of Qualified Capital Stock (other than (1) Qualified Capital Stock
paid as a dividend on any Capital Stock or as interest on any Indebtedness
or (2) any such Net Equity Proceeds from issuances and sales financed
directly or indirectly using funds borrowed from the Company or any
Subsidiary, until and to the extent such borrowing is repaid).
The provisions of this covenant shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other
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<PAGE> 70
than to a Subsidiary of the Company) of Qualified Capital Stock of the Company,
(iii) the defeasance, redemption or repurchase of Indebtedness of the Company
which is subordinate to the Exchange Notes, with an incurrence of Permitted
Refinancing Indebtedness, (iv) the payment of any dividend or distribution on
Equity Interests of the Company or any Subsidiary of the Company to the extent
necessary to permit the direct or indirect beneficial owners of such Equity
Interests to pay federal and state income tax liabilities arising from income of
the Company or such Subsidiary and attributable to them solely as a result of
the Company or such Subsidiary (and any intermediate entity through which such
holder owns such Equity Interests) being a partnership or similar pass-through
entity for federal income tax purposes, and (v) the payment of annual fees for
management services to the General Partner pursuant to the terms of the
Partnership Agreement as currently in effect on the Issue Date (including any
extensions of such agreement on terms substantially the same as those in
existence on the Issue Date) and in any event not to exceed in any fiscal year
4% of the Company's annual revenues plus $5.00 multiplied by the average
aggregate number of subscribers to the Systems owned by the Company during such
year; in the case of an event under clause (ii) or (iii) above (but not in the
case of an event under clause (i), (iv) or (v) above), provided that no Default
or Event of Default shall have occurred and be continuing. In determining the
amount of Restricted Payments permissible under this covenant, amounts expended
pursuant to clause (i) above shall be included as Restricted Payments.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Limitation on Restricted Payments" were computed,
which calculations may be based upon the Company's latest available financial
statements.
Limitation on Incurrence of Indebtedness. The Indenture provides that each
of the Issuers shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, incur any Indebtedness (including
Acquired Debt) or issue any Disqualified Stock, except for Permitted
Indebtedness; provided, however, that if no Default or Event of Default with
respect to the Exchange Notes shall have occurred and be continuing, or shall
occur as a consequence of the incurrence of such Indebtedness, the Company may
incur Indebtedness and the Company and its Subsidiaries may issue Disqualified
Stock if, at the time of such incurrence or issuance and after giving effect to
the incurrence of such Indebtedness (and any other Indebtedness incurred since
the end of the last full fiscal quarter or fiscal year for which internal
financial statements are available and the application of the proceeds thereof),
the ratio (the "Debt Ratio") of (a) the aggregate principal amount of
consolidated Indebtedness of the Company and its Subsidiaries outstanding as of
the end of the last full fiscal quarter or fiscal year for which internal
financial statements are available to (b) four times the Pro Forma Consolidated
Cash Flow of the Company and its Subsidiaries for the last full fiscal quarter
immediately preceding the date of the incurrence, determined on a pro forma
basis as if any such Indebtedness had been incurred and the proceeds thereof had
been applied at the beginning of such preceding fiscal quarter ("Pro Forma
Annual Cash Flow"), would be less than or equal to 6.50 to 1.0; provided that
this covenant shall not apply to the incurrence of Indebtedness by the Company
so long as all of the proceeds of such Indebtedness are applied to the
repurchase of outstanding Notes and Exchange Notes by the Company pursuant to an
offer to purchase Notes and Exchange Notes pursuant to (x) the provisions of the
Indenture described under the first paragraph of "-- Optional Redemption" or (y)
a tender offer made to all Holders of the Notes and Exchange Notes effected in
accordance with all federal and state securities laws, including, without
limitation, Rule 14e-1 under the Exchange Act and any other applicable federal
or state regulations.
The foregoing limitations will not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"): (a) Indebtedness under the
New Bank Credit Facility in an aggregate principal amount not to exceed $30
million in principal amount at any one time outstanding, less the amount of all
permanent reductions in the outstanding borrowings and related commitments under
the New Bank Credit Facility resulting from any application of Net Cash Proceeds
from any Asset Sale after the Issue Date (with letters of credit being deemed to
have a principal amount equal to the maximum potential liability of the Company
thereunder); (b) the incurrence by the Issuers of Existing Indebtedness; (c) the
incurrence by the Issuers of the Indebtedness represented by the Notes or
Exchange Notes; (d) the incurrence of Permitted Refinancing Indebtedness; (e)
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk
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<PAGE> 71
with respect to any floating rate Indebtedness that is permitted by the terms of
the Indenture to be outstanding; (f) the incurrence by the Company of
Indebtedness represented by Capital Lease Obligations, mortgage financings, or
Purchase Money Obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property used in the business of the Company in an aggregate principal amount
not to exceed $2,500,000 at any one time outstanding; (g) guarantees by any
Subsidiary of Indebtedness of the Company; and (h) other Indebtedness of the
Company, including any Indebtedness under the New Bank Credit Facility that
utilizes this clause, having an aggregate principal amount not to exceed
$2,500,000 at any time outstanding.
Limitation on Liens. The Indenture provides that each Issuer shall not, and
the Company shall not permit any of its Subsidiaries to, directly or indirectly,
create, incur, assume or otherwise cause or suffer to exist or become effective
any Lien of any kind (other than Permitted Liens) upon any of their property or
assets, now owned or hereafter acquired, or any income or profits therefrom or
assign or convey any right to receive income therefrom, unless (i) if such Lien
secures Indebtedness which is pari passu with the Exchange Notes, then the
Exchange Notes are secured on an equal and ratable basis with the obligation so
secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness which is subordinated to the Exchange
Notes, any such Lien shall be subordinated to the Lien granted to the holders of
the Exchange Notes to the same extent as such Indebtedness is subordinated to
the Exchange Notes.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Indenture provides that each Issuer shall not, and the Company
shall not permit any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any Payment Restriction,
except for such Payment Restrictions existing under or by reason of (i) the New
Bank Credit Facility, (ii) the Indenture, the Notes or the Exchange Notes, (iii)
applicable law, (iv) any instrument governing Indebtedness of a Person acquired
by the Company or any of its Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired;
provided that the Consolidated Cash Flow of such Person, to the extent that it
is subject to an effective Payment Restriction and has not been paid or made
available to the Company, is not taken into account in determining whether such
acquisition was permitted by the terms of the Indenture, (v) by reason of
customary nonassignment provisions in leases or franchise agreements entered
into in the ordinary course of business and consistent with past practices, (vi)
Purchase Money Obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (i)(c) of
the definition of "Payment Restriction" on the property so acquired, or (vii)
Permitted Refinancing Indebtedness with respect to the Indebtedness referred to
in clauses (i), (ii) or (iv) above; provided that the Payment Restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced.
Limitation on Transactions with Affiliates. The Indenture provides that
neither of the Issuers shall, and the Company shall not permit any of its
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such Subsidiary
with an unrelated Person; (b) such Affiliate Transaction relates to and is in
furtherance of the lines of business the Company was engaged in on the Issue
Date or as the Company's business has thereafter evolved in the fields of cable
television systems, enhanced video services, advanced telecommunications
services, such as broadband high speed Internet access and inter- and intra-
network data services, and telephony; (c) in the case of any such Affiliate
Transaction involving aggregate payments in excess of $3 million, the Company
delivers to the Trustee a resolution of the Partnership Advisory Board set forth
in an Officers' Certificate certifying that (i) such Affiliate Transaction
complies with clauses (a) and (b) above, (ii) such Affiliate Transaction is in
the best interests of the Company or the relevant Subsidiary and (iii) such
Affiliate Transaction is approved by a majority of the disinterested members of
the Partnership
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Advisory Board; and (d) with respect to any Affiliate Transaction involving
aggregate payments in excess of $5 million, an opinion as to the fairness to the
Company or the applicable Subsidiary from a financial point of view which is
issued by an investment banking firm of national standing.
The provisions described in the foregoing paragraph shall not apply to (i)
annual fees for management services to the General Partner pursuant to the terms
of the Partnership Agreement as currently in effect on the Issue Date (including
any extensions of such agreement on terms substantially the same as those in
existence on the Issue Date) and in any event not to exceed in any fiscal year
4% of the Company's annual revenues plus $5.00 multiplied by the average
aggregate number of subscribers to the Systems owned by the Company during such
year, (ii) transactions between or among the Company and/or its Wholly-Owned
Subsidiaries and (iii) transactions permitted by the provisions of the Indenture
described above under the covenant "Limitation on Restricted Payments." In
addition, the provisions of this covenant shall not apply to the 1994 Incentive
Compensation Agreement between the Company and the General Partner; provided
that (i) the payment of any amounts pursuant to such 1994 Incentive Compensation
Agreement shall not be payable prior to the earliest to occur of: (a) the date
all principal, premium, if any, or interest on the Notes and Exchange Notes has
been indefeasibly paid in full, or (b) in the event of the occurrence of a
Change of Control, the Change of Control Payment Date, provided that all Notes
and Exchange Notes properly tendered for payment on said date have been
purchased, or (c) any other date on which the Incentive Fee has been earned and
is payable to the General Partner under the 1994 Incentive Compensation
Agreement, so long as such payment is permitted by the provisions of the
Indenture described above under the covenant "Limitation on Restricted
Payments"; and (ii) any claim to such amounts is subordinated until the date
permitted to be paid under clause (i)(a), (i)(b) or (i)(c) above to the prior
repayment in full of all principal, premium, if any, or interest on the Notes
and Exchange Notes.
Limitation on Conduct of Business of Finance Corp. Finance Corp. shall not
hold any operating assets or other properties or conduct any business other than
to serve as an Issuer and co-obligor with respect to the Notes and Exchange
Notes and will not own any Capital Stock of any other Person.
Limitation on Creation of Subsidiaries. Neither Issuer shall create or
acquire, or permit any of its Subsidiaries to create or acquire, any Subsidiary
other than (i) Finance Corp. and (ii) any Subsidiary of the Company that shall,
at the time it has either assets or net worth in excess of $5,000, execute a
Guarantee, in the form attached to the Indenture and reasonably satisfactory in
form and substance to the Trustee (and with such documentation relating thereto
as the Trustee shall require, including, without limitation a supplement or
amendment to the Indenture and Opinions of Counsel as to the enforceability of
such guarantee). See "Future Guarantees."
Limitation on Preferred Stock of Subsidiaries. The Company will not permit
any Subsidiary to issue any Preferred Stock (except Preferred Stock to the
Company or a Subsidiary) or permit any Person (other than the Company or a
Subsidiary) to hold any such Preferred Stock unless the Company or such
Subsidiary would be entitled to incur or assume Indebtedness (other than
Permitted Indebtedness) under the first paragraph of the covenant described
under "Limitation on Incurrence of Indebtedness" in the aggregate principal
amount equal to the aggregate liquidation value of the Preferred Stock to be
issued.
Limitation on Sale and Leaseback Transactions. The Issuers shall not, and
the Company shall not permit any of its Subsidiaries to, enter into any Sale and
Leaseback Transaction unless (i) the consideration received in such Sale and
Leaseback Transaction is at least equal to the fair market value of the property
sold, as determined in good faith by the Board of Directors of the Company and
(ii) the Company could incur the Attributable Indebtedness in respect of such
Sale and Leaseback Transaction in compliance with the covenant "Limitation on
Incurrence of Indebtedness."
Payments for Consents. Neither the Issuers nor any of the Guarantors shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Exchange Notes for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Exchange Notes unless such consideration is
offered to be paid or agreed to be paid to all Holders of the Notes and Exchange
Notes which so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
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Reports. So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, it will continue to furnish the information
required thereby to the Commission and to the Holders of the Exchange Notes. The
Indenture provides that even if the Company is entitled under the Exchange Act
not to furnish such information to the Commission or to the Holders of the
Exchange Notes, they will nonetheless continue to furnish such information to
the Commission and Holders of the Exchange Notes.
LIMITATION ON MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that neither Issuer nor any Guarantor may
consolidate or merge with or into, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another corporation, Person or entity unless
(in the case of the Company or any Guarantor) (i) the Company or such Guarantor,
as the case may be, is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company or such Guarantor, as the case may be) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation (or, in the case of the Company, a corporation, a limited
partnership, a limited liability company or limited liability partnership),
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; provided that at any time the Company or its successor
is a limited partnership, limited liability company or limited liability
partnership there shall be a co-issuer of the Notes that is a corporation; (ii)
the entity or Person formed by or surviving any such consolidation or merger (if
other than the Company or such Guarantor) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of the Company or such Guarantor, as the
case may be, pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under the Notes, the Exchange Notes and the
Indenture; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) the Company or any entity or Person formed by or
surviving any such consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made will, at
the time of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable period, be
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of the covenant entitled
"Limitation on Incurrence of Indebtedness"; provided, however, that such Person
shall not be required to meet the ratio in such covenant if such Person has, at
the time of such transaction and after giving pro forma effect thereto, a
long-term indebtedness credit rating at least equal to the greater of (i) BB by
Standard & Poor's Corporation or Ba(2) by Moody's Investor Service, Inc. or (ii)
one full credit rating above the Company's credit rating, provided the Company
received such credit rating within the 12 months preceding any such
determination.
FUTURE GUARANTEES
The Exchange Notes will be guaranteed on a senior basis by the Guarantors.
The obligations of each Guarantor will be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees of Indebtedness
incurred under the New Bank Credit Facility) and after giving effect to any
collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, result in the
obligations of such Guarantor under the Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law. Each Guarantor
that makes a payment or distribution under a Guarantee will be entitled to a
contribution from each other Guarantor in a pro rata amount based on the
Adjusted Net Assets of each Guarantor.
A Guarantor will be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Stock is sold, in each case in a transaction in compliance with the
covenant described under "Limitation on Certain Asset Sales," or the Guarantor
merges with or into or consolidates with, or transfers all or substantially all
of its assets to, the Company or another Guarantor in a transaction in
compliance with the covenant entitled "Limitation on Merger, Consolidation or
Sale of Assets," and such
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Guarantor has delivered to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent herein provided for
relating to such transaction have been complied with.
EVENTS OF DEFAULT AND REMEDIES
The following events constitute "Events of Default" under the Indenture:
(i) default in the payment when due of interest on the Notes or Exchange Notes
and the continuance of such default for a period of 30 days; (ii) default in the
payment when due of the principal of or premium, if any, on the Notes or
Exchange Notes, whether at maturity, upon acceleration, redemption or otherwise
(including the failure to repurchase Notes or Exchange Notes tendered pursuant
to the requirements of the covenants set forth in the Indenture and summarized
herein under the headings "Change of Control Offer" and "Certain Asset Sales");
(iii) failure by the Issuers to comply with the provisions described under the
covenants "Change of Control Offer," "Certain Asset Sales", "Certain Covenants
- -- Limitation on Restricted Payments," "-- Limitation on Incurrence of
Indebtedness," "-- Limitation on Preferred Stock of Subsidiaries" or "--
Limitation on Merger, Consolidation or Sale of Assets;" (iv) failure by the
Issuers for 60 days after written notice from the Trustee or Holders of at least
25% of the aggregate principal amount of the Notes and Exchange Notes then
outstanding to comply with any of its other agreements in the Indenture, the
Notes or Exchange Notes; (v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to pay
principal of or premium if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity without such declaration having been
rescinded or annulled within a period of 10 days, and in each case, the
principal amount of any such Indebtedness, together with the principal amount of
any other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $5 million or more at any
one time; (vi) failure by the Issuers or any of the Company's Subsidiaries to
pay final judgments aggregating in excess of $5 million (net of amounts covered
by reputable and creditworthy insurance companies), which judgments are not
paid, discharged or stayed for a period of 60 days; or (vii) certain events of
bankruptcy, insolvency or reorganization in respect of the Issuers, the General
Partner or any Significant Subsidiary.
If any Event of Default (other than an Event of Default specified in clause
(vii) above) occurs and is continuing, the Trustee by written notice to the
Issuers, or the Holders of at least 25% in aggregate principal amount of then
outstanding Notes and Exchange Notes by written notice to the Issuers and the
Trustee, may declare all the Notes and Exchange Notes to be due and payable
immediately. If an Event of Default specified in clause (vii) above shall occur,
all outstanding Notes and Exchange Notes shall ipso facto become immediately due
and payable without any declaration, notice or other act on the part of the
Trustee or any of the Holders of the Notes or Exchange Notes. Holders of the
Exchange Notes may not enforce the Indenture or the Exchange Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in aggregate principal amount of the then outstanding Notes and Exchange Notes
may direct the Trustee in its exercise of any trust or power.
The Holders of not less than a majority in aggregate principal amount of
Notes and Exchange Notes then outstanding by notice to the Trustee may on behalf
of the Holders of all of the Notes and Exchange Notes waive any existing Default
or Event of Default and its consequences under the Indenture except a continuing
Default or Event of Default in the payment of the principal of, premium, if any,
or interest on the Notes or Exchange Notes.
The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF CERTAIN PERSONS
No director, officer, employee, partner, interest holder or shareholder, as
such, of either Issuer or of the General Partner, will have any liability for
any obligations of either of the Issuers under the Notes, the Exchange Notes or
the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of the Notes or Exchange Notes by
accepting a Note or Exchange Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes and
Exchange Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Securities and Exchange
Commission (the "Commission") that such a waiver is against public policy.
Absent such waiver and release, under the Delaware Revised Uniform Limited
Partnership Act, as amended, the Holders of the Notes or Exchange Notes would
have been able to proceed against the General Partner in the event of nonpayment
thereof, and such Holders would have been able to proceed against the limited
partners of the Company only if the limited partners received distributions from
the Company and, at the time of such distributions, they knew that the Company's
total liabilities exceeded the fair value of the Company's assets.
DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of
their obligations discharged with respect to the outstanding Exchange Notes
("Defeasance") except for (i) the rights of Holders of outstanding Exchange
Notes to receive payments in respect of the principal of, premium, if any, and
interest on such Exchange Notes when such payments are due, (ii) the Issuers'
obligations with respect to the Exchange Notes concerning issuing temporary
Exchange Notes, registration of Exchange Notes, mutilated, destroyed, lost or
stolen Exchange Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Issuers' obligations in connection
therewith and (iv) the Defeasance provisions of the Indenture.
In order to exercise Defeasance, (i) the Issuers must irrevocably deposit
with the Trustee, in trust, for the benefit of the Holders of the Exchange
Notes, cash in U.S. dollars, U.S. Government Obligations, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest on the outstanding Exchange Notes on the stated
maturity or on the applicable redemption date, as the case may be, of such
principal or installment of principal of, premium, if any, or interest on the
outstanding Exchange Notes; (ii) the Issuers shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Issuers have received from, or there has been published
by, the IRS a ruling or (B) since the date of the Indenture, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the Holders
of outstanding Exchange Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Defeasance had not occurred; (iii) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (iv) such Defeasance shall not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the Indenture) to which the Issuers or any of the Company's Subsidiaries is
a party or by which the Issuers or any of the Company's Subsidiaries is bound;
(v) the Issuers shall have delivered to the Trustee an Opinion of Counsel to the
effect that after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vi) the
Issuers shall have delivered to the Trustee an Officers' Certificate stating
that the deposit was not made by the Issuers with the intent of preferring the
Holders of the Exchange Notes over the other creditors of the Issuers with the
intent of defeating, hindering, delaying or defrauding creditors of the Issuers
or others; and (vii) the Issuers shall have delivered to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Defeasance have been complied
with.
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AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraphs, the Indenture or the
Exchange Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes and Exchange Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Notes and Exchange Notes), and any existing default or
compliance with any provision of the Indenture or the Exchange Notes may be
waived with the consent of the Holders of a majority in principal amount of then
outstanding Notes and Exchange Notes (including consents obtained in connection
with a tender offer or exchange offer for Notes and Exchange Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any of the Exchange Notes held by a non-consenting Holder of
the Exchange Notes): (i) reduce the principal amount of the Exchange Notes whose
Holders must consent to an amendment, supplement or waiver of any provision of
the Indenture or the Exchange Notes, (ii) reduce the principal of or change the
fixed maturity of any Exchange Note or alter the provisions with respect to the
redemption of the Exchange Notes pursuant to the provisions of the Indenture
(other than provisions relating to the covenants described above under the
headings "Change of Control Offer" and "Certain Asset Sales") or reduce the
purchase price payable in connection with repurchases of the Exchange Notes
pursuant to the covenants described under the headings "Change of Control Offer"
and "Certain Asset Sales," (iii) reduce the rate of or change the time for
payment of interest on any Exchange Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Exchange Notes (except a rescission of acceleration of the Exchange Notes by the
Holders of at least a majority in aggregate principal amount of the Notes and
Exchange Notes and a waiver of the payment default that resulted from such
acceleration), (v) make the principal of, or the interest on, any Exchange Note
payable in money other than that stated in the Exchange Notes, (vi) make any
change in the provisions of the Indenture relating to waivers of past Defaults
or the rights of Holders of the Exchange Notes to receive payments of principal
of or premium, if any, or interest on the Exchange Notes, (vii) waive a
redemption payment with respect to any Exchange Note (other than a payment
required by one of the covenants described above under the headings "Change of
Control Offer" and "Certain Asset Sales"), (viii) make a change that adversely
affects the ranking of the Exchange Notes or the Guarantees, or (ix) make any
change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of the
Exchange Notes, the Issuers and the Trustee may amend or supplement the
Indenture or the Exchange Notes to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Exchange Notes in addition to or in place of
certificated Exchange Notes, to provide for the assumption of the Issuers'
obligations to Holders of the Exchange Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Exchange Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the Exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers are not required to transfer or exchange
any Exchange Note selected for redemption. Also, the Issuers are not required to
transfer or exchange any Exchange Notes for a period of 15 days before a
selection of the Exchange Notes to be redeemed.
The registered Holder of an Exchange Note will be treated as the owner of
it for all purposes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of either of the Issuers, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other
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transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days or resign.
The Holders of a majority in principal amount of the then outstanding Notes
and Exchange Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent Person in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of the Exchange Notes, unless such Holder shall
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person
and (ii) Indebtedness encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect control with
such specified Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling," "controlled by" and "under
common control with)), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Asset Sale" means the sale, lease, exchange, transfer or other disposition
(other than to the Company or any of its Subsidiaries) in any single transaction
or series of related transactions of (a) any Capital Stock of or other equity
interest in any Subsidiary of the Company, (b) all or substantially all of the
assets of the Company or of any Subsidiary thereof, (c) real property or (d) all
or substantially all of the assets owned by the Company or any Subsidiary
thereof, or a division, line of business or comparable business segment of the
Company or any Subsidiary thereof; provided, however, that Asset Sales shall not
include (i) any transaction consummated in compliance with "-- Limitation on
Merger, Consolidation or Sale of Assets" and "--Limitation on Restricted
Payments" above and the creation of any Lien not prohibited by the provisions
described under "-- Limitation on Liens" above, (ii) a transaction or series of
related transactions for which the Company or its Subsidiaries receive aggregate
consideration of less than $500,000, (iii) sales of property or equipment that
has become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of the Company or any Subsidiary, as the case may
be, and (iv) sales, leases, conveyances, transfers or other dispositions to the
Company or to a Subsidiary or to any other Person if after giving effect to such
sale, lease, conveyance, transfer or other disposition such other Person becomes
a Subsidiary.
"Attributable Indebtedness" means, as at the time of determination, the
present value (discounted at a rate of 10%, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Leaseback Transaction (including any period for
which such lease has been extended).
"Bankruptcy" means commencement of a voluntary case under the Bankruptcy
Code of 1978, as amended, or commencement of an involuntary case under the
Bankruptcy Code of 1978, as amended.
"Bankruptcy Law" means Title 11, United States Code or any similar federal,
state or foreign law for the relief of debtors.
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"Board of Directors" means (i) in the case of the Company or the General
Partner, the partner or partners holding a majority of the Equity Interests in
the General Partner, (ii) in the case of a Person that is a partnership, other
than the Company and the General Partner, the board of directors of such
Person's corporate general partner (or if such general partner is itself a
partnership, the board of directors of such general partner's corporate general
partner), (iii) in the case of a Person that is a corporation, the board of
directors of such Person and (iv) in the case of any other Person, the board of
directors, management committee or similar governing body or any authorized
committee thereof responsible for the management of the business and affairs of
such Person.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including, without
limitation, Partnership Interests and any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, such partnership, limited liability company or
partnership or any other entity.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 50% or more of the total voting power of the outstanding Voting
Stock of the Company, the General Partner or Jamesco, as the case may be; (b)
the Company, the General Partner or Jamesco, as the case may be, consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person consolidates with, or merges with or into,
the Company, the General Partner or Jamesco, as the case may be, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company, the General Partner or Jamesco, as the case may be, is converted into
or exchanged for cash, securities or other property, other than any such
transaction where the outstanding Voting Stock of the Company, the General
Partner or Jamesco, as the case may be, is converted into or exchanged for
Voting Stock (other than Disqualified Equity Interests) of the surviving or
transferee Person and, immediately after such transaction, the Permitted Holders
or the holders of the Voting Stock of the Company, the General Partner or
Jamesco, as the case may be, immediately prior thereto own, directly or
indirectly, more than 50% of the total voting power of the outstanding Voting
Stock of the surviving or transferee Person; (c) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company, the General Partner or Jamesco, as the case may be
(together with (i) one or more Permitted Holders, and (ii) any new directors
whose election to such Board of Directors was approved by the Permitted Holders
or by a vote of at least a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved), cease for any reason (other
than by action of the Permitted Holders) to constitute a majority of the Board
of Directors of the Company, the General Partner or Jamesco, as the case may be,
then in office; (d) the admission of any Person as a general partner of the
Company or the General Partner, as the case may be, after which the General
Partner or Jamesco, Trenary Corp., Ltd. and DKS Holdings, Inc., as the case may
be, together with one or more Permitted Holders, do not have the sole power,
directly or indirectly, to take all of the actions they are entitled or required
to take under the Partnership Agreement of the Company or the General Partner,
as the case may be, as in effect on the Issue Date; provided, however, that a
Change of Control will be deemed not to have occurred with respect to the events
in this clause (d) if such events have been approved by the Permitted Holders
holding a majority in interest of the total outstanding Equity Interests of the
General Partner held by the Permitted Holders; (e) except as permitted by clause
(b) above, the adoption by either Issuer of a plan relating to the dissolution
or liquidation of either Issuer or the appointment of a liquidating trustee or
the commencement of any other proceedings to effect such result; or (f) 180 days
following the occurrence of any of certain events provided for in the
Partnership Agreement, as in effect on the Issue Date, which would
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require that the Company be dissolved, wound up and terminated (unless prior to
the expiration of said 180-day period, the term of the Company is subsequently
extended by a vote of the partners), including, but not limited to, (i)
expiration of the term of the Partnership or (ii) the removal of the General
Partner, whether or not such event creates a dissolution, winding up or
termination of the Partnership.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, in each case to
the extent deducted in computing Consolidated Net Income, (a) an amount equal to
any extraordinary loss; plus (b) an amount equal to any net loss realized in
connection with an Asset Sale, plus (c) provision for taxes based on income or
profits of such Person for such period, plus (d) Consolidated Interest Expense
of such Person for such period, whether paid or accrued, plus (e) depreciation
and amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) of such Person for such period, plus (f) other consolidated non-cash
charges, minus (g) non-cash items increasing consolidated revenues for such
period, in each case, on a consolidated basis and determined in accordance with
GAAP.
"Consolidated Interest Expense" means, for any given period and Person, the
aggregate of the interest expense in respect of all Indebtedness of such Person
and its Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP (including amortization of original issue discount on any
such Indebtedness, all non-cash interest payments, the interest portion of any
deferred payment obligation and the interest component of capital lease
obligations).
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided,
that, (i) the Net Income of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid in cash to the referent
Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income of any
Subsidiary that is subject to any Payment Restriction shall be excluded to the
extent such Payment Restriction would limit the amount that otherwise could be
paid to, or received by, such Person or a Subsidiary of such Person not subject
to any Payment Restriction, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatory
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the
Maturity Date.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Issuers in existence on
the Issue Date, until such Indebtedness is repaid.
"Fair Market Value" means, with respect to any asset, property or Capital
Stock, the price which could be negotiated in an arm's length free market
transaction between a willing seller and a willing buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. "Fair Market
Value" shall be determined by the Board of Directors of the Company and by the
Board of Directors of the applicable Subsidiary, if applicable, acting
reasonably and in good faith and shall be evidenced by a duly and properly
adopted resolution of the Board of Directors of the Company and of such
Subsidiary's Board of Directors, if applicable, set forth in an Officers'
Certificate delivered to the Trustee; except that any determination of Fair
Market Value made with respect to any real property or personal property having
a value in excess of $2 million shall be made by an independent qualified
appraiser.
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"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"General Partner" means James Communications Partners, a Michigan general
partnership and the General Partner of the Company.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements the value of which is tied directly to fluctuations in interest
rates.
"Holder" or "Noteholder" means a Person in whose name a Note or Exchange
Note is registered.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"incurrence," "incurred," "incurable" and "incurring" shall have meanings
correlative to the foregoing), provided that the accrual of interest (whether
such interest is payable in cash or in kind) and the accretion of original issue
discount shall not be deemed an incurrence of Indebtedness, provided, further
that (a) any Indebtedness or Disqualified Stock of a Person existing at the time
such Person becomes (after the Issue Date) a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) of the Company shall be deemed to be
incurred by such Subsidiary at the time it becomes a Subsidiary of the Company
and (b) any amendment, modification or waiver of any document pursuant to which
Indebtedness was previously incurred shall be deemed to be an incurrence of
Indebtedness unless such amendment, modification or waiver does not (i) increase
the principal or premium thereof or interest rate thereon (including by way of
original issue discount), (ii) change to an earlier date the stated maturity
thereof or the date of any scheduled or required principal payment thereon or
the time or circumstances under which such Indebtedness may or shall be
redeemed, (iii) if such Indebtedness is subordinated to the Exchange Notes,
modify or affect, in any manner adverse to the Holders, such subordination, (iv)
if the Company is the obligor thereon, provide that a Subsidiary of the Company
not already an obligor thereon shall be an obligor thereon or (v) violate, or
cause the Indebtedness to violate, the provisions described under "Certain
Covenants -- Limitations on Liens" and "-- Limitations on Dividend and Other
Payment Restrictions Affecting Subsidiaries."
"Indebtedness" means with respect to any Person, without duplication, (i)
all liabilities, contingent or otherwise, of such Person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (b) evidenced by bonds (not including
performance bonds, performance guarantees, surety bonds and appeal bonds,
letters of credit or similar obligations incurred in the ordinary course of
business, including in connection with the requirements of cable television
franchising authorities, and otherwise consistent with industry practice),
notes, debentures, drafts accepted or similar instruments or representing the
balance deferred and unpaid of the purchase price of any property (other than
any such balance that represents an account payable or any other monetary
obligation to a trade creditor created, incurred, assumed or guaranteed by such
Person in the ordinary course of business of such Person in connection with
obtaining goods, materials or services, which account is not overdue by more
than 90 days, according to the original terms of sale, unless such account
payable is being contested or has been renegotiated in good faith) or (c) for
the payment of money relating to Capital Lease Obligations in excess of $100,000
in the aggregate at any one time outstanding; (ii) reimbursement obligations of
such Person with respect to letters of credit; (iii) obligations of such Person
in excess of $100,000 in the aggregate at any one time outstanding with respect
to Hedging Obligations; (iv) all liabilities of others of the kind described in
the
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preceding clause (i), (ii) or (iii) that such Person has guaranteed, that have
been incurred by a partnership in which it is a general partner (to the extent
such Person is liable, contingently or otherwise, therefor) or that is otherwise
its legal liability (other than endorsements for collection in the ordinary
course of business); and (v) all obligations of others secured by a Lien to
which any of the properties or assets (including, without limitation, leasehold
interests and any other tangible or intangible property rights) of such Person
are subject, whether or not the obligations secured thereby shall have been
assumed by such Person or shall otherwise be such Person's legal liability.
"Insolvency" means the definition of such term as provided for in the
Bankruptcy Code of 1978, as amended.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Issue Date" means August 15, 1997, the date of first issuance of the Notes
under the Indenture.
"Jamesco" means Jamesco, Inc., a Michigan corporation, whose sole
shareholder is William R. James.
"Lien" means, with respect to any asset any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Maturity Date" means August 15, 2004.
"Net Cash Proceeds" means, with respect to any Asset Sale, the cash
proceeds of such Asset Sale, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but not interest,
component thereof) when received in the form of cash (except to the extent such
obligations are financed or sold with recourse to the Company or any Subsidiary
of the Company) and proceeds from the conversion of other property received when
converted to cash, net of (a) reasonable third-party brokerage commissions and
other reasonable third-party fees and expenses (including fees and expenses of
counsel and investment bankers), related to such Asset Sale, (b) provisions for
all taxes, other than income or similar taxes (whether payable by the Company,
any subsidiary or any partner of the Company), as a result of such Asset Sale,
as computed on a consolidated basis, and (c) payments made to repay Indebtedness
or any other obligation outstanding at the time of such Asset Sale that was
incurred in accordance with the Indenture and that either (i) is secured by a
Lien incurred in accordance with the Indenture on the property or assets sold or
(ii) is, by its original terms, required to be paid as a result of such sale, in
each case to the extent actually repaid in cash.
"Net Equity Proceeds" means (a) in the case of any sale by the Company of
Qualified Capital Stock of the Company, the aggregate net cash proceeds received
by the Company, after payment of expenses, commissions and the like incurred in
connection therewith, and (b) in the case of any exchange, exercise, conversion
or surrender of any outstanding Indebtedness of the Company for or into shares
of Qualified Capital Stock of the Company, the amount of such Indebtedness (or,
if such Indebtedness was issued at an amount less than the stated principal
amount thereof, the accrued amount thereof as determined in accordance with
GAAP) as reflected in the consolidated financial statements of the Company
prepared in accordance with GAAP as of the most recent date next preceding the
date of such exchange, exercise, conversion or surrender (plus any additional
amount required to be paid by the Holder of such Indebtedness to
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the Company upon such exchange, exercise, conversion or surrender and less any
and all payments made to the Holders of such Indebtedness, and all other
expenses incurred by the Company in connection therewith).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to Sale and Leaseback Transactions), or (b)
the disposition of any securities or the extinguishment of any Indebtedness of
such Person or any of its Subsidiaries, and (ii) any extraordinary gain (but not
loss), together with any related provision for taxes on such extraordinary gain
(but not loss).
"New Bank Credit Facility" means that certain secured credit facility
entered into on the Issue Date, by and among the Company, the lenders listed
therein, NBD Bank, as Documentation Agent, and Canadian Imperial Bank of
Commerce, as Administration Agent, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as amended, extended, renewed, restated, supplemented or otherwise
modified from time to time, and any agreement governing Indebtedness incurred to
refund or refinance all or a portion of the borrowings and commitments then
outstanding or permitted to be outstanding under the New Bank Credit Facility as
provided pursuant to the provisions of the Indenture described under "Certain
Covenants -- Limitation on Incurrence of Indebtedness."
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Partnership Advisory Board" means the Partnership Advisory Board of the
Company, as provided for in the Partnership Agreement.
"Partnership Agreement" means that certain amended partnership agreement of
the Company as in effect on the Issue Date and as it may be amended from time to
time.
"Partnership Interest" means any general or limited partnership interest
and any interest as a member of a limited liability company or a limited
liability partnership.
"Payment Restriction" means, with respect to a Subsidiary of any Person,
any encumbrance, restriction or limitation, whether by operation of the terms of
its charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (i) such Subsidiary
to (a) pay dividends or make other distributions on its Capital Stock or make
payments on any obligation, liability or Indebtedness owed to such Person or any
other Subsidiary of such Person, (b) make loans or advances to such Person or
any other Subsidiary of such Person, or (c) transfer any of its properties or
assets to such Person or any other Subsidiary of such Person, or (ii) such
Person or any other Subsidiary of such Person to receive or retain any such (a)
dividends, distributions or payments, (b) loans or advances, or (c) transfer of
properties or assets.
"Permitted Holders" means (i) the General Partner, (ii) Jamesco, (iii)
Trenary Corp., Ltd., a Michigan corporation, (iv) DKS Holdings, Inc., a Michigan
corporation, and (v) William R. James, C. Timothy Trenary and Daniel K.
Shoemaker, each of their spouses and their children or other lineal descendants
(whether adoptive or biological), probate estate of any such individual, and any
trust, so long as one or more of the foregoing individuals is the beneficiary
thereunder, and any other corporation, partnership or other entity all of the
shareholders, partners, members or owners of which are any one or more of the
foregoing.
"Permitted Investments" means (i) any Investments in the Company or in a
Wholly Owned Subsidiary of the Company in anticipation of a sale of the stock of
such Wholly Owned Subsidiary in connection with the disposition of assets of the
Company provided that the Net Cash Proceeds therefrom are applied as provided
under "Change of Control Offer" and "Certain Asset Sales," (ii) Investments by
the Company or any Subsidiary of the Company in a Person, if as a result of such
Investment such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company and that is engaged in the same or a similar line of business as the
Company was engaged in on the Issue Date or as the Company's business has
thereafter evolved in the fields of cable television systems,
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enhanced video services, advanced telecommunications services, such as broadband
high speed Internet access and inter- and intra- network data services, and
telephony, and (iii) Related Business Investments of the Company or any
Subsidiary in an amount not exceeding $2 million.
"Permitted Liens" means (a) Liens securing Indebtedness incurred under the
New Bank Credit Facility; (b) Liens in favor of the Issuers; (c) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company, provided that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (d) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
acquisition: (e) Liens imposed by law such as carriers', warehousemans' or
mechanics' Liens, and other Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business; (f) Purchase Money
Liens and Liens to secure Capital Lease Obligations and mortgage financing
permitted by clause (f) of the second paragraph of the covenant entitled
"Limitation on Incurrence of Indebtedness" covering only the assets acquired
with such Indebtedness; (g) Liens existing on the Issue Date; (h) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (i) Liens securing Permitted Refinancing Indebtedness;
provided that any such Lien does not extend to or cover any property or assets
other than the property or assets securing Indebtedness so refunded, refinanced
or extended; (j) any extensions, substitutions, replacements or renewals of the
foregoing; and (k) easements, rights-of-way and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, licenses, restrictions on the use of property or minor
imperfections in title thereto which, in the aggregate, are not material in
amount, and which do not in any case materially detract from the Issuers'
properties subject thereto.
"Permitted Refinancing Indebtedness" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company outstanding on the Issue
Date or other Indebtedness (including, without limitation, Indebtedness under
the New Bank Credit Facility) permitted to be incurred by the Company or its
Subsidiaries pursuant to the terms of the Indenture, but only to the extent that
(i) the Refinancing Indebtedness is subordinated to the Exchange Notes to at
least the same extent as the Indebtedness being refunded, refinanced or
extended, if at all, (ii) the Refinancing Indebtedness is scheduled to mature
either (a) no earlier than the Indebtedness being refunded, refinanced or
extended, or (b) after the maturity date of the Exchange Notes, (iii) the
portion, if any, of the Refinancing Indebtedness that is scheduled to mature on
or prior to the maturity date of the Exchange Notes has a weighted average life
to maturity at the time such Refinancing Indebtedness is incurred that is at
least equal to or greater than the weighted average life to maturity of the
portion of the Indebtedness being refunded, refinanced or extended that is
scheduled to mature on or prior to the maturity date of the Exchange Notes, (iv)
such Refinancing Indebtedness is in an aggregate principal amount that is equal
to or less than the sum of (a) the aggregate principal amount then outstanding
under the Indebtedness being refunded, refinanced or extended, (b) the amount of
accrued and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting prepayment provisions on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness, and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended.
"Person" or "person" means any individual, corporation, partnership,
limited liability company, limited liability partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock, whether outstanding on the date hereof
or issued after the date of the Indenture, and including, without limitation,
all classes and series of preferred or preference stock of such Person.
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"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of the Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act.
"Pro Forma Consolidated Cash Flow" of any Person means for any period the
Consolidated Cash Flow of such Person for such period calculated on a pro forma
basis to give effect to any Asset Sale or acquisition of assets not in the
ordinary course of business (including acquisitions of other Persons by merger,
consolidation or purchase of Capital Stock) during such period as if such Asset
Sale or acquisition of assets had taken place on the first day of such period.
For purposes of making the computations referred to pursuant to the provisions
of the Indenture described under "Certain Covenants -- Limitation on Incurrence
of Indebtedness," any Asset Sale or acquisition of assets not in the ordinary
course of business made by the Company, including all mergers and acquisitions
subsequent to the last full fiscal quarter, shall be calculated on a pro forma
basis as if such Asset Sale or acquisition of assets had taken place on the
first day of such fiscal quarter.
"Public Equity Offering" means a public offering of Capital Stock pursuant
to a registration statement under the Securities Act.
"Purchase Money Liens" means Liens to secure or securing Purchase Money
Obligations permitted to be incurred under the Indenture.
"Purchase Money Obligations" means Indebtedness representing, or incurred
to finance, the cost of acquiring any assets (including Purchase Money
Obligations of any other Person at the time such other Person is merged with or
into or is otherwise acquired by the Company), provided that (i) the principal
amount of such Indebtedness does not exceed 100% of such cost, including
construction charges, (ii) any Lien securing such Indebtedness does not extend
to or cover any other asset or property other than the asset or property being
so acquired and (iii) such Indebtedness is incurred, and any Liens with respect
thereto are granted within 180 days of the acquisition of such property or
asset.
"Qualified Capital Stock" means, with respect to any Person, any Equity
Interest of such Person that is not Disqualified Stock.
"Related Business Investment" means (i) any capital expenditure or
Investment, in each case reasonably related to the business of the Company as
conducted on the Issue Date and as such business may thereafter evolve in the
fields of cable television systems, enhanced video services and advanced
telecommunications services, such as broadband high speed Internet access and
inter- and intra- network data services, and telephony; and (ii) any Investment
in any other Person primarily engaged in the same businesses as provided in the
foregoing subparagraph (i).
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, prior to the
scheduled maturity or prior to any scheduled repayment of principal or sinking
fund payment, as the case may be, in respect of Indebtedness that is pari passu
or subordinate in right of payment to the Notes.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means any (i) Stock Payment, (ii) Restricted
Investment or (iii) Restricted Debt Prepayment.
"Sale and Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act as such Regulation is in effect on the Issue
Date.
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"Stock Payment" means, with respect to any Person, (i) the declaration or
payment by such Person, directly or indirectly, either in cash or in property,
of any dividend on, or the making of any distribution in respect of, such
Person's Equity Interests (except in the case of the Company, dividends payable
solely in Qualified Capital Stock of the Company), or (ii) the redemption,
repurchase, retirement or other acquisition for value by such Person, directly
or indirectly, of such Person's Equity Interests, or the Equity Interests of
such Person's Subsidiaries or other Affiliates; provided, however, that in the
case of a Subsidiary of the Company, the term Stock Payment shall not include
any such payment with respect to its Equity Interests if such payment is made
solely to the Company.
"Subordinated Obligations" means any Indebtedness of the Issuers (whether
outstanding on the Issue Date or thereafter incurred) which, by its terms
pursuant to a written agreement, is subordinate or junior in right of payment to
the Exchange Notes.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is, at the date of determination, directly or indirectly,
owned by such Person, by one or more subsidiaries of such Person or by such
Person and one or more subsidiaries of such Person, (ii) a partnership in which
such Person or a subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if such Person or its
subsidiary is entitled to receive more than 50% of the assets of such
partnership upon its dissolution, or (iii) any limited liability company or any
other Person (other than a corporation or a partnership) in which such Person, a
subsidiary of such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination, has (a) at least a
majority ownership interest or (b) the power to elect or direct the election of
a majority of the directors or other governing body of such Person.
"Temporary Cash Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or of any
governmental agency or political subdivision thereof, maturing within 365 days
of the date of purchase; (ii) Investments in certificates of deposit issued by a
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totalling more than $500,000,000 and rated at least A by
Standard & Poor's Corporation and A-2 by Moody's Investors Service, Inc.
maturing within 365 days of purchase; or (iii) Investments not exceeding 365
days in duration in money market funds that invest substantially all of such
funds' assets in the Investments described in the preceding clauses (i) and
(ii).
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" means, with respect to (a) the Company, the Partnership
Interests of the General Partner, and (b) any Person other than the Company, (i)
one or more classes of the Capital Stock of such Person having general voting
power to elect at least a majority of the Board of Directors of such Person
(irrespective of whether or not at the time Capital Stock of any other class or
classes have or might have voting power by reason of the happening of any
contingency) and (ii) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the Holder thereof into
Capital Stock of such Person described in clause (i) above.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which (and
all options, warrants or other rights to acquire any shares of such Capital
Stock or other ownership interests) shall at the time be owned by such Person or
by one
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or more Wholly Owned Subsidiaries of such Person or by such Person and one or
more Wholly Owned Subsidiaries of such Person.
BOOK-ENTRY, DELIVERY AND FORM
The Notes were sold by the Issuers to the Initial Purchasers and were
resold by them to qualified institutional buyers in reliance on Rule 144A ("Rule
144A Notes") and to a limited number of institutional accredited investors in
transactions exempt from registration under the Securities Act not made in
reliance on Rule 144A or Regulation S ("Other Notes").
Exchange Notes exchanged for Rule 144A Notes and any Notes sold pursuant to
Regulation S (of which there are none as of the date of this Prospectus)
initially will be represented by one or more of the Exchange Notes in
registered, global form without interest coupons (collectively, the "Global
Exchange Note"). The Global Exchange Note will be deposited upon issuance with
the Trustee as custodian for The Depository Trust Company ("DTC"), in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant as described below.
Exchange Notes exchanged for the Other Notes will be represented by certificated
Exchange Notes.
Except as set forth below, the Global Exchange Notes may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Exchange Notes may not be
exchanged for Exchange Notes in certificated form except in the limited
circumstances described below. See "-- Exchanges Between Book-Entry Exchange
Notes and Certificated Exchange Notes."
Transfer of beneficial interests in the Global Exchange Notes will be
subject to the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
The Exchange Notes may be presented for registration of transfer and
exchange at the offices of the Registrar.
Depository Procedures
DTC has advised the Issuers that DTC is a limited purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interest
and transfer of ownership interest of each actual purchaser of each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised the Issuers that pursuant to procedures established by
it, (i) upon deposit of the Global Exchange Notes, DTC will credit the accounts
of Participants designated by the Issuers with portions of the principal amount
of the Global Exchange Notes and (ii) ownership of such interests in the Global
Exchange Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the Global Exchange Notes).
Investors in the Global Exchange Notes may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations (including Euroclear System ("Euroclear") and Cedel Bank,
S.A. ("CEDEL")), which are Participants in such system. All interests in a
Global Exchange Note, including those held through Euroclear or CEDEL, may by
subject to the procedures and requirements of DTC. Those interests held through
Euroclear or CEDEL may also be subject to the procedures and requirements of
such system.
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The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Exchange Note to such persons may be
limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a Global Exchange Note to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests. For certain
other restrictions on the transferability of the Exchange Notes, see "--
Exchanges Between Book-Entry Exchange Notes and Certificated Exchange Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL EXCHANGE NOTES
WILL NOT HAVE THE EXCHANGE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE
PHYSICAL DELIVERY OF THE EXCHANGE NOTES IN CERTIFICATED FORM AND WILL NOT BE
CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY
PURPOSE.
Payments in respect of the principal of (and premium, if any) and interest
on a Global Exchange Note registered in the name of DTC or its nominee will be
payable to DTC or its nominee in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Issuers and the Trustee will
treat the persons in whose names the Exchange Notes, including the Global
Exchange Notes, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Issuers, the Trustee nor any agent of the Issuers or
the Trustee has or will have any responsibility or liability for (i) any aspect
or accuracy of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership
interests in the Global Exchange Notes, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the Global Exchange
Notes, or (ii) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants.
DTC has advised the Issuers that its current practice, upon receipt of any
payment in respect of securities such as the Exchange Notes (including principal
and interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Exchange Notes as shown on the records of DTC. Payments by
the Participants and the Indirect Participants to the beneficial owners of the
Exchange Notes will be governed by standing instructions and customary practices
and will not be the responsibility of DTC, the Trustee or the Issuers. Neither
the Issuers nor the Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Exchange Notes, and the
Issuers and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee as the registered owner of the
Exchange Notes for all purposes.
Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Exchange Notes will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
accountholders in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the accountholders in DTC, on the one hand,
and directly or indirectly through Euroclear or CEDEL accountholders, on the
other hand, will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or CEDEL, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions to
Euroclear or CEDEL, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or CEDEL, as the case may be, will, if
the transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Exchange Note in DTC,
and making or receiving payment in accordance with normal procedures for
same-day fund settlement applicable
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to DTC. Euroclear accountholders and CEDEL accountholders may not deliver
instructions directly to the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL accountholders purchasing an interest in a Global Exchange Note from
accountholders in DTC will be credited, and any such crediting will be reported
to the relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear or CEDEL) immediately
following the settlement date of DTC. Cash received in Euroclear or CEDEL as a
result of sales of interests in a Global Exchange Note by or through an
Euroclear or CEDEL accountholder to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or CEDEL cash account only as of the business day for Euroclear or
CEDEL following DTC's settlement date.
DTC has advised the Issuers that it will take any action permitted to be
taken by a holder of the Exchange Notes only at the direction of one or more
Participants to whose account with DTC interests in the Global Exchange Notes
are credited and only in respect of such portion of the aggregate principal
amount of the Exchange Notes as to which such Participant or Participants has or
have given such direction. However, if any of the events described under "--
Exchanges Between Book-Entry Exchange Notes and Certificated Exchange Notes"
occur, DTC reserves the right to exchange the Global Exchange Notes for Exchange
Notes in certificated form, and to distribute such Exchange Notes to its
Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Issuers believe
to be reliable, but the Issuers take no responsibility for the accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Exchange Note among
accountholders in DTC, and accountholders of Euroclear and CEDEL, they are under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Issuers or the Trustee
nor any agent of the Issuers or Trustee will have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective accountholders,
indirect participants or accountholders of their respective obligations under
the rules and procedures governing their operations.
Exchanges Between Book-Entry Exchange Notes and Certificated Exchange Notes
A Global Exchange Note is exchangeable for definitive Exchange Notes in
registered certificated form if (i) DTC (x) notifies the Issuers that it is
unwilling or unable to continue as depositary for the Global Exchange Note and
the Issuers thereupon fail to appoint a successor depositary or (y) has ceased
to be a clearing agency registered under the Exchange Act, (ii) the Issuers, at
their option, notify the Trustee in writing that they elect to cause the
issuance of the Exchange Notes in certificated form, or (iii) there shall have
occurred and be continuing a Default or an Event of Default with respect to the
Exchange Notes. In all cases, certificated Exchange Notes delivered in exchange
for any Global Exchange Note or beneficial interests therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the depositary (in accordance with its customary procedures).
DESCRIPTION OF THE NOTES
The Notes evidence the same indebtedness as that which will be evidenced by
the Exchange Notes and are entitled to the benefits of the Indenture. The form
and terms of the Notes are the same as the form and terms of the Exchange Notes
(which replace the Notes) except that none of the Notes was registered under the
Securities Act. Therefore, the Notes may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons except
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. Accordingly, the Notes bear
legends restricting the transfer thereof. In addition, with certain exceptions,
the Notes may not be sold or transferred to, or acquired on behalf of, any
pension or welfare plan (as described in Section 3 of the Employee Retirement
Income
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Security Act of 1974). For a description of the terms of the Exchange Notes, see
"Description of the Exchange Notes."
EXCHANGE OFFER AND REGISTRATION RIGHTS
The Issuers entered into the Registration Rights Agreement pursuant to
which they agreed, for the benefit of the holders of the Notes, that they would,
at their cost, (i) within 30 days after the date of original issue of the Notes,
file the Registration Statement with the Commission with respect to a registered
offer to exchange the Notes for the Exchange Notes, which have terms
substantially identical in all material respects to the Notes (except that the
Exchange Notes would not contain terms with respect to transfer restrictions),
(ii) within 120 days after the Issue Date, use their best efforts to cause the
Registration Statement to be declared effective under the Securities Act, (iii)
upon the Registration Statement being declared effective, offer the Exchange
Notes in exchange for surrender of the Notes, and (iv) keep the Exchange Offer
open for not less than 30 days (or longer if required by applicable law) after
the date notice of the Exchange Offer is mailed to the holders of the Notes. The
Exchange Offer is being made to fulfill those promises in the Registration
Rights Agreement.
Under existing Commission interpretations, the Exchange Notes will in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided, that in the case of
broker-dealers, a prospectus meeting the requirements of the Securities Act be
delivered as required. The Issuers have agreed for a period of 180 days after
consummation of the Exchange Offer to make available this Prospectus and any
amendments or supplements to this Prospectus to any broker-dealer for use in
connection with any resale of any such Exchange Notes acquired as described
below. A broker-dealer which delivers such a prospectus to purchasers in
connection with such resales may be deemed to be an "underwriter" within the
meaning of the Securities Act, will be subject to certain of the civil liability
provisions under the Securities Act and will be bound by the provisions of the
Registration Rights Agreement (including certain indemnification rights and
obligations).
Each holder of the Notes that wishes to exchange such Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations
including representations that (i) any Exchange Notes to be received by it will
be acquired in the ordinary course of its business, (ii) it has no arrangement
with any person to participate in the distribution of the Exchange Notes, (iii)
it is not an "affiliate," as defined in Rule 405 of the Securities Act, of the
Issuers, or if it is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable,
and (iv) it is not acting on behalf of any person who could not truthfully make
the foregoing representations.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for the Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes.
If, prior to consummation of the Exchange Offer, the Issuers or the Holders
of a majority in aggregate principal amount of the Notes reasonably determine in
good faith that (i) the Exchange Notes would not be freely transferable by
holders which are not affiliates (within the meaning of the Securities Act) of
the Issuers without restriction under the Securities Act or (ii) the interests
of the Holders under the Registration Rights Agreement would be adversely
affected by the consummation of the Exchange Offer, or if for any reason the
Exchange Offer is not consummated within 180 days of the Issue Date, the Issuers
will, at their own expense, (a) as promptly as practicable, file a shelf
registration statement covering resales of the Notes (the "Shelf Registration
Statement"), (b) use their best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act, and (c) use their
best efforts to keep effective the Shelf Registration Statement until two years
after its effective date. The Issuers will, in the event of the Shelf
Registration Statement, provide to each holder of the Notes copies of the
prospectus which is a part of the Shelf Registration Statement, notify each such
holder when the Shelf Registration Statement for the Notes has become effective
and take certain other actions as are required to permit unrestricted resales of
the Notes. A
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holder of the Notes that sells such Notes pursuant to the Shelf Registration
Statement generally will be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification rights and obligations).
If the Issuers fail to comply with the above provisions, then the
Registration Rights Agreement provides that, as liquidated damages, additional
interest shall become payable in respect of the Notes as follows:
If (i) the Registration Statement or Shelf Registration Statement is
not filed within 30 days after the Issue Date (which requirement has been
satisfied by filing the Registration Statement);
(ii) the Registration Statement or a Shelf Registration Statement is
not declared effective within 120 days after the Issue Date; and
(iii) either (A) the Issuers have not exchanged the Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to 180 days after the Issue Date or (B) the Registration
Statement ceases to be effective at any time prior to the time that the
Exchange Offer is consummated or (C) if applicable, the Shelf Registration
Statement has been declared effective and such Shelf Registration Statement
ceases to be effective at any time prior to the second anniversary of its
effective date;
(each of such events referred to in clauses (i) through (iii) above is a
"Registration Default"), the sole remedy available to holders of the Notes will
be the immediate assessment of additional interest ("Additional Interest") as
follows: the per annum interest rate on the Notes will increase by 50 basis
points; and the per annum interest rate will increase by an additional 25 basis
points for each subsequent 90-day period during which the Registration Default
remains uncured, up to a maximum additional interest rate of 200 basis points
per annum in excess of the interest rate on the cover of this Prospectus. All
Additional Interest will be payable to holders of the Notes in cash on each
February 15 and August 15, commencing with the first such date occurring after
any such Additional Interest commences to accrue, until such Registration
Default is cured. After the date on which such Registration Default is cured,
the interest rate on the Notes will revert to the interest rate originally borne
by the Notes (as shown on the cover of this Prospectus).
If the Exchange Offer is made and the Initial Purchasers continue to hold
Notes, the Initial Purchasers may exchange Notes for other notes identical to
the Exchange Notes except for transfer restrictions ("Private Exchange Notes").
If they receive Private Exchange Notes, the Initial Purchasers thereafter will
have the right for a period after consummation of the Exchange Offer to request
the Issuers to file a shelf registration statement covering the Private Exchange
Notes. If such requested shelf registration is not filed or does not become
effective by the times provided in the Exchange Offer Registration Rights
Agreement, the interest rate on the Private Exchange Notes will increase as
provided above until such time as it does become effective.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement.
DESCRIPTION OF OTHER INDEBTEDNESS
THE NEW BANK CREDIT FACILITY
Simultaneously with the closing of the Offering, the Company entered into
the New Bank Credit Facility, with Canadian Imperial Bank of Commerce, an
affiliate of CIBC Wood Gundy Securities Corp., and NBD Bank, an affiliate of
First Chicago Capital Markets, Inc., acting as the lenders. The New Bank Credit
Facility is a $20 million revolving credit facility (with an option to increase
the amount of credit available thereunder to $30 million). The New Bank Credit
Facility matures on August 15, 2002. Proceeds under the New Bank Credit Facility
will be available (i) to provide for working capital and general corporate
purposes, (ii) to fund
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certain permitted acquisitions of cable television systems, (iii) to provide for
certain permitted repurchases of up to $5 million in the aggregate of limited
partnership interests in the Company, and (iv) to pay transaction fees and
expenses. As no borrowings under the New Bank Credit Facility were necessary to
complete the Refinancing, upon completion of the Refinancing (and subject to the
terms of the New Bank Credit Facility and the Company's Partnership Agreement)
the Company had the ability to borrow up to $20 million (with an option to
increase the amount up to $30 million) under the New Bank Credit Facility . The
New Bank Credit Facility requires payments of accrued interest on a monthly
basis throughout the term, with principal payment due at maturity. The New Bank
Credit Facility is senior Indebtedness of the Company and is secured by a first
priority lien on and secured interest in substantially all the assets of the
Issuers and contains certain financial and other covenants, as well as providing
for certain events of default customarily contained in facilities of similar
type.
THE PARTNERSHIP AGREEMENT
The following is a summary of certain material terms of the Company's
Partnership Agreement. This summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
provisions, of the Partnership Agreement, a copy of which will be available upon
request to the Issuers. Defined terms used in this summary and not otherwise
defined herein have the meanings ascribed to them in the Partnership Agreement.
ORGANIZATION AND DURATION
The Company was formed as a limited partnership pursuant to the provisions
of the Delaware Revised Uniform Limited Partnership Act, as amended, and a
certificate of limited partnership of the Company was filed with the Secretary
of State of Delaware on January 12, 1988. The purpose of the Company's
formation, as set forth in the Partnership Agreement, is to realize capital
appreciation through the ownership, control and operation of assets comprising
cable television systems. The Company's purpose does not include building new
franchises except in those circumstances where a new franchise is reasonably
proximate to an already-owned cable television system.
The Company will be dissolved upon the earliest to occur of (i) December
31, 2005 (the "Term"), (ii) a determination by the General Partner that the
Company should be dissolved, with the approval of 60% of the Limited Partner
interests, (iii) the sale or disposition by the Company of substantially all of
its assets, (iv) the consent of holders of 66 2/3% of the Limited Partner
interests, (v) the removal of the General Partner pursuant to the terms of the
Partnership Agreement, or (vi) the bankruptcy, insolvency, dissolution or
withdrawal of the General Partner. The Term can be extended upon the affirmative
vote of 66 2/3% of the Limited Partner interests and the consent of the General
Partner. In certain of the foregoing cases, the Limited Partners may elect under
the Partnership Agreement to reconstitute the business of the Company in a new
limited partnership with a new General Partner elected by the Limited Partners.
CONTROL OF OPERATIONS
The Partnership Agreement provides that the General Partner has exclusive
authority for the management and control of the business and operations of the
Company subject to the terms and provisions of the Partnership Agreement. Among
the limitations on its power, the General Partner does not have the right (i) to
admit a Partner except as provided in the Partnership Agreement, (ii) to cause
any cable television system owned by the Company to engage in any transaction
with the General Partner or any of its affiliates without the express
authorization of the Partnership Agreement or approval in advance by the
Partnership Advisory Board, or (iii) to cause the Company to incur indebtedness
in excess of $120 million in the aggregate. Without the consent of 66 2/3% of
the Limited Partner interests, the General Partner does not have the authority
to dismiss from employment or replace the certified public accountants of the
Company or to sell all or substantially all cable television systems owned by
the Company.
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CAPITAL CONTRIBUTIONS
Under the Partnership Agreement, the Partners have made certain
contributions to the Company. The General Partner is not required to lend or
advance any funds to the Company or to make any additional capital contributions
to the Company. No limited partner is required to lend any funds to the Company
or to make any capital contribution to the Company. The Partnership Agreement
provides that no partner of the Company shall have the right to withdraw or
demand the return of its capital contribution during the term of the Company's
existence. The General Partner is not personally liable for the return of the
capital contributions made by the Limited Partners.
VOTING RIGHTS
Except as to matters for which consent or approval is expressly required
under the Partnership Agreement, the Limited Partners have no right to vote on
any partnership matters. Where a vote or consent is required, each Partner is
entitled to vote based on its percentage interest in the Company.
AMENDMENT OF THE PARTNERSHIP AGREEMENT
In general, the Partnership Agreement may be modified or amended by the
vote or consent of the General Partner and 51% of the Limited Partner interests
or 66 2/3% of the Limited Partner interests without the consent of the General
Partner. The Partnership Agreement may be amended from time to time by the
General Partner without the consent of any of the Limited Partners (i) to add to
the duties or obligations of the General Partner or surrender rights or powers
granted to the General Partner, (ii) to cure any ambiguity or make certain
corrections, (iii) to make such amendments as are necessary to admit or provide
information to a substitute Limited Partner or (iv) to reflect any change in the
amount of capital accounts of a Partner as required by the Partnership
Agreement.
Notwithstanding the foregoing, all Partners must agree to any amendment
that would (i) modify the purposes of the Company, (ii) require any partner to
make any loan or contribution to the Company, (iii) modify the allocation of
income gain or loss among the Partners, (iv) provide additional restrictions on
the transferability of Limited Partners' interests, or (v) change the
dissolution provisions of the Partnership Agreement. In addition, 66 2/3% of the
Limited Partner interests must approve any amendment to the Partnership
Agreement which changes the rights and duties of the General Partner, the
General Partner's compensation or the transferability of the General Partner's
interest or extends the Term.
INDEMNIFICATION OF GENERAL PARTNER
Under the Partnership Agreement, the Company will indemnify the General
Partner and its affiliates against losses, damages and expenses (including
attorneys' fees), judgments and settlement amounts incurred by such party with
respect to activities performed in good faith on behalf of the Company so long
as such activities were reasonably believed to be within the scope of the
person's authority and are not the result of gross negligence, willful
misconduct or any other like breach of fiduciary duty.
WITHDRAWAL OR REMOVAL OF GENERAL PARTNER
The General Partner may not voluntarily retire or withdraw as the General
Partner of the Company nor may it transfer its interest. The Limited Partners
may, subject to certain procedures, remove the General Partner only in the event
that the General Partner has been found by an independent party to have been
engaged in or engaging in malfeasance, criminal conduct, wanton, willful neglect
or a material breach of the Partnership Agreement. The Partnership Agreement
requires that William R. James at all times control the General Partner. In the
event of the death or total and permanent disability of William R. James, the
General Partner may be removed upon the consent of 51% of the Limited Partner
interests.
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LIABILITY OF LIMITED PARTNER
Limited Partners of the Company are not personally responsible for the
debts or liabilities of the Company except to the extent a Limited Partner
assumes or guarantees that debt or liability. The Notes were not and the
Exchange Notes will not be so assumed or guaranteed by the Limited Partners.
ASSIGNMENT OF PARTNERSHIP INTERESTS
Under the Partnership Agreement, the General Partner may not transfer its
interest in the Partnership. A Limited Partner may not transfer its interest in
the Partnership unless the General Partner gives its consent except for
transfers to parties related to the Limited Partner. In addition, any Limited
Partner subject to insurance laws governing disposition of assets may make a
transfer of its interest in the Company to a financial institution of equivalent
quality and standing. The transferee of a Limited Partner's interest cannot
become a Limited Partner except with the express consent of the General Partner.
PARTNERSHIP ADVISORY BOARD
The Partnership Agreement provides for the establishment of a Partnership
Advisory Board consisting of not more than six members. Two members of the
Partnership Advisory Board are selected by the General Partner, one member is
selected by each of the two Limited Partners having the greatest partnership
interests, one member is designated by the Limited Partners holding at least 51%
of the partnership interests, and so long as any of the Existing Subordinated
Notes remain outstanding, one member may be designated by Sandler Mezzanine
Partners, L.P., or its successors and assigns. The Partnership Advisory Board's
functions are (i) to review and approve or disapprove valuation questions when a
determination of fair market value is required by the terms of the Partnership
Agreement, (ii) to review the annual financial statements of the Company, and
(iii) to review any potential conflicts of interest involving the General
Partner. In addition, the Partnership Advisory Board may advise the General
Partner on such matters as to which the General Partner may, from time to time,
in its sole discretion, seek the consultation of the Partnership Advisory Board.
The Company pays $1,000 for each meeting attended by the members not
otherwise affiliated with the General Partner or any of the Limited Partners.
The other members do not receive any compensation for their service as members
of the Partnership Advisory Board.
GENERAL PARTNER COMPENSATION
The Partnership Agreement provides compensation to the General Partner for
management services. Under the terms of the Partnership Agreement, the General
Partner is entitled to an annual fee equal to 4% of the Company's annual
revenues, plus $5.00 multiplied by the average aggregate number of subscribers
to the Systems owned by the Company during such year. See "Certain
Transactions."
In addition, the General Partner is entitled to be compensated pursuant to
the terms of the 1994 Incentive Compensation Agreement, which provides that, in
the event that all of the Company's cable television systems are sold, the
General Partner will be entitled to a cash Incentive Fee of up to 2% of the
value of the equity as of the date of sale.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by any broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired as a result of market-making activities or other trading
activities. The Issuers have agreed that, for a period of 180 days after the
Expiration Date, they will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1998 (90 days after commencement of the Exchange
Offer), all dealers effecting transactions in the Exchange Notes may be required
to deliver a Prospectus.
Neither Issuer will receive any proceeds from any sales of the Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to the purchaser or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Issuers have agreed to pay certain expenses
incident to the Exchange Offer, other than commission or concessions of any
brokers or dealers, and will indemnify the holders of the Exchange Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer agrees that,
upon receipt of notice from either Issuer of the happening of any event which
makes any statement in the Prospectus untrue in any material respect or which
requires the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Issuers agree to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Issuers have amended or supplemented the Prospectus to
correct such misstatement or omission and have furnished copies of the amended
or supplemental Prospectus to such broker-dealer.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered hereby will be
passed on for the Issuers by Miller, Canfield, Paddock and Stone, P.L.C.,
Bloomfield Hills, Michigan. Certain matters will also be passed upon for the
Issuers by Cole, Raywid & Braverman, Washington, D.C., the Company's regulatory
counsel.
EXPERTS
The financial statements of James Cable Partners, L.P., at December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996 and the balance sheet of James Cable Finance Corp. at June 30, 1997
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as indicated in their reports appearing herein and
elsewhere in the Registration Statement. Such financial statements have been
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
88
<PAGE> 95
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
James Cable Partners, L.P.
Independent Auditors' Report.............................. F-2
Balance Sheets as of December 31, 1995, December 31, 1996
and June 30, 1997 (unaudited).......................... F-3
Statements of Operations for the three years ended
December 31, 1996 and for the six months ended June 30,
1996 and 1997 (unaudited).............................. F-4
Statements of Cash Flows for the three years ended
December 31, 1996 and for the six months ended June 30,
1996 and 1997 (unaudited).............................. F-5
Statements of Partner's Deficit for the three years ended
December 31, 1996 and for the six months ended June 30,
1997 (unaudited)....................................... F-6
Note to Financial Statements.............................. F-7
James Cable Finance Corp.
Independent Auditors' Report.............................. F-12
Balance Sheet as of June 30, 1997......................... F-13
Notes to Balance Sheet.................................... F-14
</TABLE>
F-1
<PAGE> 96
INDEPENDENT AUDITORS' REPORT
To the Partners of
James Cable Partners, L.P.
Bloomfield Hills, Michigan
We have audited the accompanying balance sheets of James Cable Partners, L.P. (a
Delaware Limited Partnership) (the "Company") at December 31, 1995 and 1996, and
the related statements of operations, partners' deficit and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of James Cable Partners, L.P. at December 31,
1995 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
July 3, 1997
Detroit, Michigan
F-2
<PAGE> 97
JAMES CABLE PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------- JUNE 30,
1995 1996 1997
---- ---- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (NOTE 3)
- ---------------------------------------------------
Cash and Cash Equivalents.......................... $ 1,055,916 $ 100,813 $ 248,804
Accounts Receivable -- Subscribers (Net of
allowance for doubtful accounts of $25,417 in
1995 and $14,668 in 1996)........................ 3,245,093 3,307,074 3,267,838
Prepaid Expenses and Other Assets (Note 5)......... 143,320 215,944 61,898
Property and Equipment:
Cable television distribution systems and
equipment..................................... 68,255,963 71,802,231 75,445,317
Land and land improvements....................... 229,704 229,704 229,704
Buildings and improvements....................... 918,734 932,760 932,760
Office furniture and fixtures.................... 1,012,925 1,147,281 1,147,281
Vehicles......................................... 2,798,424 3,046,103 3,046,103
------------ ------------ ------------
Total......................................... 73,215,750 77,158,079 80,801,165
Less accumulated depreciation.................... (66,103,701) (69,153,781) (70,249,377)
------------ ------------ ------------
Total......................................... 7,112,049 8,004,298 10,551,788
Deferred Financing Costs (Net of accumulated
amortization of $4,537,380 in 1995 and $5,210,047
in 1996)......................................... 2,987,536 2,314,896 1,978,535
Intangible Assets, Net (Note 2).................... 25,103,031 18,881,070 16,454,585
Deposits........................................... 80,032 20,037 18,037
------------ ------------ ------------
Total Assets....................................... $ 39,726,977 $ 32,844,132 $ 32,581,485
============ ============ ============
LIABILITIES AND PARTNERS' DEFICIT
- ---------------------------------------------------
Liabilities:
Debt (Note 3).................................... $ 88,573,119 $ 82,494,236 $ 82,994,002
Accounts payable................................. 78,649 362,636 465,175
Accrued expenses (Note 5)........................ 2,674,342 3,428,776 2,519,057
Unearned revenue................................. 2,821,776 2,877,029 2,896,521
Subscriber deposits.............................. 31,065 27,673 26,442
------------ ------------ ------------
Total......................................... 94,178,951 89,190,350 88,901,197
Commitments and Contingencies (Note 4)
Partners' Deficit.................................. (54,451,974) (56,346,218) (56,319,712)
------------ ------------ ------------
Total Liabilities and Partners' Deficit............ $ 39,726,977 $ 32,844,132 $ 32,581,485
============ ============ ============
</TABLE>
See notes to financial statements.
F-3
<PAGE> 98
JAMES CABLE PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................... $30,863,972 $33,304,839 $35,212,735 $17,561,084 $17,805,775
System Operating Expenses
(Excluding Depreciation and
Amortization).................. 14,408,313 15,072,941 16,248,981 7,938,904 8,494,228
Nonsystem Operating Expenses:
Management fee (Note 5)........ 1,555,000 1,733,693 1,806,226 903,815 906,695
Other.......................... 580,635 546,509 673,994 363,333 332,738
----------- ----------- ----------- ----------- -----------
Total nonsystem operating
expenses.................. 2,135,635 2,280,202 2,480,220 1,267,148 1,239,433
Depreciation and Amortization.... 14,101,561 12,213,985 9,272,014 4,636,007 3,594,296
----------- ----------- ----------- ----------- -----------
Operating Income................. 218,463 3,737,711 7,211,520 3,719,025 4,477,818
Interest and Other:
Interest expense............... (8,492,134) (9,717,511) (8,878,285) (4,604,798) (4,268,461)
Interest income................ 76,456 58,822 26,852 20,394 3,675
Other (Note 3)................. (608,066) (140,780) (254,331) (160,036) (186,526)
----------- ----------- ----------- ----------- -----------
Total interest and other.... (9,023,744) (9,799,469) (9,105,764) (4,744,440) (4,451,312)
----------- ----------- ----------- ----------- -----------
(Loss) Income Before
Extraordinary Item............. (8,805,281) (6,061,758) (1,894,244) (1,025,415) 26,506
Extraordinary Loss due to Debt
Refinancing (Note 3)........... (548,564)
----------- ----------- ----------- ----------- -----------
Net (Loss) Income................ $(8,805,281) $(6,610,322) $(1,894,244) $(1,025,415) $ 26,506
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 99
JAMES CABLE PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------ --------------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income.................. $(8,805,281) $ (6,610,322) $(1,894,244) $(1,025,415) $ 26,506
Adjustments to reconcile net (loss)
income to net cash from operating
activities:
Depreciation..................... 6,167,622 4,797,498 3,050,080 1,525,040 1,095,596
Amortization..................... 7,933,939 7,416,487 6,221,934 3,110,966 2,498,700
Noncash interest expense......... 1,251,627 1,423,594 672,667 336,334 336,334
(Increase) decrease in assets:
Accounts receivable.............. (275,301) (302,855) (61,980) 22,128 39,235
Prepaid expenses................. 496,372 100,049 (72,624) 138,880 154,046
Deposits......................... 16,899 (45,339) 59,995 61,495 2,000
Increase (decrease) in liabilities:
Accounts payable................. 745,486 (785,614) 283,987 38,273 102,539
Accrued expenses................. 121,784 692,697 754,434 956,967 (909,719)
Unearned revenue................. 163,546 220,322 55,253 (9,203) 19,492
Subscriber deposits.............. (4,855) (5,170) (3,392) (1,737) (1,231)
----------- ------------ ----------- ----------- -----------
Total adjustments........... 16,617,119 13,511,669 10,960,354 6,179,143 3,336,992
----------- ------------ ----------- ----------- -----------
Cash flows from operating
activities................ 7,811,838 6,901,347 9,066,110 5,153,728 3,363,498
Cash Flows from Investing Activities:
Additions to property and
equipment........................ (1,099,733) (2,405,183) (3,942,330) (1,306,958) (3,643,085)
Increase in intangible assets...... (5,000) (72,188)
----------- ------------ ----------- ----------- -----------
Cash flows used in investing
activities................ (1,104,733) (2,405,183) (3,942,330) (1,306,958) (3,715,273)
Cash Flows from Financing Activities:
Principal payments on debt......... (7,000,000) (89,000,000) (6,745,563) (4,111,187)
Proceeds from debt borrowings...... 89,000,000 542,178
Deferred interest increase......... 375,000 778,359
Payments on capital lease
obligation....................... (8,114) (85,513) (111,679) (51,317) (42,412)
Purchase of interest rate
protection....................... (148,000)
Deferred financing costs........... (3,166,002)
Repurchase of partnership
interests........................ (603,260) (820,040)
----------- ------------ ----------- ----------- -----------
Cash flows (used in) from
financing activities...... (7,611,374) (3,844,555) (6,078,883) (4,162,504) 499,766
----------- ------------ ----------- ----------- -----------
Net (Decrease) Increase in Cash and
Cash Equivalents................... (904,269) 651,609 (955,103) (315,734) 147,991
Cash and Cash Equivalents, Beginning
of Period.......................... 1,308,576 404,307 1,055,916 1,055,916 100,813
----------- ------------ ----------- ----------- -----------
Cash and Cash Equivalents, End of
Period............................. $ 404,307 $ 1,055,916 $ 100,813 $ 740,182 $ 248,804
=========== ============ =========== =========== ===========
Supplemental Disclosure of Cash Flow
Information -- Cash paid for
interest during the
period............................. $ 7,240,507 $ 7,878,875 $ 6,928,827 $ 3,113,255 $ 4,493,578
=========== ============ =========== =========== ===========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION -- During 1994, the Company
incurred capital lease obligations of $291,746 related to various vehicles (Note
3).
See notes to financial statements.
F-5
<PAGE> 100
JAMES CABLE PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' DEFICIT
<TABLE>
<S> <C>
Balance, December 31, 1993.................................. $(37,613,071)
Net loss.................................................. (8,805,281)
Repurchase of partnership interests....................... (603,260)
------------
Balance, December 31, 1994.................................. (47,021,612)
Net loss.................................................. (6,610,322)
Repurchase of partnership interests....................... (820,040)
------------
Balance, December 31, 1995.................................. (54,451,974)
Net loss.................................................. (1,894,244)
------------
Balance, December 31, 1996.................................. (56,346,218)
Net income (unaudited).................................... 26,506
------------
Balance, June 30, 1997 (unaudited).......................... $(56,319,712)
============
</TABLE>
See notes to financial statements.
F-6
<PAGE> 101
JAMES CABLE PARTNERS, L.P.
(A DELAWARE LIMITED COMPANY)
NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations -- James Cable Partners, L.P. (a Delaware Limited
Partnership) (the "Company") was formed on January 12, 1988. The Company has
system locations in Alabama, Colorado, Wyoming, Oklahoma, Texas, Florida,
Tennessee, Louisiana and Georgia. The Company's principal investment objective
is to realize capital appreciation through the acquisition, ownership, control,
and operations of cable television systems.
Property, Plant and Equipment are recorded at cost. Depreciation is
computed using accelerated methods and includes amounts charged to expense under
capital lease obligations. Estimated useful lives for major categories are as
follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 31.5 and 39
Cable television distribution systems....................... 7
Office furniture and fixtures............................... 5 - 7
Vehicles.................................................... 5
</TABLE>
Intangible Assets consist of subscriber lists, franchise operating rights
and covenants not to compete acquired in connection with acquisitions. Also
included is goodwill, which is the amount by which the cost of acquisitions
exceeded the fair values assigned to assets acquired. Intangible assets are
amortized using the straight-line method over periods up to 33 years.
Deferred Financing Costs in connection with the refinancing effective June
30, 1995 (Note 3) are being amortized on the straight-line method over a 5 year
life. Also, interest rate protection was purchased on October 1, 1995 and is
being amortized on the straight-line method over 45 months.
Revenues are recognized in the period in which the related services are
provided to the subscribers.
Profits and Losses are generally allocated in accordance with the Company's
Partnership agreement. Currently, profits are allocated approximately 99% to the
limited partners and 1% to the general partner, and losses are allocated
approximately 95% to the limited partners and 5% to the general partner.
Statement of Cash Flows -- For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with maturities
of ninety days or less at date of purchase to be cash equivalents.
Estimates -- The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Income Taxes -- The financial statements include only those assets,
liabilities and results of operations of the Company which relate to the
business of the Company. No recognition has been made of income taxes since
these taxes are the personal responsibility of the partners.
Impact of Recently Adopted Accounting Principles -- Effective January 1,
1996, the Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 121, which establishes accounting standards for the impairment of
long-lived-assets, certain identifiable intangibles and goodwill related to
these assets to be held and used. The Statement requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company
periodically evaluates the carrying value
F-7
<PAGE> 102
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
for impairment based principally on the undiscounted cash flows of the
operations to which the long-lived assets and intangibles relate. The Company's
adoption of this Statement in 1996 had no impact on the accompanying financial
statements.
Fair Values of Financial Statements -- The carrying amounts of cash and
cash equivalents approximate their fair value due to the nature and length of
maturity of the investments.
The estimated fair value of the Company's debt instruments is based on
borrowing rates that approximate existing rates at December 31, 1996 and 1995
and, in the opinion of management, there is no material difference between the
fair market value and the carrying value of such debt instruments.
Unaudited Interim Statements -- The unaudited interim financial statements
have been prepared in accordance with the accounting policies described above.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
statements for these interim periods have been made. The results of these
interim periods are not necessarily indicative of the results for a full fiscal
year.
(2) INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Franchise operating rights........................ $ 60,292,548 $ 60,292,548
Subscriber lists.................................. 13,631,000 13,631,000
Covenants not to compete.......................... 13,622,318 13,622,318
Goodwill.......................................... 10,635,327 10,635,327
Organization costs................................ 1,248,020 1,248,020
------------ ------------
Total........................................ 99,429,213 99,429,213
Less accumulated amortization..................... (74,326,182) (80,548,143)
------------ ------------
Total............................................. $ 25,103,031 $ 18,881,070
============ ============
</TABLE>
(3) DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Facilities......................................... $73,000,000 $66,254,437
Subordinated notes................................. 15,375,000 16,153,359
Capital lease obligation........................... 198,119 86,440
----------- -----------
Total.............................................. $88,573,119 $82,494,236
=========== ===========
</TABLE>
Facilities -- Effective June 30, 1995, the Company refinanced its Series
"A" and Series "B" notes with an $80 million senior secured credit facility
(consisting of a $70 million senior secured term loan and a $10 million
revolving credit facility) ("Facilities"), and $15 million senior subordinated
notes ("Subordinated Notes"). The Facilities are collateralized by substantially
all assets of the Company, and generally bear interest at one to six month LIBOR
rates plus a certain percentage based on provisions related to debt to earnings
ratios and events of default, as defined (effective rates of 8.3125% and 9.4375%
at December 31, 1996 and 1995, respectively. The Company is required to make
certain mandatory prepayments, at varying dates through June 30, 2000 at which
time the unpaid principal balance of the Facilities is due. All prepayment
requirements have been met on the Facilities as of December 31, 1996.
Subordinated Notes -- The Subordinated Notes bear interest (payable
semi-annually) at 14% per annum with the Company's option to pay 5% per annum
through the issuance of additional notes. The Subordinated
F-8
<PAGE> 103
(3) DEBT -- (CONTINUED)
Notes are due in full on December 30, 2000 and may not be redeemed prior to June
1998, except under certain conditions. Additional agreements entered into by the
Company in connection with the Subordinated Notes are as follows:
Warrant Agreement -- Warrants ("Warrants") representing the right to
purchase an aggregate 8.57% of the Company's equity (on a fully diluted
basis) have been issued to holders of the Subordinated Notes. The Warrants
may be exercised in whole or in part upon surrender of the Warrants and
payment of the exercise price (total exercise price of approximately $1.7
million). The Warrants may be redeemed at the option of the Company after
June 2001 for an amount based upon a specified formula, or at any time in
connection with the redemption of the notes. Beginning December 2000,
holders of the Warrants can require the Company to repurchase the Warrants
at an amount based upon a specified formula.
Special Additional Interest -- If the Warrants have not been exercised
by the Warrant holders or repurchased by the Company on or prior to the
redemption date, the Company shall pay (at the option of the Warrant
holder) Special Additional Interest ("Special Additional Interest") based
upon a specified formula. Special Additional Interest is only required to
be paid if the net equity value of the Company (as specifically defined) is
below $25 million. Upon payment of the Special Additional Interest, holders
of the Warrants shall surrender such Warrants and all of the Company's
obligations will terminate.
Contingent Payment Agreement -- The Company has agreed to pay to
holders of the Subordinated Notes, a Contingent Payment ("Contingent
Payment") if the repayment of the Subordinated Notes (and related interest)
and the exercise, redemption or sale of the Warrants yields an annualized
internal rate of return to the Subordinated Notes holders of less than 25%.
The Contingent Payment will be calculated as the lesser of (i) an
annualized internal rate of return to the Subordinated Notes holders of at
least 25% or (ii) 2.14% of the net equity value of the Company, as
specifically defined.
The Facilities and the Subordinated Notes contain certain restrictive
financial and reporting covenants, the most significant of which prohibit the
Company from incurring additional debt, place limitations on acquisitions and
disposals of assets, restrict capital expenditures and require maintenance of
certain debt to earnings as well as interest coverage ratios. As of December 31,
1996, the Company is in compliance with these covenants.
The June 30, 1995 debt refinancing resulted in the write-off of previously
deferred financing costs of $548,564. Such write-off has been recorded as an
extraordinary loss in the accompanying financial statements.
Future minimum principal payments on debt (excluding capital lease
obligation) for the periods subsequent to December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 5,500,000
1998........................................................ 6,500,000
1999........................................................ 8,000,000
2000........................................................ 62,407,796
-----------
Total....................................................... $82,407,796
===========
</TABLE>
The Company has entered into an interest rate protection agreement on
$32,000,000 of the Facilities for $148,000 which provides for a cap on LIBOR
rates at 8.50% and expires July 10, 1998. In addition, the Company has entered
into interest rate lock agreements on $8,000,000 of the Facilities. One interest
rate lock agreement on $4,000,000 of the Facilities provides for a lock on the
LIBOR rate at 6.585%, and the other interest rate lock agreement on $4,000,000
of the Facilities provides for a lock on the LIBOR rate at 6.06%. The interest
rate lock agreements expire June 30, 1999.
In addition, the Company has paid administrative and other fees to the
debtholders for maintenance and services related to the debt. Amounts paid in
the years ended December 31, 1994, 1995 and 1996 were $0, $157,933 and $278,031,
respectively.
F-9
<PAGE> 104
(3) DEBT -- (CONTINUED)
In 1994, the Company incurred capital lease obligations of $291,746 related
to various vehicles. The agreements have been capitalized in accordance with the
provisions of Statement of Financial Accounting Standards No. 13, "Accounting
for Leases." Total depreciation expense in the years ended December 31, 1994,
1995 and 1996 related to this capital lease obligation was $58,349, $93,359 and
$56,013, respectively.
Minimum annual rental commitments under this lease as of December 31, 1996,
are as follows:
<TABLE>
<S> <C>
1997........................................................ $90,928
Less amount representing interest........................... 4,488
-------
Total present value of future minimum lease payments........ $86,440
=======
</TABLE>
(4) COMMITMENTS
The Company leases office space under operating leases which expire at
varying dates through 2000.
Minimum annual rental commitments under these leases as of December 31,
1996, are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 49,188
1998........................................................ 32,016
1999........................................................ 16,800
2000........................................................ 14,000
--------
Total....................................................... $112,004
========
</TABLE>
Total rental expense, including month-to-month rentals, was approximately
$140,000, $67,750 and $78,519 for the years ended December 31, 1994, 1995 and
1996, respectively.
The Company is committed to monthly pole rentals of $47,093 as of June 30,
1997, to various utilities. These agreements are subject to termination rights
by both parties.
(5) RELATED PARTY TRANSACTIONS
The Company has an agreement with the general partner to operate and manage
its cable systems. The fee for management services, in accordance with the
Company's agreement of Limited Partnership (the "L.P. Agreement"), is equal to
4% of annual revenues plus $5.00 per average annual subscriber. Management fees
paid by the Company to the general partner amounted to $1,555,000, $1,733,693
and $1,806,226 in the years ended December 31, 1994, 1995 and 1996,
respectively.
Included in prepaid expenses and other assets are amounts receivable from
related parties which total $189 and $16,056 at December 31, 1995 and 1996,
respectively.
Included in accrued expenses are amounts payable to related parties which
total $148,560 and $155,049 at December 31, 1995 and 1996, respectively.
(6) REGULATORY MATTERS
In October, 1992, Congress enacted the Cable Television Consumer and
Competition Act of 1992 (the "1992 Cable Act") which greatly expanded federal
and local regulation of the cable television industry. In April 1993, the
Federal Communications Commission ("FCC") adopted comprehensive regulations,
effective September 1, 1993, governing rates charged to subscribers for basic
cable and cable programming services which allowed cable operators to justify
regulated rates in excess of the FCC benchmarks through cost of service showings
at both the franchising authority level for basic service and to the FCC in
response to complaints on rates for cable programming services.
F-10
<PAGE> 105
(6) REGULATORY MATTERS -- (CONTINUED)
On February 22, 1994, the FCC issued further regulations which modified the
FCC's previous benchmark approach, adopted interim rules to govern cost of
service proceedings initiated by cable operators and lifted the stay of rate
regulations for small cable systems.
On November 10, 1994, the FCC adopted "going forward" rules that provided
cable operators with the ability to offer new product tiers priced as operators
elect, provided certain limited conditions are met, permit cable operators to
add new channels at reasonable prices to existing cable programming service
tiers and created an additional option pursuant to which small cable operators
may add channels to cable programming service tiers.
In May 1995, the FCC adopted small company rules that provided small
systems regulatory relief by implementing an abbreviated cost of service rate
calculation method. Using this methodology, for small systems seeking to
establish rates no higher than $1.24 per channel, the rates are deemed to be
reasonable.
In February 1996, the Telecommunications Act of 1996 was enacted which,
among other things, deregulated cable rates for small systems on their
programming tiers.
(7) SUBSEQUENT EVENT (UNAUDITED)
On August 12, 1997, the Company issued $100 million senior unsecured notes
due 2004. The Company used $66.7 million of the net proceeds to repay the
Facilities (Note 3), including interest. In addition, approximately $22.5
million was used to repay the Subordinated Notes (Note 3), including the
repurchase of Warrants (Note 3) associated with the Subordinated Notes.
In addition, the Company entered into a new bank credit facility which
provides for borrowings of up to $20 million (with an option to increase the
amount to $30 million).
F-11
<PAGE> 106
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
James Cable Finance Corp.
Bloomfield Hills, Michigan
We have audited the accompanying balance sheet of James Cable Finance Corp. (a
wholly owned subsidiary of James Cable Partners, L.P., a Delaware Limited
Partnership) ("Finance Corp.") at June 30, 1997. This balance sheet is the
responsibility of the management of Finance Corp. Our responsibility is to
express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of James Cable Finance Corp. at June 30, 1997 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
July 3, 1997
Detroit, Michigan
F-12
<PAGE> 107
JAMES CABLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF JAMES CABLE PARTNERS, L.P., A DELAWARE LIMITED
PARTNERSHIP)
BALANCE SHEET JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
---------
Stock subscription receivable (note 2)...................... $1,000
======
SHAREHOLDER'S EQUITY
--------------------------------
Shareholder's equity -- Common stock (1,000 shares issued
and outstanding).......................................... $1,000
======
</TABLE>
See notes to the balance sheet.
F-13
<PAGE> 108
JAMES CABLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF JAMES CABLE PARTNERS, L.P., A DELAWARE LIMITED
PARTNERSHIP)
NOTES TO BALANCE SHEET JUNE 30, 1997
(1) ORGANIZATION
James Cable Finance Corp. ("Finance Corp."), (a wholly owned subsidiary of
James Cable Partners, L.P., a Delaware Limited Partnership (the "Company")) was
formed on June 19, 1997. Finance Corp.'s principal purpose is to serve as a
co-issuer of certain debt securities with the Company pursuant to an anticipated
debt offering. Finance Corp. intends to conduct no other operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stock Subscription Receivable consists of amount receivable from the
Company in consideration for shares of Finance Corp. issued on June 19, 1997.
The amount was received by Finance Corp. on July 2, 1997.
F-14
<PAGE> 109
===============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
EXCHANGE NOTES BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING THE
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information........................ iii
Prospectus Summary........................... 1
Risk Factors................................. 13
The Exchange Offer........................... 20
Certain Federal Income Tax Consequences of
the Exchange Offer......................... 27
Capitalization............................... 28
Selected Financial Data...................... 29
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 32
Business..................................... 37
Legislation and Regulation................... 51
Management................................... 56
Certain Transactions......................... 57
Partnership Interests of Certain Beneficial
Owners and Management...................... 58
Description of the Exchange Notes............ 59
Description of the Notes..................... 82
Exchange Offer and Registration Rights....... 83
Description of Other Indebtedness............ 84
The Partnership Agreement.................... 85
Plan of Distribution......................... 88
Legal Matters................................ 88
Experts...................................... 88
Index to Financial Statements................ F-1
</TABLE>
===============================================================
===============================================================
JAMES CABLE PARTNERS, L.P.
JAMES CABLE FINANCE CORP.
OFFER TO EXCHANGE
ALL OUTSTANDING
10 3/4% SENIOR NOTES DUE 2004
($100,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 3/4% SERIES B SENIOR NOTES DUE 2004
($100,000,000 PRINCIPAL AMOUNT)
----------------------------------
PROSPECTUS
----------------------------------
, 1997
===============================================================
<PAGE> 110
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Company's Partnership Agreement, the Company is required to
indemnify the General Partner and its affiliates against losses, damages and
expenses (including attorneys' fees), judgments and settlement amounts incurred
by such party with respect to activities performed in good faith on behalf of
the Company so long as such activities were reasonably believed to be within the
scope of the person's authority and are not the result of gross negligence,
willful misconduct or any other like breach of fiduciary duty.
Article VIII of the Articles of Incorporation of Finance Corp. provides as
follows:
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director. However, this provision does not eliminate or
limit the liability of a director for any of the following:
(a) any breach of the director's duty of loyalty to the corporation or
its shareholders;
(b) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(c) a violation of Section 551(1) of [the Michigan Business
Corporation Act, as amended (the "Act")];
(d) a transaction from which the director derived an improper personal
benefit; or
(e) an act or omission occurring prior to the date when this article
becomes effective.
Any repeal, amendment or other modification of this Article shall not
increase the liability or alleged liability of any director of the
corporation then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such
state of facts. If the Act is subsequently amended to authorize corporate
action further eliminating or limiting personal liability of directors,
then the liability of directors shall be eliminated or limited to the
fullest extent permitted by the Act as so amended.
Article VI of the Bylaws of Finance Corp. provides as follows:
SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS: CLAIMS BY THIRD
PARTIES. The corporation shall, to the fullest extent authorized or
permitted by [the Michigan Business Corporation Act, as amended (the
"Act")] or other applicable law, as the same presently exist or may
hereafter be amended, but, in the case of any such amendment, only to the
extent such amendment permits the corporation to provide broader
indemnification rights than before such amendment, indemnify a director or
officer (an "Indemnitee") who was or is a party or is threatened to be made
a party to a threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative and whether
formal or informal, other than an action by or in the right of the
corporation, by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, or other enterprise, whether for profit or not,
against expenses, including attorneys' fees, judgments, penalties, fines,
and amounts paid in settlement actually and reasonably incurred by him or
her in connection with the action, suit, or proceeding, if the Indemnitee
acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation or its
shareholders, and with respect to a criminal action or proceeding, if the
Indemnitee had no reasonable cause to believe his or her conduct was
unlawful. The termination of an action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the Indemnitee
did not act in good faith and in a manner which he or she reasonably
believed to be in
II-1
<PAGE> 111
or not opposed to the best interests of the corporation or its
shareholders, and, with respect to a criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
SECTION 2. INDEMNIFICATION OF DIRECTORS AND OFFICERS: CLAIMS BROUGHT BY
OR IN THE RIGHT OF THE CORPORATION. The corporation shall, to the fullest
extent authorized or permitted by the Act or other applicable law, as the
same presently exist or may hereafter be amended, but, in the case of any
such amendment, only to the extent such amendment permits the corporation
to provide broader indemnification rights than before such amendment,
indemnify an Indemnitee who was or is a party or is threatened to be made a
party to a threatened, pending, or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of
the fact that he or she is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as
a director, officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture, trust, or
other enterprise, whether for profit or not, against expenses, including
attorneys' fees, and amounts paid in settlement actually and reasonably
incurred by the Indemnitee in connection with the action or suit, if the
Indemnitee acted in good faith and in a manner the Indemnitee reasonably
believed to be in or not opposed to the best interests of the corporation
or its shareholders. Indemnification shall not be made under this Section
for a claim, issue, or matter in which the Indemnitee has been found liable
to the corporation except to the extent authorized in Section 6 of this
Article.
SECTION 3. ACTIONS BROUGHT BY THE INDEMNITEE. Notwithstanding the
provisions of Sections 1 and 2 of this Article, the corporation shall not
be required to indemnify an Indemnitee in connection with an action, suit,
proceeding or claim (or part thereof) brought or made by such Indemnitee
except as otherwise provided herein with respect to the enforcement of this
Article, unless such action, suit, proceeding or claim (or part thereof)
was authorized by the board of directors of the corporation.
SECTION 4. APPROVAL OF INDEMNIFICATION. An indemnification under
Sections 1 or 2 of this Article, unless ordered by the court, shall be made
by the corporation only as authorized in the specific case upon a
determination that indemnification of the Indemnitee is proper in the
circumstances because such Indemnitee has met the applicable standard of
conduct set forth in Sections 1 or 2 of this Article, as the case may be,
and upon an evaluation of the reasonableness of expenses and amounts paid
in settlement. This determination and evaluation shall be made in any of
the following ways:
(a) By a majority vote of a quorum of the board of directors
consisting of directors who are not parties or threatened to be
made parties to the action, suit, or proceeding.
(b) If a quorum cannot be obtained in subsection (a), by majority
vote of a committee duly designated by the board of directors
and consisting solely of two (2) or more directors not at the
time parties or threatened to be made parties to the action,
suit or proceeding.
(c) By independent legal counsel in a written opinion, which
counsel shall be selected in one (1) of the following ways:
(i) By the board of directors or its committee in the manner
prescribed in subsection (a) or (b).
(ii) If a quorum of the board of directors cannot be obtained
under subsection (a) and a committee cannot be designated
under subsection (b), by the board of directors.
(d) By all independent directors (if any directors have been
designated as such by the board of directors or shareholders of
the corporation) who are not parties or threatened to be made
parties to the action, suit, or proceeding.
(e) By the shareholders, but shares held by directors, officers,
employees, or agents who are parties or threatened to be made
parties to the action, suit, or proceeding may not be voted.
II-2
<PAGE> 112
In the designation of a committee under subsection (b) or in the selection
of independent legal counsel under subsection (c)(ii), all directors may
participate.
SECTION 5. ADVANCEMENT OF EXPENSES. The corporation may pay or
reimburse the reasonable expenses incurred by an Indemnitee who is a party
or threatened to be made a party to an action, suit, or proceeding in
advance of final disposition of the proceeding if all of the following
apply:
(a) The Indemnitee furnishes the corporation a written affirmation
of his or her good faith belief that he or she has met the
applicable standard of conduct set forth in Sections 1 and 2 of
this Article.
(b) The Indemnitee furnishes the corporation a written undertaking,
executed personally or on his or her behalf, to repay the
advance if it is ultimately determined that he or she did not
meet the standard of conduct.
(c) A determination is made that the facts then known to those
making the determination would not preclude indemnification
under the Act.
The undertaking required by subsection (b) must be an unlimited general
obligation of the Indemnitee but need not be secured. Determinations and
evaluations of payments under this Section shall be made in the manner
specified in Section 4 of this Article.
SECTION 6. COURT APPROVAL. An Indemnitee who is a party or threatened
to be made a party to an action, suit, or proceeding may apply for
indemnification to the court conducting the proceeding or to another court
of competent jurisdiction. On receipt of an application, the court after
giving any notice it considers necessary may order indemnification if it
determines that the Indemnitee is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not
he or she met the applicable standard of conduct set forth in Sections 1
and 2 of this Article or was adjudged liable as described in Section 2 of
this Article, but if he or she was adjudged liable, his or her
indemnification is limited to reasonable expenses incurred.
SECTION 7. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled to
indemnification under Sections 1 or 2 of this Article for a portion of
expenses, including reasonable attorneys' fees, judgments, penalties,
fines, and amounts paid in settlement, but not for the total amount, the
corporation shall indemnify the Indemnitee for the portion of the expenses,
judgments, penalties, fines, or amounts paid in settlement for which the
Indemnitee is entitled to be indemnified.
SECTION 8. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Any person who is
not covered by the foregoing provisions of this Article and who is or was
an employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, whether for profit or not, may be
indemnified to the fullest extent authorized or permitted by the Act or
other applicable law, as the same exists or may hereafter be amended, but,
in the case of any such amendment, only to the extent such amendment
permits the corporation to provide broader indemnification rights than
before such amendment, but in any event only to the extent authorized at
any time or from time to time by the board of directors.
SECTION 9. OTHER RIGHTS OF INDEMNIFICATION. The indemnification or
advancement of expenses provided under Sections 1 through 8 of this Article
is not exclusive of other rights to which a person seeking indemnification
or advancement of expenses may be entitled under the articles of
incorporation, bylaws, or a contractual agreement. The total amount of
expenses advanced or indemnified from all sources combined shall not exceed
the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses. The indemnification provided
for in Sections 1 through 8 of this Article continues as to a person who
ceases to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, personal representatives, and administrators of the
person.
SECTION 10. DEFINITIONS. "Other enterprises" shall include employee
benefit plans; "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and "serving
II-3
<PAGE> 113
at the request of the corporation" shall include any service as a director,
officer, employee, or agent of the corporation which imposes duties on, or
involves services by, the director, officer, employee or agent with respect
to an employee benefit plan, its participants or its beneficiaries; and a
person who acted in good faith and in a manner he or she reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be considered to have acted in a manner "not
opposed to the best interests of the corporation or its shareholders" as
referred to in Sections 1 and 2 of this Article.
SECTION 11. LIABILITY INSURANCE. The corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity or arising out
of his or her status as such, whether or not the corporation would have
power to indemnify him or her against liability under the pertinent
provisions of the Act.
SECTION 12. ENFORCEMENT. If a claim under this Article is not paid in
full by the corporation within thirty (30) days after a written claim has
been received by the corporation, the claimant may at any time thereafter
bring suit against the corporation to recover the unpaid amount of the
claim, and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is required, has
been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the Act for the
corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the corporation. Neither the
failure of the corporation (including its board of directors, a committee
thereof, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because such claimant has
met the applicable standard of conduct set forth in the Act nor an actual
determination by the corporation (including its board of directors, a
committee thereof, independent legal counsel or its shareholders) that the
claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met
the applicable standard of conduct.
SECTION 13. CONTRACT WITH THE CORPORATION. The right to
indemnification conferred in this Article shall be deemed to be a contract
right between the corporation and each director or officer who serves in
any such capacity at any time while this Article is in effect, and any
repeal or modification of this Article shall not affect any rights or
obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such
state of facts.
SECTION 14. APPLICATION TO A RESULTING OR SURVIVING CORPORATION OR
CONSTITUENT CORPORATION. The definition for "corporation" found in Section
569 of the Act, as the same exists or may hereafter be amended is, and
shall be, specifically excluded from application to this Article. The
indemnification and other obligations set forth in this Article of the
corporation shall be binding upon any resulting or surviving corporation
after any merger or consolidation with the corporation. Notwithstanding
anything to the contrary contained herein or in Section 569 of the Act, no
person shall be entitled to the indemnification and other rights set forth
in this Article for acting as a director or officer of another corporation
prior to such other corporation entering into a merger or consolidation
with the corporation.
SECTION 15. SEVERABILITY. Each and every paragraph, sentence, term and
provision of this Article shall be considered severable in that, in the
event a court finds any paragraph, sentence, term or provision to be
invalid or unenforceable, the validity and enforceability, operation, or
effect of the remaining paragraphs, sentences, terms, or provisions shall
not be affected, and this Article shall be construed in all respects as if
the invalid or unenforceable matter had been omitted.
II-4
<PAGE> 114
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C> <C>
3.1 -- Amended and Restated Agreement of Limited Partnership of the
Company dated as of June 30, 1995
3.2 -- Certificate of Limited Partnership of the Company
3.3 -- Articles of Incorporation of Finance Corp.
3.4 -- Bylaws of Finance Corp.
4.1 -- Indenture dated as of August 15, 1997 among the Company,
Finance Corp., and United States Trust Company of New York,
as Trustee (including form of Notes)
4.2 -- Form of Exchange Notes
4.3 -- Credit Agreement dated as of August 15, 1997 among the
Company, the lenders party thereto, NBD Bank as
documentation agent and Canadian Imperial Bank of Commerce
as co-agent
4.4 -- Company Security Agreement dated as of August 15, 1997
between the Company and NBD Bank as documentation agent
4.5 -- Guaranty Agreement dated as of August 15, 1997 by Finance
Corp. in favor of the Lenders and Agents named therein
4.6 -- Guarantor Security Agreement dated as of August 15, 1997
between Finance Corp. and NBD Bank as documentation agent
*5.1 -- Opinion and consent of Miller, Canfield, Paddock and Stone,
P.L.C.
10.1 -- Securities Purchase Agreement dated as of August 12, 1997
among the Company, Finance Corp. and the Initial Purchasers
10.2 -- Registration Rights Agreement dated as of August 15, 1997
among the Company, Finance Corp. and the Initial Purchasers
10.3 -- 1994 General Partner Incentive Compensation Agreement dated
as of December 31, 1994 between the Company and the General
Partner
12.1 -- Statement re computation of ratios
21.1 -- List of subsidiaries of the Company: James Cable Finance
Corp. (Finance Corp. has no subsidiaries.)
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Miller, Canfield, Paddock and Stone, P.L.C.
(contained in Exhibit 5.1)
24.1 -- Powers of Attorney (contained in signature pages of this
Registration Statement)
25.1 -- Statement of Eligibility and Qualification of Trustee on
Form T-1 of United States Trust Company of New York under
the Trust Indenture Act of 1939
27.1 -- Financial Data Schedule
99.1 -- Form of Letter of Transmittal with respect to the Exchange
Offer
99.2 -- Form of Notice of Guaranteed Delivery with respect to the
Exchange Offer
*99.3 -- Form of Exchange Agent Agreement
</TABLE>
- -------------------------
* To be filed by amendment
(b) Financial Statement Schedules.
None.
II-5
<PAGE> 115
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, each Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of expenses
incurred or paid by a director, officer or controlling person of such Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, such Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Each undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the date of this Registration Statement (or most recent post-effective
amendment thereof) which, individual or in the aggregate, represent a
fundamental change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in
volume of the securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of this Registration Statement through the date of
responding to the request.
(c) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this Registration Statement
when it became effective.
II-6
<PAGE> 116
JAMES CABLE PARTNERS, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bloomfield Hills, State
of Michigan, on September 4, 1997.
JAMES CABLE PARTNERS, L.P.
By: James Communications Partners
General Partner
By: Jamesco, Inc.
Partner
By: /s/ WILLIAM R. JAMES
------------------------------------
William R. James
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
By signing below, each of the undersigned does hereby severally constitute
and appoint William R. James, C. Timothy Trenary and Daniel K. Shoemaker, and
each or any one of them, his true and lawful attorneys and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments or
post-effective amendments to this Registration Statement and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys and agents,
and each or any of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<C> <S> <C>
/s/ WILLIAM R. JAMES Person performing functions
------------------------------------------ similar to a principal executive
William R. James officer September 4, 1997
/s/ C. TIMOTHY TRENARY Person performing functions
------------------------------------------ similar to a director
C. Timothy Trenary September 4, 1997
/s/ DANIEL K. SHOEMAKER Person performing functions
------------------------------------------ similar to a director; principal
Daniel K. Shoemaker financial officer; principal September 4, 1997
accounting officer
</TABLE>
S-1
<PAGE> 117
JAMES CABLE FINANCE CORP.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bloomfield Hills, State
of Michigan, on September 4, 1997.
JAMES CABLE FINANCE CORP.
By: /s/ WILLIAM R. JAMES
------------------------------------
William R. James
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
By signing below, each of the undersigned does hereby severally constitute
and appoint William R. James, C. Timothy Trenary and Daniel K. Shoemaker, and
each or any one of them, his true and lawful attorneys and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments or
post-effective amendments to this Registration Statement and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys and agents,
and each or any of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
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<C> <S> <C>
/s/ WILLIAM R. JAMES Director; President (principal September 4, 1997
- --------------------------------------------- executive officer)
William R. James
/s/ C. TIMOTHY TRENARY Director September 4, 1997
- ---------------------------------------------
C. Timothy Trenary
/s/ DANIEL K. SHOEMAKER Director; Treasurer (principal September 4, 1997
- --------------------------------------------- financial officer and
Daniel K. Shoemaker principal accounting officer)
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C> <C> <C> <C>
3.1 -- Amended and Restated Agreement of Limited Partnership of the
Company dated as of June 30, 1995...........................
3.2 -- Certificate of Limited Partnership of the Company...........
3.3 -- Articles of Incorporation of Finance Corp...................
3.4 -- Bylaws of Finance Corp......................................
4.1 -- Indenture dated as of August 15, 1997 among the Company,
Finance Corp., and United States Trust Company of New York,
as Trustee (including form of Notes)........................
4.2 -- Form of Exchange Notes......................................
4.3 -- Credit Agreement dated as of August 15, 1997 among the
Company, the lenders party thereto, NBD Bank as
documentation agent and Canadian Imperial Bank of Commerce
as co-agent.................................................
4.4 -- Company Security Agreement dated as of August 15, 1997
between the Company and NBD Bank as documentation agent.....
4.5 -- Guaranty Agreement dated as of August 15, 1997 by Finance
Corp. in favor of the Lenders and Agents named therein......
4.6 -- Guarantor Security Agreement dated as of August 15, 1997
between Finance Corp. and NBD Bank as documentation agent...
*5.1 -- Opinion and consent of Miller, Canfield, Paddock and Stone,
P.L.C.......................................................
10.1 -- Securities Purchase Agreement dated as of August 12, 1997
among the Company, Finance Corp. and the Initial
Purchasers..................................................
10.2 -- Registration Rights Agreement dated as of August 15, 1997
among the Company, Finance Corp. and the Initial
Purchasers..................................................
10.3 -- 1994 General Partner Incentive Compensation Agreement dated
as of December 31, 1994 between the Company and the General
Partner.....................................................
12.1 -- Statement re computation of ratios..........................
21.1 -- List of subsidiaries of the Company: James Cable Finance
Corp. (Finance Corp. has no subsidiaries.)..................
23.1 -- Consent of Deloitte & Touche LLP............................
23.2 -- Consent of Miller, Canfield, Paddock and Stone, P.L.C.
(contained in Exhibit 5.1)..................................
24.1 -- Powers of Attorney (contained in signature pages of this
Registration Statement).....................................
25.1 -- Statement of Eligibility and Qualification of Trustee on
Form T-1 of United States Trust Company of New York under
the Trust Indenture Act of 1939.............................
27.1 -- Financial Data Schedule.....................................
99.1 -- Form of Letter of Transmittal with respect to the Exchange
Offer.......................................................
99.2 -- Form of Notice of Guaranteed Delivery with respect to the
Exchange Offer..............................................
*99.3 -- Form of Exchange Agent Agreement............................
</TABLE>
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* To be filed by amendment
<PAGE> 1
EXHIBIT 3.1
JAMES CABLE PARTNERS, L.P.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
As of June 30, 1995
<PAGE> 2
JAMES CABLE PARTNERS, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
<TABLE>
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ARTICLE ONE Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Qualification in Other Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Asset Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE THREE Partners and Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Partnership Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Liability of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE FOUR Allocation of Net Loss and Net Income; Distributions . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Allocation of Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Allocation of Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Distributions in Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Distribution of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Break Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 Allocations and Distributions Among Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10 Special Allocations Under Section 704(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE FIVE Rights and Duties of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.2 Restrictions on the Authority of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3 Duties and Obligations of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 Other Business of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Management Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Expenses Reimbursement and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE SIX The Partnership Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Selection of the Partnership Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Functions of the Partnership Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3 Fees and Expenses of Members of Partnership Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE SEVEN Transferability of the General Partner's Interest . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Assignment of the General Partner's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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<TABLE>
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7.2 No Change in Control or Ineligibility of the General Partner . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Removal of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.4 Incapacity or Withdrawal of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.5 Penalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.6 Liability of a Withdrawn or Removed General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.7 Restriction on Admission of Substitute General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE EIGHT Transferability of a Limited Partner's Interest . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.2 Transferees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Substituted Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4 Incapacity of a Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5 Transfers During a Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.6 Elections Under the Internal Revenue Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE NINE Dissolution, Liquidation and Termination of the Partnership . . . . . . . . . . . . . . . . . . . 38
9.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.2 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE TEN Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.1 Adoption of Amendments; Limitations Thereon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.2 Amendment of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE ELEVEN Consents, Voting and Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1 Method of Giving Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3 Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4 Notices to Limited Partners: Designees; No Special Inducements . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE TWELVE Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.1 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE THIRTEEN Records and Accounting; Reports; Fiscal Affairs . . . . . . . . . . . . . . . . . . . . . 47
13.1 Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.2 Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.3 Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.4 Interim Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.5 Partnership Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.6 Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.7 Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE FOURTEEN Representations Warranties and Covenants
of the Partners ........................................... . . . . . . . . . . . . . . . 51
14.1 Representations Warranties and Covenants of the Limited Partners . . . . . . . . . . . . . . . . . . . . . 51
14.2 Representations, Warranties and Certain Covenants of the General Partner . . . . . . . . . . . . . . . . . 51
</TABLE>
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<TABLE>
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ARTICLE FIFTEEN Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.2 Governing Law: Separability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
15.4 Headings etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
15.5 Binding Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
15.6 No Waiver; Creditor's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
15.7 Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
15.8 No Right to Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
15.9 ERISA Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
15.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
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<PAGE> 5
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as
of June 30, 1995, among JAMES COMMUNICATIONS PARTNERS, a Michigan general
partnership, as General Partner, and those parties which have been and shall be
admitted as Limited Partners.
W I T N E S S E T H:
WHEREAS, James Communications Partners, as General Partner, and
certain parties (the "Original Limited Partners") are parties to an Agreement
of Limited Partnership dated as of January 12, 1988 (the "Original Agreement"),
pursuant to which James Cable Partners, L.P. (the "Partnership") was formed as
a limited partnership; and
WHEREAS, on June 26, 1991, the Partnership filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code; and
WHEREAS, the Partnership during its Chapter 11 bankruptcy proceeding
remained in possession of its assets and continued to operate its businesses
and to manage its properties as debtor-in-possession; and
WHEREAS, pursuant to its confirmed plan of reorganization (the "Plan
of Reorganization") certain creditors of the Partnership (the "New Limited
Partners") shall be admitted as limited partners of the Partnership; and
WHEREAS, the parties to the Original Agreement desire to amend the
Original Agreement as set forth herein, and the New Limited Partners wish to
become parties to the Original Agreement, as so amended; and
WHEREAS, the parties to this Agreement, having previously amended the
Agreement as of December 15, 1993 and December 31, 1994 wish to further amend
and restate this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein made and intending to be legally bound, the parties hereby amend and
restate the Agreement as follows:
ARTICLE ONE
Defined Terms
1.1 Defined Terms. The defined terms used in this Agreement
shall, unless the context otherwise requires, have the meanings specified in
this Article One.
1.1.1 "Adjusted Capital Account" means, with respect to any
Partner, the Capital Account for such Partner adjusted by disregarding
all debits to such Capital Account for distributions made subsequent
to the Consummation Date.
1.1.2 "Affiliate" means, when used with reference to a
specified Person, (i) any Control Group Affiliate of the
<PAGE> 6
specified Person, (ii) any Person which is an officer, partner or
trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person serves in a similar
capacity, (iii) any Person which, directly or indirectly, is the
beneficial owner of 10% or more of any class of voting securities of,
or otherwise has a substantial beneficial interest in the specified
Person or of which the specified Person is directly or indirectly the
owner of 10% or more of any class of voting securities or in which the
specified Person has a substantial beneficial interest and (iv) any
relative or spouse of the specified Person.
1.1.3 "Agreement" shall mean the Original Agreement as
amended and restated by this Amended and Restated Agreement of Limited
Partnership, and as the same may be amended, modified, supplemented or
restated from time to time.
1.1.4 "Bankruptcy" shall mean commencement of a voluntary
case under the Bankruptcy Code of 1978, as amended, or commencement of
an involuntary case under the Bankruptcy Code of 1978, as amended, if
such case is not dismissed within 60 days of its commencement.
1.1.5 "Cable Systems" (or, in the singular, "Cable System")
shall mean cable television systems.
1.1.6 "Capital Account" shall mean, with respect to any
Partner, the Capital Account for such Partner as of the Consummation
Date as set forth on Schedules A and B hereto, (i) increased by the
amount of all Net Income and items of income and gain allocated to
such Partner pursuant to Article Four hereof, (ii) decreased by the
sum of (x) all amounts of cash and the Fair Market Value of any assets
distributed to such Partner other than the management fee and (y) the
amount of all Net Losses or items of loss, deduction, depreciation and
amortization allocated to such Partner pursuant to Article Four hereof
and (iii) increased or decreased, as appropriate, to reflect all
adjustments pursuant to paragraphs 3.3.4, 4.11, 7.5 and 9.2.2.
1.1.7 "Capital Contributions" shall mean, with respect to
the General Partner or any Original Limited Partner, the capital
contributions actually made by such Partner pursuant to the Original
Agreement.
1.1.8 "Capital Transaction" means, as of any date, any
disposition of an Ownership Interest, or liquidating dividends or
other similar transactions or distributions with respect to an
Ownership Interest.
1.1.9 "Cash Available for Distribution" means, as of any
date, all cash, bank deposits, publicly saleable commercial paper and
other cash equivalents, and publicly traded securities that are
unrestricted in the hands of the Partnership and the Limited Partners,
in each case held by the
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Partnership at such date from whatever source derived, other than
proceeds of a Capital Transaction, net of all current expenses
(including debt service payments) required to be paid or borne by the
Partnership pursuant to subparagraph 5.6.1 and working capital
reserves pursuant to subparagraph 5.1.1(f).
1.1.10 "Consent" shall mean the approval of a Person, given
as provided in paragraph 11.1, to do the act or thing for which the
approval is solicited, or the act of granting such approval, as the
context may require. Reference to the Consent of a specified
percentage in Percentage Interests of the Limited Partners shall mean
the Consent of Limited Partners whose aggregate Percentage Interests
as set forth on Schedule A or B represent not less than the specified
percentage of the aggregate Percentage Interests of all Limited
Partners at the time of such Consent; provided, however, that in
determining the giving or withholding of any Consent of the Limited
Partners, any Percentage Interests of the General Partner or any
Affiliate of the General Partner shall not be counted whether made as
a General Partner or as a Limited Partner (and, accordingly, shall
also be excluded in calculating the aggregate Percentage Interests for
the foregoing purpose) but provided further, that none of JCP Holding
Company, Cord Capital N.V., Concord Partners Japan, Limited, Lexington
Partners II, L.P. or the individual investors listed in Schedule A
hereto for whom at the date hereof Dillon, Read & Co. Inc. is acting
as agent shall be deemed to be an Affiliate of the General Partner for
purposes of determining Limited Partners who are eligible to
participate in a Consent of Limited Partners.
1.1.11 "Consummation Date" shall be September 21, 1992.
1.1.12 "Control" shall have the meaning ascribed to it in
paragraph 7.2.
1.1.13 "Control Group Affiliate" means, when used with
reference to a specified Person, any Person that directly or
indirectly through one or more intermediaries controls or is
controlled by or is under common control with the specified Person.
1.1.14 "Disability" means, when used with reference to a
specified person, such Person's substantial inability, by virtue of
illness, or physical or mental incapacity or disability, to perform
such Person's duties or responsibilities for a continuous period of at
least 90 days within any period of 120 consecutive days. Disability
shall be deemed to occur on the 91st day within such period of 120
consecutive days.
1.1.15 "FCC" shall mean the United States Federal
Communications Commission.
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<PAGE> 8
1.1.16 "Fair Market Value" shall mean the value of
Partnership assets and, when the reference so requires, of Ownership
Interests, determined as provided in paragraph 6.2.
1.1.17 "Fiscal Year" shall mean the period from and
including January 1 of a calendar year to and including the earlier of
(i) December 31 of such calendar year and (ii) the date on which the
winding up of the Partnership is completed.
1.1.18 "General Partner" shall mean James Communications
Partners, a Michigan general partnership, and/or any other Person
which becomes a successor or additional general partner of the
Partnership as provided herein, in such Person ' s capacity as a
general partner of the Partnership.
1.1.19 "Gross Revenues" shall have the meaning ascribed to
it in paragraph 5.5.1.
1.1.20 "Incapacity" shall mean, as to any Person, such
Person's Bankruptcy, Insolvency, death, dissolution, termination
(other than by merger or consolidation) or Disability; provided,
however, that the Incapacity of the General Partner shall not include
any change in the identity or composition of the partners,
shareholders or members of the General Partner resulting from the
addition, withdrawal or Incapacity of any partner, shareholder or
member of the General Partner.
1.1.21 "Insolvency" shall have the meaning ascribed to it
under the Bankruptcy Code of 1978, as amended.
1.1.22 "Interest" shall mean the entire interest of a
Partner in the Partnership at any particular time, including the right
of such Partner to any and all benefits to which a Partner may be
entitled as provided in this Agreement, together with the obligations
of such Partner to comply with all the terms and provisions of this
Agreement.
1.1.23 "Internal Rate of Return" shall mean an annual
interest rate, compounded semi-annually, that causes the discounted
present value of specified distributions made to all Limited Partners
to equal the discounted present value of the Capital Contributions of
the Original Limited Partners. In computing Internal Rate of Return,
Capital Contributions shall be taken into account on the date such
Capital Contributions were made, distributions shall be taken into
account on the date received, and, for purposes of determining the 10%
Hurdle, Capital Account balances shall be deemed distributed as of the
end of the Fiscal Year. Capital Contributions made or distributions
received other than pursuant to subparagraph 9.2.2 during the first
three months of a semi-annual period shall be deemed made or received
on the first day of such semi-annual period; and Capital Contributions
made or distributions received other than
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pursuant to subparagraph 9.2.2 during the last three months of a
semi-annual period shall be deemed made or received on the first day
of the next semi-annual period; provided, however, that for purposes
of determining the 10% Hurdle in connection with liquidating
transactions, Capital Account balances shall be deemed distributed as
of the date liquidating distributions will be made to the Limited
Partners, and the convention described in the first part of this
sentence shall not apply.
1.1.24 "Internal Revenue Code" shall mean the Internal
Revenue Code of 1986, as it may be amended, or any succeeding law.
1.1.25 "Limited Partner" shall mean, as of the Consummation
Date, the Original Limited Partners and the New Limited Partners, and
thereafter, any Person who is a limited partner at the time of
reference thereto, in such Person's capacity as a limited partner of
the Partnership and so indicated on the books of the Partnership.
1.1.26 "Liquidating Trustee" shall mean a Person approved by
a majority in Partnership Interests of the Limited Partners to act as
a liquidating trustee as provided in subparagraph 9.2.1.
1.1.27 "Net Income" and "Net Loss" means an amount equal to
the Partnership's taxable income or loss for each Fiscal Year,
determined in accordance with Section 703(a) of the Internal Revenue
Code (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a)(1) of the
Internal Revenue Code shall be included in taxable income or loss),
with the following adjustments:
(i) Any income of the Partnership that is exempt
from federal income tax and not otherwise taken into account
in computing Net Income or Net Loss shall be added to such Net
Income or Net Loss;
(ii) Any expenditures of the Partnership described
in Section 705(a)(2)(B) of the Internal Revenue Code or
treated as such expenditures pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(i), shall be taken into account in
computing Net Income or Net Loss (to the extent not otherwise
taken into account);
(iii) Upon the distribution of property by the
Partnership to a Partner, gain or loss attributable to the
difference between the fair market value of the property and
its basis shall be treated as recognized; and
(iv) Any expenses borne by the General Partner
pursuant to subparagraph 5.6.1(b) shall not be taken into
account in computing Net Income or Net Loss.
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1.1.28 "New Limited Partners" shall mean the Persons named
on Schedule B hereto, as amended from time to time.
1.1.29 "Original Limited Partners" shall mean the Persons
named on Schedule A hereto, as amended from time to time.
1.1.30 "Ownership Interests" shall mean assets comprising
Cable Systems, if held directly by the Partnership, or indirect
ownership interests in partnerships or other entities which are
accorded flow-through tax consequences under the Internal Revenue Code
and which entities hold assets comprising Cable Systems directly.
1.1.31 "Partners" shall mean the General Partner, the
Original Limited Partners and the New Limited Partners unless
otherwise indicated.
1.1.32 "Partnership" shall mean the limited partnership
governed hereby, as such limited partnership may from time to time be
constituted.
1.1.33 "Partnership Act" shall mean the Delaware Revised
Uniform Limited Partnership Act, set forth as Chapter 17 of Title 6 of
the Delaware Code, as amended from time to time.
1.1.34 "Partnership Advisory Board" shall mean that
committee of the Partnership selected, and performing the functions,
as provided in this Agreement.
1.1.35 "Partnership Notes" shall mean the Series "A" Notes
and the Series "B" Notes of the Partnership, governed by the Statement
of Standard Terms and Conditions Relating to Notes dated as of
September 21, 1992, as the same may be amended, modified, supplemented
or restated from time to time.
1.1.36 "Percentage Interest" shall mean, with respect to the
General Partner or any Limited Partner, (i) prior to the Prepayment
Date, if any, the percentage set forth opposite such Partner's name on
Schedule A or B hereto under the heading "Before Prepayment Date" and
(ii) thereafter, the percentage set forth opposite such Partner's name
on Schedule A or B hereto under the heading "On and After Prepayment
Date".
1.1.37 "Person" shall mean any individual, partnership,
corporation, unincorporated organization or association, trust
(including the trustees thereof, in their capacity as such) or other
entity.
1.1.38 "Prepayment Date" means the first date, if any, that
occurs both (i) on or before the earlier of September 30, 1994 and the
second anniversary of the Consummation Date and
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(ii) when the principal amount of and all interest due on the
Partnership Notes shall have been paid in full.
1.1.39 "Prepayment Year" means the Fiscal Year, if any, in
which the Prepayment Date occurs.
1.1.39A "Senior Notes" means those Senior Notes issued on or
before June 30, 1995 and the terms and conditions of which shall have
been approved by the Partnership Advisory Board, offered in the total
principal amount of up to $80,000,000, as the same may be amended,
modified, supplemented or restated from time to time and any
refinancings or refundings thereof.
1.1.39B "Senior Subordinated Notes" means those Senior
Subordinated Notes issued on or before June 30, 1995 and the terms and
conditions of which shall have been approved by the Partnership
Advisory Board, offered in the total principal amount of up to
$20,000,000, as the same may be amended, modified, supplemented or
restated from time to time.
1.1.40 "Substituted Limited Partner" shall mean any Person
admitted to the Partnership as a Limited Partner pursuant to the
provisions of paragraph 8.3.
1.1.41 "Target Level" shall mean 5% of the aggregate amount
of the Adjusted Capital Accounts of all Partners.
1.1.41A "Warrants" shall mean those Warrants issued by the
Partnership at the time of the issuance of the Senior Subordinated
Notes, the terms and conditions of which shall have been approved by
the Partnership Advisory Board, as the same may be amended, modified,
supplemented or restated from time to time.
1.1.42 "10% Hurdle" has the meaning set forth in
subparagraph 4.2.2(c).
ARTICLE TWO
Organization
2.1 Formation. The parties hereby agree to amend the terms of the
partnership pursuant to the provisions of the Partnership Act. The rights and
liabilities of the Partners shall be as provided in said Partnership Act,
except as herein otherwise expressly provided.
2.2 Name. The name of the Partnership shall be James Cable
Partners, L.P. However, the business of the Partnership may be conducted, upon
compliance with all applicable laws, under any other name or names (other than
the name of a Limited Partner) designated in writing by the General Partner to
the Limited
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Partners, provided such name contains such words as may be required by
applicable state law.
2.3 Place of Business and Office; Registered Agent. The
Partnership shall maintain a registered office at The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The Partnership shall maintain its principal office
at 710 North Woodward Avenue, Suite 180, Bloomfield Hills, Michigan 48304.
The General Partner may at any time change the location of the Partnership's
offices and may establish additional offices. Notice of any such change shall
be given to the Limited Partners on or before the date of any such change. The
name and address of the Partnership's registered agent is The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801.
2.4 Purpose. The principal investment objective of the
Partnership is to realize capital appreciation through the ownership, control
and operation of assets comprising Cable Systems. In furtherance of the
foregoing objective, the Partnership may acquire, own, operate, expand,
finance, and ultimately sell and dispose of such operating Cable Systems and to
do such other activities as are incidental or necessary in connection with the
foregoing. The Partnership will not build new franchises (except in limited
circumstances where the new franchise is reasonably approximate to an
already-owned Cable System).
2.5 Term. The Partnership was organized pursuant to the Original
Agreement on January 12, 1988. The General Partner and the Original Limited
Partners hereby agree to continue the Partnership as a limited partnership
pursuant to the Original Agreement, as amended hereby, and to admit the New
Partners as limited partners of the Partnership on the Consummation Date. The
Partnership shall continue in full force and effect until December 31, 2005, or
until dissolution prior thereto pursuant to the provisions hereof.
2.6 Qualification in Other Jurisdictions. The General Partner
shall cause the Partnership to be qualified or registered under assumed or
fictitious name or names or foreign limited partnership statutes or similar
laws in any jurisdiction in which the Partnership owns property or transacts
business if such qualification or registration is necessary in order to protect
the limited liability of the Limited Partners or to permit the Partnership
lawfully to own property or transact business, and shall cause the Partnership
not to transact business in any such jurisdiction until it is so qualified or
registered. The General Partner shall execute, file and publish all such
certificates, notices, statements or other instruments necessary to permit the
Partnership to conduct business as a limited partnership in all jurisdictions
where the Partnership elects to do business and to maintain the limited
liability of the Limited Partners.
2.7 Asset Valuation. For purposes of this Agreement, the Partners
hereby agree that, on the Consummation Date, the
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preliminary determination of the fair market value of the assets of the
Partnership is $105,934,173, as set forth on Schedule C hereto. The General
Partner shall make the final determination of the fair market value of the
assets of the Partnership on the Consummation Date and shall distribute to each
Partner the final version of Schedule C by October 31, 1992. It is expected
that the gross fair market value of the assets reflected in the final version
of Schedule C will not differ materially from that reflected in the preliminary
version assuming the Consummation Date occurs on or before September 30, 1992.
ARTICLE THREE
Partners and Capital
3.1 General Partner.
3.1.1 The General Partner shall be as defined in
subparagraph 1.1.18 hereof. The names and addresses of the general
partners thereof are set forth in Schedule A hereto, as amended from
time to time.
3.1.2 The General Partner shall not be required to lend any
funds to the Partnership or to make any capital contribution or
infusion to the Partnership; provided, however, that if the General
Partner lends funds to the Partnership, the terms of such lending must
be as favorable to the Partnership as the terms that could have been
obtained at the time of such lending from a Person that was not the
General Partner or an Affiliate of the General Partner.
3.2 Limited Partners.
3.2.1 As of the Consummation Date, the limited partners of
the Partnership shall be the Original Limited Partners and the New
Limited Partners. The names and addresses of the Original Limited
Partners are set forth in Schedule A hereto, as amended from time to
time. The names and addresses of the New Limited Partners are set
forth in Schedule B hereto, as amended from time to time.
3.2.2 Notwithstanding any provision herein to the contrary,
no Limited Partner shall be required to lend any funds to the
Partnership or to make any capital contribution or infusion to the
Partnership.
3.2.3 The Limited Partners and any such Limited Partners'
directors, officers or any partners thereof, except the General
Partner as a Limited Partner, (i) shall not, except as permitted under
subparagraph 13.1.1, engage in communication with the General Partner
or any licensee of Cable Systems owned by the Partnership on matters
pertaining to the day to day management of Cable Systems owned by the
Partnership or participate in, or take part in the management
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or operation of, or perform any services for the Partnership business;
(ii) shall not act as employee, agent or independent contractor of the
Partnership in matters relating to the Cable Systems owned by the
Partnership; provided, however, that a Limited Partner may act as a
surety or lender to the Partnership, conduct routine insurance or
banking transactions with the Partnership, and maintain cash
collateral accounts on behalf of the Partnership; and (iii) shall have
no right or authority to act for or bind the Partnership.
3.2.4 Each Limited Partner shall use its best efforts not
to cause the Partnership to violate the provisions of 47 U.S.C. 533
(1987) and 47 C.F.R. Section Section 63.54-63.58 of the FCC
regulations or any successor provisions thereof, provided, however,
that nothing in this paragraph 3.2.4 shall be construed as prohibiting
any Limited Partner from investing in any entity not subject to such
provisions, including, without limitation, companies that provide
common carrier services which are exclusively interexchange.
3.2.5 Unless named in this Agreement, or unless admitted to
the Partnership as a General Partner or a Limited Partner, as provided
in this Agreement, no Person shall be considered a Partner. The
Partnership and the General Partner need deal only with Persons so
named or admitted as Partners. They shall not be required to deal
with any other Person merely because of an assignment or transfer of
an Interest in the Partnership to such Person or by reason of the
Incapacity of a Partner; provided, however, that any distribution by
the Partnership to the Person shown on the Partnership records as a
Partner or to its legal representatives, or to the assignee of the
right to receive Partnership distributions as provided herein, shall
acquit the Partnership and the General Partner of all liability to any
other Person who may be interested in such distribution by reason of
any other assignment by the Partner or by reason of his Incapacity, or
for any other reason.
3.3 Partnership Capital.
3.3.1 If the General Partner shall determine in good faith
that it would be in the interests of the Partnership to obtain
additional infusions of capital from the Partners, the General Partner
shall deliver to each Partner a written request for capital infusions
describing the circumstances that have given rise to such request and
the terms and conditions of the proposed additional capital infusions,
and offering to all Partners the opportunity to make a commitment to
make or to make additional capital infusions on a pro rata basis
(determined based on the Percentage Interests at the time of such
request) by a date no earlier than ten business days after the date of
such request. In the event any Partner shall fail to respond by the
date stated in such request or shall decline to make such requested
commitment or capital infusion, the General Partner shall promptly
provide an
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additional written request to the non-declining Partners of the amount
of the resulting shortfall and shall offer to all non-declining
Partners the opportunity to increase the amounts of their commitments
or capital infusions on a pro rata basis and, in the event any
non-declining Partner shall fail to respond by the date stated in such
request or shall decline such additional request, the General Partner
shall continue to provide such further additional written requests to
the remaining non-declining Partners until a sufficient number of
Partners shall have agreed to make commitments or capital infusions
that the General Partner determines that such commitments or capital
infusions should satisfy the interests of the Partnership. If the
General Partner requests that commitments of capital infusions be made
prior to the date when the principal amount and all interest due on
the Partnership Notes shall have been paid in full, then by failing to
respond to any written request for commitments or capital infusions by
the date stated in such request, or by declining to make such
requested commitment or capital infusion, any New Limited Partner
shall be deemed to have provided its Consent to any amendment to this
Agreement determined to be necessary or appropriate to enable the
non-declining Partners to make commitments or capital infusions on the
terms and conditions contained in such written request; provided, that
any such capital infusions may be made by non-declining Partners only
on terms that provide such Partners with no greater than a market rate
of return on such capital infusions. Notwithstanding the foregoing,
no non-recourse creditor of the Partnership will be permitted to make
or increase its capital infusions to the extent that such capital
infusion would cause such creditor's direct, indirect or attributed
interest for purposes of Section 752 of the Internal Revenue Code and
the Regulations thereunder, in any item of partnership income or loss
to equal or exceed 10%.
3.3.2 No Partner shall have any right to demand the return,
reduction or change of its Capital Account, except upon dissolution of
the Partnership pursuant to Article Nine and then only to the extent
permitted by Article Nine.
3.3.3 Without the Consent of all Partners, no Partner shall
have the right to demand and receive property other than cash.
3.3.4 Upon the admission of the New Limited Partners on the
Consummation Date, the General Partner shall adjust the Capital
Accounts of the Partners to reflect a revaluation of partnership
property (including intangible assets such as goodwill) of the
Partnership's assets in the circumstances and in the manner prescribed
in Reg. Section 1.704-1(b)(2)(iv). Such adjustments shall be based
upon the valuation set forth in Section 2.7.
3.4 Liability of Partners.
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3.4.1 Except as provided in Sections 17-303 and 17-607 of
the Partnership Act, a Limited Partner shall not be required to lend
any funds to the Partnership or to make any further capital
contributions or infusions to the Partnership or to repay to the
Partnership, any Partner or any creditor of the Partnership, all or
any fraction of any negative amount of such Limited Partner's Capital
Account or any amount returned to the Partners as a partial return of
their capital contributions or infusions. Except as provided in
Sections 17-303 and 17-607 of the Partnership Act, no Limited Partner
shall have any personal liability whatsoever in its capacity as a
Limited Partner, whether to the Partnership, to any of the Partners or
to the creditors of the Partnership, for the debts, liabilities,
contracts or any other obligations of the Partnership or for any
losses of the Partnership.
3.4.2 Except as provided in Sections 17-303 and 17-607 of
the Partnership Act, no distribution to any Limited Partner of Cash
Available for Distribution pursuant to paragraph 4.3 shall be deemed a
return or withdrawal of capital, and no Limited Partner shall be
obligated to pay any such amount to or for the account of the
Partnership or any creditor of the Partnership.
3.4.3 Except as provided in subparagraph 5.6.2, neither the
General Partner nor any of its Affiliates shall have any personal
liability to any Limited Partner.
3.4.4 No Limited Partner shall be liable for any deficit in
its Capital Account, whether upon liquidation or otherwise. If,
however, the General Partner has a deficit balance in its Capital
Account following the liquidation of its interest in the Partnership
(as defined in Treasury Regulation Section 1.704-1(b)(2)(ii)(g)),
after taking into account all Capital Account adjustments for the
Fiscal Year during which such liquidation occurs, the General Partner
is unconditionally obligated to restore the amount of such deficit
balance to the Partnership by the end of such Fiscal Year or, if
later, within 90 days after the date of such liquidation in accordance
with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2). Any amount
so repaid shall, upon liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in
accordance with their positive Capital Account balances as provided in
paragraph 9.2 hereof.
ARTICLE FOUR
Allocation of Net Loss and
Net Income; Distributions
4.1 Allocation of Net Loss.
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4.1.1 For purposes of and prior to making allocations of
Net Loss, Capital Accounts shall be determined as of the end of the
Fiscal Year, after taking into account adjustments and allocations
pursuant to paragraphs 3.3.4, 4.9, and 4.11 and all distributions
during the Fiscal Year.
4.1.2 Subject to paragraphs 4.9, 4.10, and 4.11 hereof, Net
Loss from and after the Consummation Date shall be allocated among the
Partners in the following order of priority:
(a) First, until the sum of the aggregate amount
of the Capital Accounts of the Original Limited Partners plus
the cumulative amount of all distributions to the Original
Limited Partners shall be equal to at least $78,425,000, (i)
for each Fiscal Year prior to the Prepayment Year, 4.5% to the
General Partner, 85.5% ratably to the Original Limited
Partners, and 10% ratably to the New Limited Partners and (ii)
for the Prepayment Year and thereafter, 4.75% to the General
Partner, 90.25% ratably to the Original Limited Partners, and
5% ratably to the New Limited Partners;
(b) Second, until the aggregate amount of the
Capital Accounts of all Limited Partners shall be equal to at
least the 10% Hurdle, (i) for each Fiscal Year prior to the
Prepayment Year, 90% ratably to the Original Limited Partners,
and 10% ratably to the New Limited Partners and (ii) for the
Prepayment Year and thereafter, 95% ratably to the Original
Limited Partners, and 5% ratably to the New Limited Partners;
and
(c) Third, if the aggregate amount of the Capital
Accounts of all Limited Partners shall exceed the 10% Hurdle,
(i) for each Fiscal Year prior to the Prepayment Year, 18% to
the General Partner, 72% ratably to the Original Limited
Partners, and 10% ratably to the New Limited Partners and (ii)
for the Prepayment Year and thereafter, 19% to the General
Partner, 76% ratably to the Original Limited Partners, and 5%
ratably to the New Limited Partners.
4.1.3 (a) Depreciation and amortization deductions with
respect to Partnership assets that secure indebtedness of the
Partnership, where any Partner (or an affiliate of such Partner) (the
"Lending Partner") is the lender or guarantor of the indebtedness
("Partner Indebtedness") shall be specially allocated to the Lending
Partner to the extent required by Treasury Regulation Sections
1.704-2(i).
(b) If a Lending Partner is specially allocated
depreciation or amortization deductions corresponding to Partner
Indebtedness pursuant to subparagraph 4.1.3(a), items of income and
gain shall be specially allocated to the Lending Partner in an amount
equal to the decrease in the excess, if
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any, of the principal amount of such Partner Indebtedness over the
aggregate adjusted tax basis of the Partnership assets securing such
Partner Indebtedness, in the Fiscal Year (and, if necessary,
subsequent Fiscal Years) in which such excess decreases or in which
the assets are disposed of; provided, however, that the aggregate
income and gain allocated to a Partner pursuant to this subparagraph
4.1.3(b) shall not exceed the aggregate of the depreciation and
amortization deductions allocated to the Partner pursuant to
subparagraph 4.1.3(a).
4.2 Allocation of Net Income.
4.2.1 For purposes of and prior to making allocations of
Net Income, Capital Accounts shall be determined as of the end of the
Fiscal Year, after taking into account adjustments and allocations
pursuant to paragraphs 3.3.4, 4.9, and 4.11 and all distributions
during the Fiscal Year.
4.2.2 Subject to paragraphs 4.9, 4.10, and 4.11 hereof, Net
Income from and after the Consummation Date shall be allocated among
the Partners in the following order of priority:
(a) First, until no Partner shall have a negative
Capital Account balance, to all Partners with negative Capital
Account balances, ratably based on their Capital Account
balances;
(b) Second, until the sum of the aggregate amount
of the Capital Accounts of the Original Limited Partners plus
the cumulative amount of all distributions to the Original
Limited Partners shall be equal to at least $78,425,000, (i)
for each Fiscal Year prior to the Prepayment Year,.9% to the
General Partner, 89.1% ratably to the Original Limited
Partners, and 10% ratably to the New Limited Partners and (ii)
for the Prepayment Year and thereafter, .95% to the General
Partner, 94.05% ratably to the Original Limited Partners, and
5% ratably to the New Limited Partners;
(c) Third, until the aggregate amount of the
Capital Accounts of all Limited Partners shall be equal to at
least an amount (the "10% Hurdle"), which if distributed to
the Limited Partners as of the end of the Fiscal Year (or, in
the final Fiscal Year, as of the date liquidating
distributions will be made to all Limited Partners) would,
when combined with the amounts of all prior distributions to
all Limited Partners, result in an Internal Rate of Return of
10%, (i) for each Fiscal Year prior to the Prepayment Year,
90% ratably to the Original Limited Partners, and 10% ratably
to the New Limited Partners and (ii) for the Prepayment Year
and thereafter, 95% ratably to the Original Limited Partners,
and 5% ratably to the New Limited Partners; and
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(d) Fourth, if the aggregate amount of the
Capital Accounts of all Limited Partners shall exceed the 10%
Hurdle, (i) for each Fiscal Year prior to the Prepayment Year,
18% to the General Partner, 72% ratably to the Original
Limited Partners, and 10% ratably to the New Limited Partners
and (ii) for the Prepayment Year and thereafter, 19% to the
General Partner, 76% ratably to the Original Limited Partners,
and 5% ratably to the New Limited Partners.
4.3 Distributions.
4.3.1 Except as provided in paragraph 9.2.2, all
distributions of cash or property shall be made as follows:
(a) First, until the cumulative amount of all
distributions to the Original Limited Partners shall be equal
to at least $78,425,000, (i) prior to the Prepayment Date,.9%
to the General Partner, 89.1% ratably to the Original Limited
Partners, and 10% ratably to the New Limited Partners and (ii)
thereafter,.95% to the General Partner, 94.05% ratably to the
Original Limited Partners, and 5% ratably to the New Limited
Partners;
(b) Second, until the cumulative amount of all
distributions to all Limited Partners shall result in an
Internal Rate of Return of at least 10%, (i) prior to the
Prepayment Date, 90% ratably to the Original Limited Partners,
and 10% ratably to the New Limited Partners and (ii)
thereafter, 95% ratably to the Original Limited Partners, and
5% ratably to the New Limited Partners; and
(c) Third, if the cumulative amount of all
distributions to all Limited Partners shall result in an
Internal Rate of Return that exceeds 10%, (i) prior to the
Prepayment Date, 18% to the General Partner, 72% ratably to
the Original Limited Partners, and 10% ratably to the New
Limited Partners and (ii) thereafter, 19% to the General
Partner, 76% ratably to the Original Limited Partners, and 5%
ratably to the New Limited Partners.
(d) Notwithstanding subparagraphs (a), (b) and
(c), if a Prepayment Date shall occur, all distributions shall
be made only to the General Partner and the Original Limited
Partners, based on the relative proportions set forth in
subparagraphs (a), (b) and (c), until the cumulative amount of
all distributions made to the New Limited Partners from and
after the Consummation Date shall be equal to 5% of all
distributions made to all Partners pursuant to this Section
4.3.1 from and after the Consummation Date and thereafter
distributions shall be made to the Partners pursuant to
subparagraphs (a), (b) and (c) of this Section 4.3.1.
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4.3.2 Cash Available for Distribution for each month shall
be distributed to the Partners promptly after the end of the month.
4.3.3 The net proceeds of any Capital Transaction
(including any securities permitted by subparagraph 5.1.1(b) to be
received in the Capital Transaction), after any payments of principal,
interest and other charges on indebtedness, shall be distributed to
the Partners promptly after receipt of such proceeds.
4.3.4 Notwithstanding the provisions contained in sections
4.3.2, 4.3.3 and 4.4, as long as any indebtedness or other obligation
remains outstanding under the Senior Notes or the Senior Subordinated
Notes, distributions from Cash Available for Distribution, net
proceeds from Capital Transactions and distributions in kind shall be
made only if and to the extent allowable under the terms of the Senior
Notes, the Senior Subordinated Notes, the Warrants and related
documents.
4.4 Distributions in Kind. Distributions shall not be made in
kind unless the property to be distributed consists of publicly saleable
commercial paper and other cash equivalents or publicly traded securities that
are unrestricted in the hands of the Partnership and the Limited Partners.
Such property shall be distributed in accordance with paragraph 4.3 as if such
property were sold for its Fair Market Value and an amount of cash equal to the
Fair Market Value thereof were distributed for such Fiscal Year. If any such
distribution is made at a time when the Fair Market Value of such property has
not been finally determined as provided in paragraph 6.2 or the results of the
Partnership's Fiscal Year with respect to which such distribution is made have
not been definitively calculated, then the General Partner shall withhold from
such distribution such portion of such property as is necessary as a reasonable
reserve in respect of such distribution pending the final determination of the
allocation of such distribution. If a distribution is made both in cash and in
kind, such distribution shall be made so that, to the fullest extent
practicable, the percentage of the cash and other property distributed to each
Partner is identical.
4.5 Distribution of Property. For purposes of this Agreement, if
property other than cash is distributed to any Partner under paragraph 4.4,
such Partner shall be treated as receiving an amount of cash equal to the Fair
Market Value of the property; and the excess, if any, of the Fair Market Value
of the property over its adjusted tax basis to the Partnership, or the excess,
if any, of the adjusted tax basis of the property to the Partnership over its
Fair Market Value, shall be included in computing Net Income or Net Loss, as
appropriate, for all purposes of this Agreement.
4.6 Break Fees. [OMITTED]
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4.7 Withholding. The Partnership shall withhold all amounts
required to be withheld by law. Any amounts withheld shall be treated as
distributed to such Partner for all purposes of this Agreement; provided,
however, that if the amount required to be withheld exceeds the amount
otherwise currently distributable to a Partner, such excess shall be treated as
a loan by the Partnership to such Partner, such loan to be repaid out of future
distributions to such Partners, with interest at the "Federal long-term rate"
(as defined in Section 1274 of the Internal Revenue Code).
4.8 Allocations and Distributions Among Limited Partners.
Allocations or distributions to the New Limited Partners shall be allocated or
distributed among the New Limited Partners in proportion to their respective
Percentage Interests, and allocations or distributions to the Original Limited
Partners shall be allocated or distributed among the Original Limited Partners
in proportion to their respective Percentage Interests.
4.9 Minimum Gain Chargeback and Qualified Income Offset.
Notwithstanding any other provision of this Article Four:
(a) if there is a net decrease in "partnership minimum
gain" (within the meaning of Treasury Regulation Section 1.704-
1(b)(4)(iv)(c)) during a Fiscal Year, all Limited Partners with
deficit balances in their Capital Accounts at the end of such Fiscal
Year (excluding items described in Treasury Regulation Section
1.704-1(b)(4)(iv)(e)) shall be allocated, before any other allocations
of Partnership items for such Fiscal Year, items of income and gain
for such Fiscal Year (and, if necessary, subsequent Fiscal Years), in
the amount and in the proportions necessary to eliminate such deficits
(as defined in and to the extent required by Treasury Regulation
Section 1.704-1(b)(4)(iv)(e) as quickly as possible; the foregoing is
intended to be a "minimum gain chargeback" provision as described in
Treasury Regulation Section 1.704-1(b)(4)(iv)(e), and shall be
interpreted and applied in all respects in accordance with that
section; and
(b) if during any taxable year of the Partnership any
Limited Partner unexpectedly receives an adjustment, allocation or
distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), there shall be allocated to such
Limited Partner items of income and gain (consisting of a pro rata
portion of each item of Partnership income, including gross income and
gain for such year) in an amount and manner sufficient to eliminate
such Limited Partner's deficit Capital Account balance (as defined in
and to the extent required by Treasury Regulation Section
1.704-1(b)(4)(iv)(e)) as quickly as possible; the foregoing is
intended to be a "qualified income offset" provision as described in
Treasury Regulation Section 1.704-1(b)(2)(ii)(d), and shall be
interpreted and applied in all respects in accordance with that
Section.
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4.10 Special Allocations Under Section 704(c). Notwithstanding the
allocation provisions of Section 4.1, 4.2, and 4.11 hereof, in the event of any
adjustment of any Partner's Capital Account pursuant to Section 3.3.4 of this
Agreement and Reg. Section 1.704-1(b)(2)(iv) based upon a revaluation or any
asset, subsequent allocations of income, gain, loss and deduction with respect
to such asset shall take account of any difference, on the date of adjustment,
between the adjusted basis of such asset for federal income tax purposes and
its fair market value as set forth in Schedule C in accordance with Section
704(c) of the Internal Revenue Code and the regulations thereunder.
4.11 Special Allocations in Prepayment Year and Subsequent Fiscal
Years. Notwithstanding the allocation provisions of Section 4.1 and 4.2
hereof, if at the commencement of the Prepayment Year the aggregate amount of
the Adjusted Capital Accounts of the New Limited Partners (whether positive or
negative) is not equal to the Target Level, items of gross income and items of
loss or deduction realized in the Prepayment Year (and in each subsequent
Fiscal Year, to the extent necessary as set forth below) shall be allocated in
accordance with the following principles:
(a) In the Prepayment Year, if the aggregate amount of
the Adjusted Capital Accounts of the New Limited Partners is greater
than the Target Level, all items of gross income shall be allocated to
the Original Limited Partners and to the General Partner, and all
items of loss or deduction shall be allocated to the New Limited
Partners, until the aggregate amount of the Adjusted Capital Accounts
of the New Limited Partners shall equal the Target Level. A
proportionate amount of each item of gross income and deduction or
loss shall be allocated to the extent necessary to comply with this
Section 4.11(a).
(b) In the Prepayment Year, if the aggregate amount of
the Adjusted Capital Accounts of the New Limited Partners is less than
the Target Level, all items of gross income shall be allocated to the
New Limited Partners, and all items of loss or deduction shall be
allocated to the Original Limited Partners and the General Partner,
until the aggregate amount of the Adjusted Capital Accounts of the New
Limited Partners shall equal the Target Level. A proportionate amount
of each item of gross income and deduction or loss shall be allocated
to the extent necessary to comply with this Section 4.11(b);
(c) If the special allocations set forth in subparagraphs
(a) and (b) above in the Prepayment Year shall fail to adjust the
aggregate amount of the Adjusted Capital Accounts of the New Limited
Partners to the Target Level, the special allocations shall continue
to apply in each subsequent Fiscal Year until the aggregate amount of
the Adjusted Capital Accounts of the New Limited Partners shall equal
the Target Level;
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(d) On or after the Prepayment Date, if immediately prior
to any distribution pursuant to Section 9.2.2 hereof, the aggregate
amount of the Adjusted Capital Accounts of the New Limited Partners
shall not equal the Target Level, the General Partner shall adjust the
Capital Accounts of the Partners so that they will equal the Capital
Accounts that would have resulted if the percentages for determining
allocations set forth in Sections 4.1 and 4.2 hereof for the
Prepayment Year and each subsequent Fiscal Year had been in effect
since the Consummation Date;
(e) Items of gross income, loss or deduction allocated
under this Section 4.11 during any Fiscal Year shall not be taken into
account in computing Net Income or Net Loss for such Fiscal Year. Any
item of gross income, loss or deduction not specially allocated under
this Section 4.11 in the Prepayment Year or any subsequent Fiscal Year
shall be taken into account in computing Net Income or Net Loss for
such Fiscal Year, and shall be allocated in accordance with Sections
4.1 and 4.2 hereof.
(f) Any items of gross income, loss or deduction
specially allocated under this Section 4.11 shall be allocated (i)
between the Original Limited Partners as a class and the General
Partner in proportion to the relative percentages set forth in
subparagraphs (b), (c), or (d) of Section 4.2.2 hereof, whichever is
applicable, and (ii) among each of the Original Limited Partners and
among each of the New Limited Partners in accordance with Section 4.8
hereof.
ARTICLE FIVE
Rights and Duties of the General Partner
5.1 Management.
5.1.1 Except as otherwise expressly provided herein or by
law, the General Partner is hereby vested with the full, exclusive and
complete right, power and discretion to operate, manage and control
the affairs of the Partnership and to make all decisions affecting
Partnership affairs, as deemed proper, convenient or advisable by the
General Partner to carry on the business of the Partnership as
described in paragraph 2.4, and the General Partner shall have all of
the rights, powers and obligations of a general partner of a limited
partnership under the Partnership Act and otherwise as provided by
law. Without limiting the generality of the foregoing, all of the
Partners hereby specifically agree and Consent that the General
Partner may, on behalf of the Partnership, at any time, and without
further notice to or Consent from any Limited Partner, do or cause the
Partnership, and the Cable Systems, if operated as separate entities,
to do the following:
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(a) make investments consistent with the purposes of the
Partnership, FCC rules and regulations and other applicable laws;
(b) sell all or any part of an Ownership Interest, for
cash, publicly saleable commercial paper and other cash equivalents or
publicly traded securities that are unrestricted in the hands of the
Limited Partners; provided, however, that all or substantially all of
the Ownership Interests (other than Ownership Interests in the last
remaining Cable System) may not be sold in any one transaction or
several related transactions except with the prior written Consent of
66-2/3% in Partnership Interests of the Limited Partners;
(c)(i) incur or assume indebtedness (including, without
limitation, guarantees), whether on a recourse or a non-recourse
basis, (w) to finance capital expenditures, (x) to finance working
capital, and (y) to refinance any of the foregoing or any indebtedness
outstanding on the Consummation Date;
(ii) in connection with (x) financings pursuant to clause
(i) above, issue notes, debentures, other debt securities, mortgages,
pledges, and other security interests on Ownership Interests or
underlying Cable System assets and income therefrom to secure and
provide for the repayment of such indebtedness, and (y) transactions
pursuant to clause (i) above and this clause (ii), pay any legal fees
and expenses (including legal fees and expenses of lenders), the cost
of any credit report or appraisals, recording or filing fees,
commitment, stand-by or similar fees paid to lenders and other usual
and necessary expenses in connection with secured borrowings;
(iii) acquire financial instruments, including interest
rate futures contracts and options thereupon, and arrange other
contracts such as interest rate swaps, so as to protect the
Partnership against increases in interest rates with respect to
floating rate loans; provided, however, that the sum of indebtedness
owed by the Partnership, including debt refinanced, pursuant to
clauses (w), (x), (y) and (z) of subparagraph 5.1.1(c)(i), shall not
exceed $120,000,000.
(d) perform, or arrange for the performance of, the
management and administrative services necessary for the operations of
the Partnership but shall not receive and its Affiliates shall not
receive any salary or other compensation therefor except pursuant to
paragraph 5.5 or with Partnership Advisory Board approval, pursuant to
paragraph 6.2 (and distributions pursuant to subparagraphs 4.3.1,
4.3.3 and 9.2.2 and paragraph 4.6);
(e) directly or through its Control Group Affiliates
manage the Ownership Interests, including, but not limited to,
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administer investments actually made by the Partnership and the
ultimate realization of those investments and provide, or arrange for
the provision of, managerial assistance to the Cable Systems owned
directly or indirectly thereby, but shall not receive, and its
Affiliates shall not receive, any salary or other compensation
therefor except pursuant to paragraph 5.5 (and distributions pursuant
to subparagraphs 4.3.1, 4.3.3 and 9.2.2 and paragraph 4.6);
(f) incur all expenditures permitted by this Agreement;
and, to the extent that funds of the Partnership are available, pay
all expenses, debts and obligations of the Partnership, and, in
connection therewith, establish a working capital reserve;
(g) employ and dismiss from employment any and all
consultants, custodians of the assets of the Partnership or other
agents;
(h) enter into, execute, amend, supplement, acknowledge
and deliver any and all contracts, agreements (other than amendments
or supplements to this Agreement except as permitted in Article Ten)
or other instruments as the General Partner shall determine to be
appropriate in furtherance of the purposes of the Partnership;
(i) make temporary investments in (i) United States
government and agency obligations, (ii) commercial paper rated not
lower than P-1, (iii) interest-bearing deposits maturing within 1 year
in member banks of the Federal Reserve System with an unrestricted
surplus of at least $250,000,000, and (iv) money market mutual funds
with assets of not less than $750,000,000, substantially all of which
assets consist of items described in one or more of the foregoing
clauses (i), (ii) and (iii);
(j) admit an assignee of all or any fraction of a Limited
Partner's Interest to be a Substituted Limited Partner in the
Partnership pursuant to and subject to the terms of paragraph 8.3;
(k) make any reasonable election under federal, state and
local tax laws;
(l) act as the "tax matters partner" of the Partnership,
as such term is defined in Section 6231(a)(7) of the Internal Revenue
Code, and exercise any authority permitted the tax matters partner
under the Internal Revenue Code; and
(m) increase or decrease the Capital Accounts of the
Partners pursuant to subparagraphs 3.3.4 and 4.11.
5.1.2. Third parties dealing with the Partnership may rely
conclusively upon any certificate of the General Partner to the effect that it
is acting on behalf of the Partnership. The
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signature of the General Partner shall be sufficient to bind the Partnership in
every manner to any agreement or on any document, including, but not limited
to, documents drawn or agreements made in connection with the acquisition or
disposition of any Ownership Interests or other properties in furtherance of
the purposes of the Partnership.
5.2 Restrictions on the Authority of the General Partner. Without
the Consent of 66-2/3% in Partnership Interests of the Limited Partners, (i)
the General Partner shall not have the authority to admit a Person as a Partner
except as provided in this Agreement, and (ii) the General Partner shall not,
and shall not cause any Cable Systems owned by the Partnership to, engage in
any transactions with itself or any of its Affiliates, on behalf of the
Partnership or involving assets or property of the Partnership including
without limitation, such Cable Systems, except as expressly authorized in this
Agreement or approved in advance by the Partnership Advisory Board. Without
the Consent of 66-2/3% in Partnership Interests of the Limited Partners, the
General Partner shall not have the authority to dismiss from employment or
replace the accountants of the Partnership.
5.3 Duties and Obligations of the General Partner.
5.3.1 [OMITTED]
5.3.2 The General Partner shall take all action which may
be necessary or appropriate for the continuation of the Partnership's
valid existence as a limited partnership under the laws of the State
of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Limited Partners and
to enable the Partnership to conduct the business in which it is
engaged.
5.3.3 The General Partner shall at all times conduct its
affairs and those of the Partnership and shall cause the affairs of
all of its Control Group Affiliates to be conducted in such a manner
that neither any Limited Partner nor any Affiliate of any Limited
Partner will have any personal liability with respect to any
Partnership liability or obligation.
5.3.4 The General Partner shall prepare or cause to be
prepared and shall file on or before the due date (or any extension
thereof) any federal, state or local tax returns required to be filed
by the Partnership. The General Partner shall cause the Partnership
to pay any taxes payable by the Partnership (it being understood that
the expenses of preparation and filing of such tax returns, and the
amounts of such taxes, are expenses of the Partnership and not of the
General Partner); provided, however, that the General Partner shall
not be required to cause the partnership to pay any tax so long as the
General Partner or the Partnership is in good faith and by appropriate
legal proceedings contesting the
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validity, applicability or amount thereof and such contest does not
materially endanger any right or interest of the Partnership.
5.3.5 The General Partner shall, from time to time, submit
to any appropriate state securities administrator, or to the
Securities and Exchange Commission pursuant to Regulation D under the
Securities Act of 1933, as amended, all documents, papers, statistics,
forms and reports required to be filed therewith or submitted thereto,
provided, that the Limited Partners shall cooperate and provide to the
General Partner such information as may reasonably be necessary to
permit the General Partner to make complete filings or submissions of
such nature.
5.3.6 The General Partner will take such actions as are
reasonable and necessary under the circumstances to preserve and
maintain the Ownership Interests, including, without limitation,
insuring the Ownership Interests in a manner and to the extent
commercially reasonable and maintaining a $5,000,000 key man life
insurance policy on William R. James payable to the Partnership.
5.4 Other Business of the General Partner. The General Partner
and its Control Group Affiliates, including, without limitation, William R.
James, shall devote to the business and affairs of the Partnership a
substantial portion of their time so as to conduct such business and affairs in
accordance with the purposes stated in paragraph 2.4 and its duties pursuant to
paragraph 5.3 and shall not and its Affiliates shall not engage in or possess
any interest in other business ventures of any kind, nature or description,
independently or with others, that are competitive with the Partnership; except
that:
(i) the General Partner or any of its
Affiliates may act as general partner of other funds with
similar investment objectives to the fund established pursuant
to the Original Partnership Agreement, provided, however, that
no such other fund may acquire Cable Systems in the geographic
area served by the Partnership's Cable Systems; and
(ii) the General Partner, singly or as a
group under Section 13(d)(3) of the Securities Exchange Act of
1934 (the "1934 Act"), or any of its Affiliates, singly or as
a group under Section 13(d)(3) of the 1934 Act, may own up to
5% of the outstanding stock of any company whose stock is
regularly traded.
Notwithstanding the foregoing, the General Partner will promptly
furnish the Partnership Advisory Board with information on a
confidential basis as to any investment in Cable Systems made by it or
any of its Control Group Affiliates, for its or such Control Group
Affiliate's own account or for others based upon its or such Control
Group
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Affiliate's recommendations. If the General Partner or a Control
Group Affiliate of the General Partner commences another such fund or
funds having the same purposes during the term of the Partnership or
one year after the termination of the Partnership, the General Partner
agrees to, or agrees to cause such Control Group Affiliate to, offer
to such Persons who are Original Limited Partners the opportunity to
invest in or purchase, outside the Partnership the equivalent of
Interests in such other fund or funds, in the first instance, pro
rata, such pro rata amount to be offered to each such Original Limited
Partner determined by multiplying the aggregate amount of equivalents
of interests in such fund or funds by a fraction of which (a) the
numerator shall be each such Original Limited Partner's Capital
Contribution and (b) the denominator shall be the aggregate of all
such Original Limited Partners' Capital Contributions. The terms and
conditions of such offer may be determined by the General Partner or
its Control Group Affiliate and may differ from the terms and
conditions of this Agreement and any such fund will be wholly separate
and distinct from the Partnership. Such offer shall be accepted by
each such Person who is an Original Limited Partner in whole or not at
all within 30 days of receipt of notice of such offer by such Person.
If acceptance by such Person is not received by the offeror within
such 30 days at the address specified for response in such notice, the
offeror may deem such offer to be rejected by such Person.
5.5 Management Compensation.
5.5.1 Subject to paragraph 5.7 hereof, the General Partner
shall be permitted to take from such aggregate gross operating
revenues generated by the Cable Systems owned directly or indirectly
by the Partnership during the period that such Cable Systems are owned
by the Partnership as are proportionate to the Partnership's share of
economic benefits and losses thereof ("Gross Revenues") a management
fee equal to 4% of Gross Revenues for such Fiscal Year, payable
monthly, in arrears, on the basis of the previous month's Gross
Revenues. For purposes of this subparagraph 5.1.1, "Gross Revenues"
shall not include interest or other returns on temporary investments
made pursuant to subparagraph 5.1.1(i) or proceeds of any Capital
Transaction. In the event that an overpayment or underpayment shall
occur as a result of aggregated monthly payments which exceed or fall
short of, as the case may be, 4% of Gross Revenues for a Fiscal Year,
such overpayment or underpayment shall be deducted or added to, as
applicable, from the next succeeding monthly payments (and each
succeeding month thereafter if not used up by the prior month's
payment).
5.5.2 Upon removal, the General Partner shall be entitled
to retain that portion of the compensation paid to it pursuant to
subparagraph 5.5.1, determined on the basis of the entire Fiscal Year
during which the General Partner was removed, prorated through the
time of such removal, but shall
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not be entitled to any compensation with respect to any subsequent
periods.
5.6 Expenses Reimbursement and Indemnification.
5.6.1 (a) Subject to paragraph 5.7 hereof, the
Partnership shall bear or pay (or reimburse the General Partner for
its payment of) the following expenses relating to its operations:
(i) ordinary and normal operating expenses of Cable Systems owned by
the Partnership as are proportionate to the Partnership's share of
economic benefits and losses thereof, including debt service payments
on debt outstanding on the Consummation Date or incurred or assumed
pursuant to subparagraph 5.1.1(c)(i) ( provided, however, that such
expenses shall be paid solely out of operating reserves and revenues
of Cable Systems owned by the Partnership), (ii) legal and accounting
fees of the Partnership, (iii) fees and expenses of the Partnership
Advisory Board, (iv) taxes, if any, imposed on the Partnership in
respect of its operations or income, (v) all legal and accounting fees
and expenses, and all fees and expenses of brokers and finders, that
are incurred in connection with dispositions of Ownership Interests,
(vi) commitment and other fees and expenses (including counsel fees)
paid to, or on behalf of, banks, investment banks, insurance companies
or other lenders or investors in connection with arranging for the
financing or refinancing of debt outstanding on the Consummation Date
or incurred or assumed pursuant to subparagraph 5.1.1(c)(i), (vii)
operating expenses of the General Partner's headquarters facilities of
the type that would be borne by each Cable System owned by the
Partnership individually if management of all such Cable Systems was
not centralized at such headquarters facilities for each Fiscal Year
in an amount up to $5.00 multiplied by the average aggregate number of
subscribers to Cable Systems owned by the Partnership during such
Fiscal Year, and the General Partner shall be entitled to
reimbursement of any such expenses so paid by the General Partner on
behalf of the Partnership. The Partnership shall also bear or pay (or
reimburse the General Partner for its payment of) the costs and
expenses of the Appraiser as this term is defined in the Incentive
Compensation Agreement.
(b) The General Partner or an Affiliate thereof, and not
the Partnership or Cable Systems owned by the Partnership, shall bear
or pay all expenses relating to the operation of the Partnership not
borne by the Partnership pursuant to subparagraph 5.6.1(a) above.
5.6.2 Provided they shall act in good faith and with that
degree of care which an ordinary prudent Person in a like position
would use under similar circumstances, the General Partner and its
Control Group Affiliates and any officer, partner, agent or employee
of the foregoing shall not be liable to any other Partner or the
Partnership (i) for any mistake in judgment, (ii) for any action or
inaction taken or
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omitted in good faith reliance on the provisions of this Agreement or
for a purpose which the General Partner or such Person reasonably
believed to be consistent with the best interests of the Partnership,
or (iii) for any loss due to the mistake, action, inaction,
negligence, dishonesty, fraud or bad faith of any broker or other
agent, provided that such broker or other agent is not and was not a
Control Group Affiliate of the General Partner and was selected,
engaged or retained by the General Partner or such Person with
reasonable care; provided, however, that the General Partner shall be
liable to, and shall indemnify and hold harmless, any other Partner or
the Partnership for (i) any penalties imposed on such other Partner or
Partners (whether in their capacity as such or otherwise) or the
Partnership (which are not set aside or judicially reversed) by any
governmental body as a consequence of acts or omissions by the General
Partner or its Control Group Affiliates before the date of the
Original Agreement, regardless of whether the Partner could have
avoided the penalty by its own action, and (ii) any breach of the
General Partner's representations, warranties or covenants contained
in paragraph 14.2 or the representations, warranties or covenants
contained in the Subscription Agreements in respect of the offering of
Interests executed by each of the Original Limited Partners, and
notwithstanding any other provision of this Agreement to the contrary,
the Partnership shall not indemnify the General Partner or any Control
Group Affiliate of the General Partner for such liability or indemnity
and shall bear no cost or expense in connection therewith, including,
without limitation, costs, fees or expenses of setting such penalty
aside or obtaining judicial reversal thereof. The General Partner may
consult with legal counsel and accountants in respect of Partnership
affairs and, except in respect of matters in which there is a conflict
of interest, shall be fully protected and justified in any action or
inaction which is taken or omitted in good faith, in reliance upon and
in accordance with the opinion or advice of such counsel or
accountants, provided that they shall have been selected with
reasonable care. In respect of conflicts of interest, the General
Partner shall be subject to the review of the Partnership Advisory
Board pursuant to Article Six, and approval by a majority of the
members thereof shall fully protect and justify the General Partner's
entering into any transaction with an Affiliate in good faith, in
reliance upon and in accordance with such approval. In determining
whether the General Partner or any of its Affiliates acted in good
faith and with the requisite degree of care, each such Person shall be
entitled to rely on reports and written statements of the directors,
officers and employees of a Person in which the Partnership holds
Ownership Interests unless the General Partner has reason to believe
that such reports or statements are not true and complete. For the
purposes of clauses (i), (ii) and (iii) of the first sentence of this
subparagraph 5.6.2, the directors, officers and employees of a Person
in which the Partnership holds Ownership
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Interests shall not, solely by virtue of such holding, be deemed to be
Affiliates of the General Partner.
5.6.3 The Partnership shall, to the fullest extent
permitted by law, indemnify and hold harmless the General Partner and
each of its Control Group Affiliates, each member of the Partnership
Advisory Board and the Liquidating Trustee (and their respective heirs
and legal and personal representatives) who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including any action by or in the right of the
Partnership), by reason of any acts or omissions or alleged acts or
omissions arising out of such Person's activities as the General
Partner, as a Control Group Affiliate of the General Partner, as a
member of the Partnership Advisory Board, as the Liquidating Trustee
or as an officer, director, consultant or other advisor to a Cable
System owned by the Partnership, if such activities were performed in
good faith either on behalf of the Partnership or consistent with the
best interests of the Partnership and in a manner reasonably believed
by such Person to be within the scope of the authority conferred by
this Agreement or by law or by the Consent of 66-2/3% in Partnership
Interests of the Limited Partners, against losses, damages or expenses
for which such Person has not otherwise been reimbursed (including
attorneys' fees, judgments, fines and amounts paid in settlement)
actually and reasonably incurred by such Person in connection with
such action, suit or proceeding, so long as such Person was not guilty
of gross negligence, willful misconduct or any other like breach of
fiduciary duty as General Partner under this Agreement with respect to
such acts or omissions and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful, and provided that the satisfaction of any indemnification
and any holding harmless shall be from and limited to Partnership
assets and no Limited Partner shall have any personal liability
(beyond the amount of any capital contributions or infusions actually
made) on account thereof, and provided, further, that any Person
entitled to indemnification from the Partnership hereunder shall first
seek recovery under any insurance policies by which such Person is
covered and, if other than the General Partner, shall obtain the
written consent of the General Partner prior to entering into any
compromise or settlement which would result in an obligation of the
Partnership to indemnify such Person, and provided, further, that if
liabilities arise out of the conduct of the business and affairs of
the Partnership and any other Person for which the Person entitled to
indemnification from the Partnership hereunder was then acting in a
similar capacity, the amount of the indemnification provided by the
Partnership shall be limited to the Partnership's proportionate share
thereof as determined in good faith by the General Partner in light of
its fiduciary duties as General Partner under this Agreement to the
Partnership and the Limited Partners. For
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the purposes of this subparagraph 5.6.3, the Partnership's coventurers
or partners in a Cable System owned by the Partnership shall not be
deemed to be Affiliates of the General Partner.
5.7 1994 General Partner Incentive Compensation Award. In the
event that all of the cable television systems owned by the Partnership are
sold, exchanged or otherwise disposed of, then the Partnership shall pay to the
General Partner, in addition to the amounts described in Sections 5.5.1 and
5.6.1(a), all other amounts payable to the General Partner in accordance with
the terms and conditions of the 1994 General Partner Incentive Compensation
Agreement dated as of December 31, 1994 between the Partnership and the General
Partner.
ARTICLE SIX
The Partnership Advisory Board
6.1 Selection of the Partnership Advisory Board. The Partnership
Advisory Board shall consist of not more than six members. Two members shall
be designated by the General Partner, one member shall be designated and
approved by the Consent of Limited Partners holding at least 51% of the
Partnership Interests of the Limited Partners, each of the two Limited Partners
having the greatest Partnership Interests may designate and approve one member
and so long as any of the Senior Subordinated Notes remain outstanding, Sandler
Mezzanine General Partnership or its successors and assigns ("Sandler") may
designate and approve one member; provided that no member of the Partnership
Advisory Board shall be an Affiliate of the General Partner; provided, however,
that for purposes of serving as a member of the Partnership Advisory Board no
representative of Dillon, Read & Co. Inc. who is not otherwise an Affiliate of
the General Partner shall be deemed an Affiliate of the General Partner. The
removal of any member of the Partnership Advisory Board may be proposed at any
time by any Partner, and, if so proposed, such member will be removed from the
Partnership Advisory Board if a Consent of at least 35% in Partnership
Interests of the Limited Partners is obtained to remove such member; provided,
however, that (i) the member of the Partnership Advisory Board designated and
approved by each of the two Limited Partners having the greatest Partnership
Interests may be removed and replaced upon the proposal and approval of such
removal and replacement by the Limited Partner that designated and approved
such member, and (ii) so long as any of the Senior Subordinated Notes remain
outstanding the member of the Partnership Advisory Board designated and
approved by Sandler may be removed and replaced only by Sandler. Members shall
serve for the duration of the Partnership or until their resignation, removal,
or Incapacity. In the event of a vacancy on the Partnership Advisory Board,
the party who designated and approved the member vacating his position shall
designate and approve a new member, who shall serve on the terms described
above. Prior to the first meeting of
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the Partnership Advisory Board, the Limited Partners shall hold a special
meeting for the purpose of designating and approving one member.
6.2 Functions of the Partnership Advisory Board.
6.2.1 The functions of the Partnership Advisory Board will be
(i) to review and approve or disapprove the valuation of the Fair
Market Value of Partnership assets (including Ownership Interests) as
determined by the General Partner when a determination of Fair Market
Value is required by the terms of this Agreement, (ii) to review the
annual audited financial statements of the Partnership, (iii) to
review and approve or disapprove any potential conflicts of interest
of the General Partner or any Affiliate thereof and (iv) to advise the
General Partner on such other matters, including investment advice,
about which the General Partner may from time to time, in its sole
discretion, determine to consult the Partnership Advisory Board. A
quorum of the Partnership Advisory Board shall consist of three
Partnership Advisory Board members, which quorum must be present at
all Partnership Advisory Board meetings or telephone conference calls.
The Partnership Advisory Board shall meet at least once each calendar
quarter, such meetings to occur on the first Tuesday that is a
business day in each of February, May, August and November, unless
rescheduled with consent of at least three members, notice of
rescheduling to be given to all members 5 days before such regularly
scheduled meeting. The Partnership Advisory Board may hold special
meetings, which meetings may be called by at least two members of the
Partnership Advisory Board or by the General Partner, when
appropriate. Notice of a special meeting must be provided to all
members of the Partnership Advisory Board who did not call such
special meeting, at least 2 days prior to the scheduled date of such
special meeting, and matters considered and voted upon at such meeting
shall be limited to matters set forth in the notice, provided,
however, that any such member may waive such notice and voting
limitations by attendance or in writing. Members may participate in a
meeting by means of conference telephone or similar communications
equipment by means of which all participating members can hear each
other, and participation in a meeting by such means shall be deemed to
constitute presence in person at the meeting. If the party
designating a member so permits, such member may be represented at
meetings by proxy.
6.2.2 The Partnership Advisory Board shall act by the vote
of a majority of its members, except as otherwise specified in this
Agreement. Action of the Partnership Advisory Board may be taken at a
meeting, or by written approval of a majority of members (or the
requisite number of members as specified elsewhere in this Agreement)
with all members being promptly notified of any action taken by
written approval, or by means of conference telephone or similar
communications equipment by means of which all participating
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members can hear each other. Except as provided in subparagraphs
6.2.1 and 6.2.3 below, the recommendations of the Partnership Advisory
Board shall be advisory only and shall not obligate the General
Partner to act in accordance therewith. Any member of the Partnership
Advisory Board may resign by giving to the General Partner and the
other members of the Partnership Advisory Board 30 days' prior written
notice. Any vacancy in the Partnership Advisory Board, whether
created by such a resignation or by the death of any member or
otherwise, shall promptly be filled as provided in paragraph 6.1 of
this Agreement.
6.2.3 For all purposes of this Agreement, the calculation
of the Fair Market Value of any Ownership Interests or of property
received in exchange for any Ownership Interests shall initially be
made by the General Partner, who shall supply the Partnership Advisory
Board with all such information and data as shall be requested to
enable the Partnership Advisory Board to reach an informed judgment
with respect thereto. In the event the Partnership Advisory Board
shall disagree with any valuation made by the General Partner and the
General Partner shall not accept the valuation proposed by the
Partnership Advisory Board, the matter shall be settled by appraisal
as provided in subparagraph 6.2.4 below. Any valuation made in
accordance with the provisions of this subparagraph 6.2.3 shall be
made in writing and a copy thereof given to each Limited Partner.
Regardless of whether the Partnership Advisory Board has approved the
General Partner's valuation, each Limited Partner shall have 30 days
after receipt of such valuation within which it may advise the General
Partner in writing of its objection to any valuation other than one
which has been settled by appraisal and if Limited Partners (excluding
the General Partner, if it is also a Limited Partner, or any Affiliate
thereof) whose Partnership Interests at the time represent not less
than 51% of the aggregate Partnership Interests of the then Limited
Partners (excluding the General Partner, if it is also a Limited
Partner, or any Affiliate thereof) so advise the General Partner of
any such objection and if the Limited Partners so objecting and the
General Partner are unable to agree upon a valuation, the matter shall
be determined by appraisal as provided in subparagraph 6.2.4 below.
In determining the value of the Partnership or the Fair Market Value
of any Ownership Interests or of property received in exchange for any
Ownership Interests, the following principles shall apply: (i) The
valuation of a Cable System will be based on a going concern basis, in
conformity with standard appraisal techniques, applying the market
factors then relevant, and other assets and other securities not
subject to valuation as described below, shall be valued similarly;
(ii) securities which are freely tradable and the principal market for
which (measured by the average daily volume over the preceding four
trading weeks) is either the New York Stock Exchange or the American
Stock Exchange or which are quoted on the National Market System of
the National Association of Securities
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Dealers, shall be valued at their last reported closing sale price,
prior to the date of determination on such exchange, or, if no sales
occurred on such day, at the mean between the closing "bid" and
"asked" prices on such day; and (iii) securities which are freely
tradable and the principal market for which is some other national
securities exchange or the over-the-counter market (but which are not
quoted on the National Market System) shall be valued at their last
reported closing sale price, regular way, prior to the date of
determination on the principal national securities exchange on which
they are traded, or, if no sales occurred on such day, at the mean
between the closing "bid" and "asked" prices on such day, or, if the
principal market for such securities is, or is deemed to be, in the
over-the-counter market, at their average closing "bid" price as
published by the National Association of Securities Dealers Automated
Quotation System, or if such price is not so published, at the mean
between their closing "bid" and "asked" prices, if available, which
prices may be obtained from any reputable broker or dealer. For all
purposes of this Agreement, Fair Market Value shall be determined
after considering all factors which might reasonably affect the sales
price of such Ownership Interests or other assets or securities,
including, without limitation, if and as appropriate, the anticipated
impact on current market prices of immediate sale, the lack of a
market for such Ownership Interests or assets of securities and the
impact on present value of, among others, the length of time before
any such sales may become possible and the cost and complexity of any
such sales. For all purposes of this Agreement, all valuations which
have been determined in accordance with the terms of this subparagraph
6.2.3 shall be final and conclusive on the Partnership and all
Partners, their successors and assigns. In determining the value of
assets in accordance with the provisions of this subparagraph 6.2.3,
the General Partner and the Partnership Advisory Board may obtain and
rely on information provided by any source or sources reasonably
believed to be accurate.
6.2.4 Any controversy arising out of a valuation which
shall be submitted to appraisal as provided for by subparagraph 6.2.3
above shall be settled in New York, New York by an appraisal
undertaken by two independent nationally recognized experts in the
cable television field, to determine the Fair Market Value of the
Ownership Interests, or other assets or securities to be appraised.
One such appraiser shall be appointed by the General Partner, and the
other by the Consent of 66-2/3% in Partnership Interests of the
Limited Partners, and the deliberations of the appraisers shall
commence forthwith following their appointment. If the disparity
between the Fair Market Value determined by the two appraisers is less
than or equal to 5% of such Fair Market Value, the final Fair Market
Value shall be the average of the two Fair Market Values. If the
disparity between the determination of Fair Market Value by each of
the two appraisers is greater than 5%, they shall select a third
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appraiser possessing similar qualifications. If they cannot agree
upon a third appraiser within 25 days of the commencement of their
original deliberations to determine Fair Market Value, the third
appraiser shall be selected by the American Arbitration Association,
and such third appraiser, within 20 days of appointment, shall make
its determination of Fair Market Value. The final Fair Market Value
shall be whichever Fair Market Value of the two earlier appraisers is
closest to the Fair Market Value as determined by the third appraiser
so long as the disparity between the third Fair Market Value and the
earlier Fair Market Value to which it is closest is less than or equal
to 20% of such earlier Fair Market Value. If the disparity is greater
than 20%, then the Fair Market Value shall be the average of the two
Fair Market Values that are closest. The valuation decision of such
appraisers shall be final and conclusive on the Partnership and all
Partners. The cost of any such appraisal shall be borne equally by
the Partnership (as a Partnership expense) and the General Partner.
6.3 Fees and Expenses of Members of Partnership Advisory Board.
Members of the Partnership Advisory Board shall be entitled to reimbursement
from the Partnership for their reasonable travel and other out-of-pocket
expenses incurred in connection with the performance of their duties as members
of the Partnership Advisory Board, and members of the Partnership Advisory
Board not otherwise affiliated with the General Partner or any of the Limited
Partners shall be entitled to a fee of $1,000 for each meeting of the
Partnership Advisory Board attended by said member.
ARTICLE SEVEN
Transferability of the General Partner's Interest
7.1 Assignment of the General Partner's Interest. Unless any
assignment or transfer is to a Person controlled by William R. James, without
the prior Consent of 66-2/3% in Partnership Interests of the Limited Partners,
the General Partner shall not assign, sell or otherwise dispose of all or a
fraction of its Interest as General Partner in the Partnership, or enter into
any agreement as a result of which any Person shall have a general partner
interest in the Partnership, provided, however, that the Letter Agreement,
dated January 11, 1988, between Dillon, Read & Co. Inc. and the General Partner
shall not be deemed a violation of this paragraph and changes in the
composition of the members constituting the partnership which is the General
Partner shall be permitted, including additions to and subtractions from the
partnership, except as prohibited in paragraph 7.2 provided further, however,
that no dispositions, agreements or changes in composition otherwise permitted
by the foregoing shall be permitted without the prior approval of the FCC (if
required) and if not in compliance with other applicable laws.
7.2 No Change in Control or Ineligibility of the General Partner.
Unless the prior Consent of 66-2/3% in Partnership
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Interests of the Limited Partners is given, or unless there occurs (x) the
death of William R. James or (y) the Disability of William R. James, William R.
James (or a corporation 100% of the voting stock of which is owned by him or a
Person controlled by him) shall at all times either (i) own at least a 51%
interest in the profits and losses of and distributions from, and control, the
General Partner or (ii) be the sole General Partner (either of clause (i) or
(ii) above constituting "Control" of the General Partner).
7.3 Removal of the General Partner. The General Partner may not
be removed, directly or indirectly, except the General Partner shall be removed
automatically, effective (a) upon a finding by an independent party (which
party shall be selected by the Consent of 60% in Partnership Interests of the
Limited Partners but which party shall not be an Affiliate of any Limited
Partner or the General Partner) that the General Partner has engaged in or is
engaging in malfeasance, criminal conduct or wanton, willful neglect; or (b)
upon a determination by a court or other official body of competent
jurisdiction that the General Partner has engaged in the conduct described in
clause (a) above, or a material breach of this Agreement by the General
Partner. In addition to the events described in (a) and (b), but only in the
event of William R. James' Incapacity, or if the General Partner ceases to be
controlled by William R. James, the General Partner may be removed upon Consent
of 51% in Partnership Interests of the Limited Partners (excluding the General
Partner, if it is also a Limited Partner, or any Affiliate thereof) to the
removal of the General Partner.
7.4 Incapacity or Withdrawal of the General Partner. In the event
of the Incapacity or withdrawal of the General Partner, the Partnership shall
be dissolved, except as provided in subparagraph 9.3.1.
7.5 Penalty. Regardless of any vote to continue the Partnership
pursuant to subparagraph 9.3.1, if William R. James (or a corporation 100% of
the voting stock of which is owned by him) shall cease to Control the General
Partner except as permitted in paragraph 7.2, then the Interest of the General
Partner shall be divided into two components: (i) 25% shall be allocated
proportionately to the Limited Partners thereby increasing their respective
Limited Partnership Interests (and the Capital Accounts of the Limited
Partners, shall be automatically adjusted to reflect such increase), and (ii)
75% thereof shall be retained by the General Partner or, if the Partnership is
continued as herein provided in paragraph 9.3, shall be purchased by the newly
appointed General Partner for the lesser of (x) 75% of the Capital Account of
the General Partner (calculated as provided in the second to last sentence of
paragraph 9.3.1), less the amount of any distributions made to the General
Partner subsequent to the end of the month as of the end of which its Capital
Account was so calculated or (y) 75% of the amount of the General Partner's
Capital Contribution, less all distributions actually made by the
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Partnership to the General Partner pursuant to paragraph 4.3 or 4.6.
7.6 Liability of a Withdrawn or Removed General Partner. Any
General Partner which shall suffer Incapacity, withdraw or be removed from the
Partnership, or which shall sell, transfer or assign its General Partner's
Interest, shall remain liable for obligations and liabilities incurred by it as
General Partner prior to the time such Incapacity, withdrawal, removal, sale,
transfer or assignment shall have become effective, but it shall be free of any
obligation or liability incurred on account of the activities of the
Partnership from and after the time such Incapacity, withdrawal, removal, sale,
transfer or assignment shall have become effective.
7.7 Restriction on Admission of Substitute General Partner. No
substitute General Partner shall be admitted to the Partnership pursuant to
this Article Seven unless an opinion of responsible counsel (who may be counsel
for the Partnership) is delivered to the Partnership stating that admission of
the substitute General Partner will not cause the Partnership to lose its
status as a Partnership for federal income tax purposes.
ARTICLE EIGHT
Transferability of a Limited Partner's Interest
8.1 Restrictions on Transfers of Interests.
8.1.1 Notwithstanding any other provisions of this
paragraph 8.1, no sale, exchange, transfer, assignment or other
disposition (collectively, a "Transfer") of all or any fraction of a
Limited Partner's Interest may be made unless (a) such Transfer is
effective as of the end of a fiscal quarter, (b) the General Partner
gives its Consent (which Consent may be granted or withheld in the
sole discretion of the General Partner) to such Transfer, and (c) in
the opinion of responsible counsel (who may be counsel for the
Partnership), satisfactory in form and substance to the General
Partner (which opinion may be waived, in whole or in part, at the
discretion of the General Partner provided that prompt notice of such
waiver is given by the General Partner to the Limited Partners),
(i) such Transfer, when added to the
total of all other Transfers of Interests within the preceding
twelve (12) months, would not result in the Partnership being
considered to have terminated within the meaning of Section
708 of the Internal Revenue Code;
(ii) such Transfer would not violate the
Securities Act of 1933, as amended, or any state securities or
"Blue Sky" laws applicable to the
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Partnership or the Interest to be the subject of such
Transfer;
(iii) such Transfer would not cause the
Partnership to lose its status as a partnership for federal
income tax purposes or cause the Partnership to become subject
to the Investment Company Act of 1940, as amended (the "1940
Act");
(iv) such Transfer would not cause the
equity participation in the Partnership by "benefit plan
investors" to be "significant" as such terms are defined in
section 2510.3-101(f)(2) and section 2510.3-101(f)(1),
respectively, of Part 2510 of Chapter XXV, Title 29 of the
Code of Federal Regulations; and
any such opinion of counsel is delivered in writing to the Partnership
not less than 10 days prior to the date of the Transfer; provided,
however, that (x) the foregoing provisions of this subparagraph 8.1.1
shall not apply to a Transfer by a Limited Partner to another Partner
or to a Person which succeeds to its business substantially in its
entirety or which, directly or indirectly, owns a majority of the
outstanding equity securities of such Limited Partner or is a
majority-owned subsidiary of such Limited Partner (or of the Person of
which such Limited Partner, directly or indirectly, is a
majority-owned subsidiary), (y) any Limited Partner subject to
insurance laws governing disposition of assets may make a Transfer of
its Interest to a financial institution of equivalent quality and
standing and (z) any Limited Partner that is a tax-exempt organization
under Section 501 of the Internal Revenue Code may make a Transfer of
its Interest if such a disposition is called for by a governmental
agency, including the Internal Revenue Service. The General Partner
agrees to cooperate with any Limited Partner making a Transfer by
providing promptly such records and other factual information as may
be reasonably requested with respect to any proposed Transfer. Each
Limited Partner hereby severally agrees that it will not Transfer all
or any fraction of its Interest in the Partnership, except as
permitted by this Agreement.
8.1.2 No Interest nor any part thereof shall be the subject
of a Transfer to a minor or an incompetent except in trust, pursuant
to the Uniform Gifts to Minors Act, or by will, trust agreement or
intestate succession.
8.1.3 Each Limited Partner agrees that it will, prior to
the time the General Partner Consents to a Transfer of Interest by
that Limited Partner, pay all reasonable expenses, including
attorneys' fees, incurred by the Partnership in connection with such
Transfer.
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8.2 Transferees.
8.2.1 The Partnership shall not recognize for any purpose
any purported Transfer of all or any fraction of the Interest of a
Limited Partner unless the provisions of paragraph 8.1 shall have been
complied with and there shall have been filed with the Partnership a
dated notice of such Transfer, in form satisfactory to the General
Partner, executed and acknowledged by both the Limited Partner making,
and the Person accepting, such Transfer (such Limited Partner making,
a "Transferor" and such Person accepting, a "Transferee"), and such
notice (i) contains the acceptance by the Transferee of all of the
terms and provisions of this Agreement and its agreement to be bound
thereby by executing a counterpart hereof and (ii) represents that
such Transfer was made in accordance with all applicable laws and
regulations.
8.2.2 Unless and until a Transferee of an Interest becomes
a Substituted Limited Partner, such Transferee shall not be entitled
to give Consents with respect to such Interest.
8.2.3 Subject to subparagraph 8.1.4, any Transferor which
shall Transfer all of its Interest shall cease to be a Limited
Partner, except that, unless and until a Substituted Limited Partner
is admitted in its stead, such Transferor shall retain the statutory
rights of an assignor of a limited partner's interest under the
Partnership Act and shall be entitled to give Consents with respect to
such Interest.
8.2.4 Anything herein to the contrary notwithstanding, both
the Partnership and the General Partner shall be entitled to treat the
Transferor of an Interest as the absolute owner thereof in all
respects, and shall incur no liability for distributions made in good
faith to it, until such time as a notice that conforms to the
requirements of subparagraph 8.2.1 has been received by the
Partnership and accepted by the General Partner.
8.2.5 A Person who is the Transferee of all or any fraction
of the Interest of a Transferor as permitted hereby but does not
become a Substituted Limited Partner and who desires to make a further
Transfer of such Interest, shall be subject to all of the provisions
of this Article Eight to the same extent and in the same manner as any
Limited Partner desiring to make a Transfer of its Interest.
8.3 Substituted Limited Partner.
8.3.1 No Limited Partner shall have the right to substitute
a purchaser, assignee, transferee, donee, heir, legatee, distributee
or other recipient of all or any fraction of such Limited Partner's
Interest as a Limited Partner in its place. Any such purchaser,
assignee, transferee, donee, heir,
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legatee, distributee or other recipient of an Interest (whether
pursuant to a voluntary or involuntary Transfer) shall be admitted to
the Partnership as a Substituted Limited Partner only upon the Consent
of the General Partner (which Consent may be granted or withheld in
the sole discretion of the General Partner) and only upon (i)
satisfying the requirements of paragraphs 8.1 and 8.2 and (ii) an
amendment (x) to Schedule A to this Agreement and (y) if required by
then-effective law, to the Partnership's certificate of limited
partnership, recorded in the proper records of each jurisdiction in
which such recordation is necessary to qualify the Partnership to
conduct business or to preserve the limited liability of the Limited
Partners.
8.3.2 Each Substituted Limited Partner, as a condition to
its admission as a Limited Partner, shall execute and acknowledge such
instruments, in form and substance satisfactory to the General
Partner, as the General Partner reasonably deems necessary or
desirable to effectuate such admission and to confirm the agreement of
the Substituted Limited Partner to be bound by all the terms and
provisions of this Agreement with respect to the Interest acquired.
All reasonable expenses, including attorneys' fees, incurred by the
Partnership in this connection shall be borne by such Substituted
Limited Partner.
8.3.3 Until a Transferee shall have been admitted to the
Partnership as a Substituted Limited Partner pursuant to subparagraph
8.3.1, such Transferee shall be entitled to all of the rights of an
assignee of a limited partner interest under the Partnership Act.
8.4 Incapacity of a Limited Partner. In the event of the
Incapacity of a Limited Partner, the Partnership shall not be terminated, and
the Limited Partner's trustee in bankruptcy or other legal representative shall
have only the rights of a transferee of the right to receive Partnership
distributions applicable to the Interest of such Limited Partner as provided
herein. Any Transfer from such trustee in bankruptcy or legal representative
shall be subject to the provisions of this Agreement.
8.5 Transfers During a Fiscal Year. In the event of the Transfer
of a Limited Partner's Interest at any time other than the end of a Fiscal
Year, the distributive shares of the various items of Partnership profit,
income, gain, deduction, loss, credit and allowance as computed for federal
income tax purposes shall be allocated between the Transferor and the
Transferee in the ratio of the number of days in the Fiscal Year before and
after the Transfer, unless the Transferor and the Transferee shall (i) have
given the Partnership written notice, on or before the January 15 following the
year in which such Transfer occurred, stating their agreement that such
allocation shall be made on some other basis permitted for federal income tax
purposes, and (ii) agree to reimburse the Partnership for any incremental
accounting fees and
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other expenses incurred by the Partnership in making such allocation.
8.6 Elections Under the Internal Revenue Code. In the event of a
transfer of all or any part of a Limited Partner's Interest by sale or
exchange, the General Partner shall, at the request of such Limited Partner or
its successors in interest, cause the Partnership to elect (unless such
election has theretofore been made), pursuant to Section 754 of the Internal
Revenue Code, to adjust the basis of the Partnership's assets as provided by
Sections 734 and 743 of the Internal Revenue Code; provided that either such
Limited Partner or its successor in interest makes provisions, reasonably
satisfactory to the General Partner, to reimburse the Partnership for all costs
and expenses incurred by the Partnership by virtue of such election and
transfer. Thereafter, any additional expenses incurred in connection with any
subsequent transfer as a result of such election shall be paid by the
subsequent transferee. The Partnership shall provide such Limited Partners,
transferees or such successors with appropriate verification of such costs and
expenses. Nothing herein shall prevent the General Partner from making an
election pursuant to Section 754 of the Internal Revenue Code at any other
time.
ARTICLE NINE
Dissolution, Liquidation and
Termination of the Partnership
9.1 Dissolution. The Partnership shall be dissolved, wound up and
terminated upon the happening of any of the following events, except as
provided in subparagraph 9.3.1:
(i) the expiration of its term;
(ii) upon at least 30 days' prior written notice
to the Limited Partners of the election to dissolve the Partnership by
the General Partner; provided that 60% in Partnership Interests of the
Limited Partners shall Consent thereto;
(iii) upon the sale or other disposition by the
Partnership of all or substantially all of the Ownership Interests it
owns on the date hereof;
(iv) Consent thereto of 66-2/3% in Partnership
Interests of the Limited Partners;
(v) [OMITTED]
(vi) the removal of the General Partner pursuant
to paragraph 7.3;
(vii) the Incapacity or withdrawal of the General
Partner; or
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(viii) termination required by operation of law.
Dissolution of the Partnership shall be effective on the day on which
the event occurs giving rise to the dissolution, but the Partnership shall not
terminate until the certificate of limited partnership of the Partnership has
been canceled and the assets of the Partnership have been distributed as
provided in paragraph 9.2.
9.2 Liquidation.
9.2.1 Upon dissolution of the Partnership, the General
Partner or, if there is none, a Person approved by a majority in
Partnership Interests of the Limited Partners to act as a liquidating
trustee (the "Liquidating Trustee") shall wind up the affairs of the
Partnership and proceed within a reasonable period of time to sell or
otherwise liquidate the assets of the Partnership and, after paying or
making due provisions by the setting up of reserves for all
liabilities to creditors of the Partnership to distribute the assets
among the Partners in accordance with the provisions for the making of
distributions set forth in this Agreement. Notwithstanding the
foregoing, in the event that the General Partner or the Liquidating
Trustee shall, in its absolute discretion, determine a sale or other
disposition of part or all of the Partnership's investments would
cause undue loss to the Partners or otherwise be impractical, the
General Partner or the Liquidating Trustee may either defer
liquidation of, and withhold from distribution for a reasonable time,
any such investments or distribute part or all of such investments,
pro rata, to the Partners in kind in accordance with paragraph 4.4.
9.2.2. In the final Fiscal Year of the Partnership, Net
Income, Net Loss and any items specially allocated pursuant to
paragraph 4.1 shall be credited or charged to the Capital Accounts of
the Partners in accordance with the provisions of Article Four. If
the Fair Market Value of Partnership assets to be distributed in kind
exceeds ("book gain") or is less than ("book loss") the Partnership
basis of such assets, to the extent not otherwise recognized to the
Partnership, such book gain or book loss shall be taken into account
in computing Net Income or Net Losses for such Fiscal Year for all
purposes of crediting or charging the Capital Accounts of the Partners
as if such assets had been sold. Thereupon, all of the assets of the
Partnership, or the proceeds therefrom, shall be distributed or used
as follows and in the following order of priority:
(i) for the payment of the debts and
liabilities of the Partnership and the expenses of liquidation
(other than liabilities for distributions to Partners);
(ii) to the setting up of any reserves
which the General Partner or the Liquidating Trustee may deem
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reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership; and
(iii) to the Partners, in proportion to
positive Capital Account Balances (treating any distribution
of property other than cash as a distribution of cash in the
amount of the Fair Market Value of the property distributed).
9.2.3 When the General Partner or the Liquidating Trustee
has complied with the foregoing liquidation plan, the Partners shall
execute, acknowledge and cause to be filed an instrument evidencing
the cancellation of the certificate of limited partnership of the
Partnership.
9.3 Continuation of the Partnership.
9.3.1. If any event described in subparagraph 9.1(i), (iii),
(vi), or (vii) occurs, then within 90 days after the occurrence of
such event the Limited Partners shall hold a meeting and shall vote
whether to continue the Partnership.
(a) In the case of an event described in
subparagraph 9.1(i), a Consent of 66-2/3% in Partnership
Interests of the Limited Partners, and of the General Partner,
is required to continue the Partnership.
(b) In the case of an event described in
subparagraph 9.1(iii), the Partnership will be continued if
legally permissible with the General Partner as general
partner if 66-2/3% in Partnership Interests of the Limited
Partners, and the General Partner, give their Consent thereto.
If the General Partner does not give its Consent to continue,
66-2/3% in Partnership Interests of the Limited Partners
(excluding the General Partner, or any Affiliate thereof) may
at such time elect a new General Partner, to serve as the
General Partner of the Partnership, and such event shall be
deemed to have occurred immediately prior to the occurrence of
the event requiring such meeting and Consent.
(c) A Consent of 60% in Partnership Interests of
the Limited Partners in the case of the events described in
subparagraphs 9.1 (vi) or (vii) shall be necessary to continue
the Partnership. In the event that such Consent is given, 60%
in Partnership Interests of the Limited Partners (excluding
the General Partner, if it is also a Limited Partner, or any
Affiliate thereof) shall at such time elect a new General
Partner, to serve as the General Partner of the Partnership,
and such election shall be deemed to have occurred immediately
prior to the occurrence of the event requiring such meeting
and Consent. If, in the case of the events described in
subparagraph 9.1 (vii), William R. James shall not be in a
condition of Incapacity the new General Partner, if one
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is elected, shall be, in William R. James' sole discretion,
either William R. James, a corporation 100% of the voting
stock of which is owned by William R. James, or a Person
controlled by William R. James.
In each of clauses (a), (b) and (c) above, provided the requisite
Consent of the Limited Partners is obtained, each Limited Partner shall be
deemed to have given its Consent to the continuation, and the Partnership shall
continue to own and the General Partner (or the new General Partner, as the
case may be) shall continue to manage the Ownership Interests.
9.3.2 Upon the General Partner, or William R. James,
ceasing to be the General Partner of the Partnership as provided in
this Agreement, its, or his, liability as the General Partner shall
cease as provided in the Partnership Act, and the Partnership shall
promptly file an amendment to the Partnership's certificate of limited
partnership and otherwise take all steps reasonably necessary under
the Partnership Act to cause such cessation of liability.
9.3.3 Upon the General Partner ceasing to be the General
Partner of the Partnership as provided in this Agreement (unless
William R. James or a corporation 100% of the voting stock of which is
owned by him becomes sole General Partner), the General Partner and
its Affiliates shall resign from all directorships, officerships and
engagements held by them in any Person in which the Partnership then
holds Ownership Interests; provided that neither the General Partner
nor any of its Affiliates shall be entitled to compensation solely for
the act of its resignation from any such position in any such Person.
9.3.4 If the Partnership shall not be continued in
accordance with subparagraph 9.3.1, it shall be dissolved, wound up
and terminated in accordance with paragraphs 9.1 and 9.2.
9.3.5 No General Partner shall be admitted to the
Partnership pursuant to this paragraph 9.3 unless an opinion of
responsible counsel (who may be counsel for the Partnership) is
delivered to the Partnership stating that admission of such General
Partner will not cause the Partnership to lose its status as a
Partnership for federal income tax purposes.
9.3.6 Upon the General Partner ceasing to be the General
Partner of the Partnership as provided in this Agreement, the General Partner's
Interest in the Partnership shall automatically be converted to an additional
Interest as a Limited Partner of the Partnership, with a percentage Interest in
the Partnership so converted equal to the Percentage Interest it held as the
General Partner on the date on which the General Partner ceased being the
General Partner, provided, however, this Section 9.3.6 shall not apply if the
General Partner ceases to be
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the General Partner of the Partnership and the provisions of Section 7.5 apply.
ARTICLE TEN
Amendments
10.1 Adoption of Amendments; Limitations Thereon.
10.1.1 Except as provided in subparagraphs 3.3.1 (with
respect only to any New Limited Partner who is deemed to have provided
its Consent in the circumstances stated in subparagraph 3.3.1),
8.3.1(ii) and 10.1.2 and paragraph 5.2, this Agreement is subject to
amendment only with the written Consent of the General Partner and 51%
in Partnership Interests of Limited Partners, or 66-2/3% in
Partnership Interests of Limited Partners without the Consent of the
General Partner; provided, however, that no amendment to this
Agreement may:
(i) add to, detract from or otherwise
modify the purposes of the Partnership without the Consent of
all of the Partners;
(ii) require any Partner to make any loan
or capital contribution or infusion to the Partnership;
convert a Limited Partner's Interest into a General Partner's
Interest; modify the limited liability of a Limited Partner;
or increase the liabilities or responsibilities of any Partner
under this Agreement; in each case, without the Consent of
each such affected Partner; and provided, further, that no
amendment to provide for any capital infusion of any Partner
may be adopted unless all of the Partners are offered the
opportunity to make capital infusion on a pro rata basis in
accordance with subparagraph 3.3.2;
(iii) alter the Interest of any Partner in
income, gains and losses or amend or modify any portion of
Article Four without the Consent of 96% in Partnership
Interests; provided, however, that (i) any such alteration,
amendment or modification shall affect each Partner on a pro
rata basis (determined based on the Percentage Interests at
the time of such alteration, amendment or modification) and
(ii) the admission of additional Limited Partners in
accordance with the terms of this Agreement shall not
constitute such an alteration, amendment or modification;
(iv) amend or modify any portion of
Article Eight in a manner that would further restrict the
transferability of a Limited Partner's Interest without the
Consent of all of the Limited Partners;
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(v) amend any provisions hereof which
require the Consent, action or approval of a specified
percentage in Partnership Interests of the Limited Partners
without the Consent of such specified percentage in Interest
of the Limited Partners;
(vi) amend paragraphs 9.1, 9.3 or except
as provided in Section 10.1.1(v), amend this subparagraph
10.1.1 without the Consent of 66-2/3% in Partnership Interests
of the Limited Partners;
(vii) amend the provisions of paragraphs
5.1.1, 5.1.2, 5.3, 5.4, 5.5, 5.6, 7.1, 7.2, 7.3, 7.4, 7.5 or
7.6 without the Consent of 66-2/3% in Partnership Interests of
Limited Partners;
(viii) extend the term of the Partnership
without the Consent of 66-2/3% in Partnership Interests of
Limited Partners and the General Partner; or
(ix) expand the Limited Partners' rights
or powers beyond the applicable standards of the FCC for
exempting a Limited Partner's investment in the Partnership
from attribution under 47 U.S.C. 553A (1987) and 47 C.F.R.
Section Section 76.501 or any successor provisions thereof.
10.1.2 In addition to any amendments otherwise authorized
hereby, this Agreement may be amended from time to time by the General
Partner without the Consent of any of the Limited Partners (i) to add
to the representations, duties or obligations of the General Partner
or surrender any right or power granted to the General Partner herein;
(ii) to cure any ambiguity or correct or supplement any provisions
hereof which may be inconsistent with any other provision hereof, or
correct any printing, stenographic or clerical errors or omissions;
(iii) to admit one or more Substituted Limited Partners substituted
therefor and withdraw one or more Limited Partners, in accordance with
the terms of this Agreement; (iv) to amend Schedule A hereto to
provide any necessary information regarding any Partner, any successor
General Partner or any Substituted Limited Partner; (v) as provided in
subparagraph 8.3.1(ii); and (vi) to reflect any change in the amount
of the Capital Accounts of any Partner in accordance with the terms of
this Agreement; provided, however, that no amendment shall be adopted
pursuant to this subparagraph 10.1.2 unless (a) in the case of any
amendment referred to in clause (i) or (ii) of this paragraph, such
amendment would not alter the Interest of a Partner in income, gains
or losses or distributions and such amendment is for the benefit of,
or not adverse to, the Interests of the Limited Partners, and (b) such
amendment would not, in the opinion of counsel for the Partnership,
alter, or result in the alteration of, the limited liability of the
Limited Partners or the status of the Partnership as a partnership for
federal income tax purposes.
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The General Partner shall send each Limited Partner a copy of any
amendment adopted pursuant to this subparagraph 10.1.2.
10.1.3 Upon the adoption of any amendment to this Agreement,
the amendment shall be executed by the General Partner and all of the
Limited Partners and, if required by law, shall be recorded in the
proper records of the State of Delaware and of each jurisdiction in
which recordation is necessary for the Partnership to conduct business
or to preserve the limited liability of the Limited Partners. Any
such amendment may be executed by the General Partner on behalf of the
Limited Partners pursuant to the power of attorney granted in
paragraph 12.1.
10.2 Amendment of Certificate. In the event this Agreement shall
be amended pursuant to this Article Ten, the General Partner shall amend the
certificate of limited partnership of the Partnership to reflect such change if
such amendment is required by law or if the General Partner deems such
amendment to be desirable and shall make any other filings or publications
required by law or desirable to reflect such amendment, including any required
filing for recordation of any certificate of limited partnership or other
instrument or similar document of the type contemplated by paragraph 2.6.
ARTICLE ELEVEN
Consents, Voting and Meetings
11.1 Method of Giving Consent. Any Consent of a Partner may be
given as follows:
(i) by a written Consent given by such Partner at
or prior to the doing of the act or thing for which the Consent is
solicited, provided that such Consent shall not have been nullified by
either notice to the General Partner by such Partner at or prior to
the time of, or the negative vote by such Partner at, any meeting held
to consider the doing of such act or thing; or
(ii) by the affirmative vote by such Partner to
the doing of the act or thing for which the Consent is solicited at
any meeting called and held to consider the doing of such act or
thing.
11.2 Meetings
11.2.1 (a) An annual meeting of Limited Partners for the
review of Partnership matters and the transaction of such business as
may properly come before it shall be held at such location in New York
City or other location reasonably accessible to all the Limited
Partners as shall be designated from time to time by the General
Partner and set forth in the notice of meeting. The meeting shall be
held on the second
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Tuesday of May of each and every year through and including the last
year of the term of the Partnership, at 10:00 o'clock a.m. New York
City time or such other reasonable time as shall be designated in such
notice. Written notice of the place, date and time of the meeting
shall be given, either personally or by mail, to all Limited Partners
not less than 10 nor more than 60 days before the date of the annual
meeting. If mailed, the notice shall be addressed to each such
Limited Partner at the address shown for such Partner in the records
of the Partnership. The attendance by any Partner at an annual
meeting in person or by proxy without objecting at the beginning of
the meeting to the lack of notice of such meeting shall constitute a
waiver of notice by such Partner.
(b) Special meetings of Limited Partners may be called at
any time by the General Partner or any two Limited Partners for any
purpose, including the consideration of a matter for which a Consent
is being solicited or sought. Written notice of a special meeting
stating the place in New York City, the date and hour of the meeting,
the purpose or purposes for which it is called, and the names of the
Partners by whom or at whose direction the meeting is called, shall be
given, to each Limited Partner in the same manner as notice of the
annual meeting. The attendance by any Partner at a special meeting in
person or by proxy meeting objecting at the beginning of the meeting
to the lack of notice of such meeting shall constitute a waiver of
notice by such Partner.
(c) Limited Partners may participate in a meeting by
means of conference telephone or similar communications equipment by
means of which all members can hear each other, and participation in a
meeting by such means shall be deemed to constitute presence in person
at a meeting.
11.3 Record Dates. The General Partner may set in advance a date
for determining the Limited Partners entitled to notice of and to vote at any
meeting. All record dates shall not be more than 60 days before the date of
the meeting to which such record date relates.
11.4 Notices to Limited Partners: Designees; No Special
Inducements. The General Partner shall give all of the Limited Partners
notice, in a notice of meeting or otherwise, of any proposal or other matter
required by any provision of this Agreement or by law to be submitted for the
consideration and approval of the Limited Partners. Such notice shall include
any information required by the relevant provision of this Agreement or by law.
Neither the General Partner nor the Partnership shall solicit, request or
negotiate for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement or the Partnership's certificate of limited
partnership or any Consent by the Limited Partners unless each Limited Partner
shall be informed thereof by the General Partner or the Partnership, as the
case may be, and shall be afforded the opportunity of considering the same and
shall be supplied with sufficient information to
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enable it to make an informed decision with respect thereto, provided, however,
that upon obtaining the requisite Consents to take a particular action, the
General Partner may take such action before polling the remaining Limited
Partners provided that such remaining Limited Partners are promptly advised by
the General Partner of such action taken and of the identity of the Limited
Partners who have Consented thereto. Each Limited Partner shall designate an
individual or individuals to receive notices, attend meetings, give consents
and otherwise act on its behalf in matters regarding this Agreement and the
Partnership. Such individual or individuals so designated by a Limited Partner
may be removed at any time by the Limited Partner upon notice to the General
Partner. Neither the General Partner nor the Partnership shall, directly or
indirectly, pay or cause to be paid any renumeration, fee or other
consideration to any Limited Partner for or as an inducement to the entering
into by such Limited Partner of any waiver or amendment of any of the terms and
provisions of this Agreement or the Partnership's certificate of limited
partnership or the giving of any Consent, unless such renumeration is
concurrently paid on the same terms, in proportion to their respective Capital
Accounts to all the then Limited Partners.
ARTICLE TWELVE
Power of Attorney
12.1 Power of Attorney.
12.1.1 Each Limited Partner, by its execution hereof, hereby
irrevocably makes, constitutes and appoints the General Partner and
William R. James as its true and lawful agents and attorneys-in-fact,
with full power of substitution and full power and authority in its
name, place and stead, to make, execute, sign, acknowledge, swear to,
record and file (i) any amendment to this Agreement which has been
adopted as herein provided; (ii) the original certificate of limited
partnership of the Partnership and all amendments thereto required or
permitted by law or the provisions of this Agreement; (iii) all
certificates and other instruments deemed advisable by the General
Partner to carry out the provisions of this Agreement and applicable
law or to permit the Partnership to become or to continue as a limited
partnership or partnership wherein the Limited Partners have limited
liability in each jurisdiction where the Partnership may be doing
business; (iv) all instruments that the General Partner deems
appropriate to reflect a change or modification of this Agreement or
the Partnership in accordance with this Agreement including, without
limitation, the admission of additional Limited Partners or the
substitution of assignees as Substituted Limited Partners pursuant to
the provisions of this Agreement; (v) all conveyances and other
instruments or papers deemed advisable by the General Partner,
including, without limitation, those to effect the dissolution and
termination of the Partnership in accordance with the
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provisions of this Agreement; (vi) all fictitious or assumed name
certificates required or permitted to be filed on behalf of the
Partnership; and (vii) all other instruments or papers which may be
required or permitted by law to be filed on behalf of the Partnership
that are not inconsistent with the terms of this Agreement; provided,
however, that the foregoing power of attorney shall not give the
General Partner the right to do anything that diminishes the powers or
increases the liabilities of the Limited Partners.
12.1.2 The foregoing power of attorney:
(a) is coupled with an interest, shall be
irrevocable and shall survive and not be affected by the
subsequent disability or the Incapacity of each Limited
Partner;
(b) may be exercised by the General Partner or
William R. James either by signing separately as
attorney-in-fact for each Limited Partner or, after listing
all of the Limited Partners executing an instrument, by a
single signature of the General Partner or William R. James
acting as attorney-in-fact for all of them; and
(c) shall survive the delivery of an assignment
by a Limited Partner of the whole or any fraction of its
Interest; except that, where the assignee of the whole of such
Limited Partner's Interest has been approved by the General
Partner for admission to the Partnership as a Substituted
Limited Partner, the power of attorney of the assignor shall
survive the delivery of such assignment for the sole purpose
of enabling the General Partner or William R. James to
execute, swear to, acknowledge and file any instrument
necessary or appropriate to effect such substitution.
12.1.3 Each Limited Partner shall execute and deliver to the
General Partner within 15 days after receipt of the General Partner's
request therefor such further designations, powers-of-attorney and
other instruments as the General Partner reasonably deems necessary to
carry out the terms of this Agreement, provided that they are not
inconsistent with the terms of this Agreement and that the foregoing
shall not given the General Partner the right to do anything that
diminishes the powers or increases the liabilities of the Limited
Partners.
ARTICLE THIRTEEN
Records and Accounting; Reports; Fiscal Affairs
13.1 Records and Accounting.
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13.1 Proper and complete records and books of account of
the business of the Partnership, including a list of the names,
addresses and Interests of all Limited Partners, shall be maintained
at the Partnership's principal place of business. Any Partner, or its
duly authorized representatives, shall be entitled to a copy of the
list of names, addresses and Interests of the Limited Partners,
provided such information shall be used only for Partnership purposes.
Each Limited Partner and its duly authorized representatives may, in
connection with any purpose reasonably related to its Interest as a
Limited Partner, visit and inspect any of the properties of the
Partnership or the General Partner, examine their books of account,
records, reports and other papers (to the extent the same pertain to
the Partnership) which are not legally required to be kept
confidential or secret, make copies and extracts therefrom, and
request information relating to the affairs, finances and accounts of
the Partnership from the General Partner and the independent public
accountants of the Partnership (and by this provision the Partnership
authorizes said accountants to provide information to each Limited
Partner regarding the finances and affairs of the Partnership), all at
such reasonable times and as often as may be reasonably requested;
provided, however, that the Limited Partners shall not have the
authority to direct or control such independent public accountants.
The General Partner shall use its best efforts to cause each Person in
which the Partnership then holds Ownership Interests to afford similar
rights to information to any Limited Partner (and its duly authorized
representatives) which may request to exercise such rights, provided,
however, that the Limited Partners shall not have the authority to
direct or control such Persons.
13.1.2 The books and records of the Partnership shall be
kept on the accrual basis of accounting, and the accrual basis of
accounting shall be followed by the Partnership for federal income tax
purposes. The taxable year of the Partnership shall be its Fiscal
Year.
13.2 Annual Reports.
13.2.1 Within 90 days after the end of each Fiscal Year, the
General Partner shall cause to be delivered to each Person who was a
Partner at any time during the Fiscal Year, an annual report
containing the following:
(i) financial statements of the
Partnership, including, without limitation, a balance sheet as
of the end of the Fiscal Year and statements of income,
Partners' equity and changes in financial position for such
Fiscal Year, which shall be prepared in accordance with
generally accepted accounting principles consistently applied
and shall be certified by a firm of independent certified
public accountants of recognized national standing;
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(ii) a statement, in reasonable detail,
showing the Capital Account of each Partner and computing the
distributions to each Partner during such Fiscal Year;
(iii) a report containing a description of
material events regarding the business of the Partnership
(including material developments in the investments made by
the Partnership) during such Fiscal Year, a general
description of the business, and an overview of the investment
activities, of the Partnership during such Fiscal Year,
including valuations of Ownership Interests, and, with respect
to the fourth quarter of such Fiscal Year, the description
required by subparagraph 13.4(a)(ii);
(iv) a calculation of the Management Fee
for such Fiscal Year;
(v) a statement of the amount of
reimbursement for operating expenses incurred during such
Fiscal Year under paragraph 5.6.1(vii) and documentation of
the calculation of the average aggregate number of subscribers
during such Fiscal Year made in connection therewith; and
(vi) a statement, accompanied by a
certificate of the General Partner, as to the Fair Market
Value of the Partnership's Ownership Interests as of the end
of such Fiscal Year;
and shall also so deliver, with respect to each Person in which the
Partnership then holds Ownership Interests, copies of a balance sheet
as of the end of such Person's fiscal year and statements of income,
retained earnings and sources of funds for such fiscal year, all
accompanied by a report thereon of the Partnership's independent
public accountants.
13.2.2 The assets of the Partnership, to the extent they are
in the form of securities (including Ownership Interests), shall be
valued in accordance with the provisions of paragraph 6.2. All other
assets of the Partnership shall be valued at their "Fair Market
Value," except that for all purposes of this Agreement, no value shall
ever be attributed to the firm name of the Partnership, or the right
of its use, or to the good will appertaining to the Partnership or its
business, either during the continuation of the Partnership or in the
event of its dissolution and termination. Liabilities shall be
determined in accordance with the method of accounting employed by the
Partnership and may include reserves for estimated accrued expenses
and reserves for unknown or unfixed liabilities or contingencies.
13.3 Tax Information. Within 75 days after the end of each Fiscal
Year, the General Partner will cause to be delivered to each Person who was a
Partner at any time during such Fiscal Year, a
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Form K-l and such other information, if any, with respect to the Partnership as
may be necessary for the preparation of such Partner's federal or state income
tax (or information) returns, including a statement showing each Partner's
share of income, gain or loss and credits for such Fiscal Year for federal or
state income tax purposes.
13.4 Interim Reports. (a) Within 45 days after the end of each
quarter of each Fiscal Year excepting the fourth quarter, the General Partner
shall cause to be delivered to each Person who was a Partner at any time during
such quarter, a report containing (i) an overview of the Partnership's
portfolio, including a summary of all Cable Systems in which investments were
made by the Partnership during such quarter; (ii) a description of such
investment and the terms thereof; (iii) a description of any material event
regarding the business of the Partnership (including material developments in
the investments made by the Partnership) during such quarter; and (iv) an
unaudited balance sheet and statement of income for such quarter.
(b) 10 days after the consummation of the acquisition of any
Ownership Interests, the General Partner shall cause to be delivered to each
Person who was a partner at the time of such acquisition a report summarizing
the Cable System(s) in which such investments were made and the material terms
of such investments.
13.5 Partnership Funds. The funds of the Partnership may be
deposited in the name of the Partnership in one or more bank accounts in one or
more member banks of the Federal Reserve System with an unrestricted surplus of
at least $250,000,000, provided, however, that Partnership funds may be
deposited in any bank insured by the Federal Deposit Insurance Corporation for
a period not to exceed 30 days and, provided that at no time shall the amount
of the deposit in any account exceed the Federal Deposit Insurance
Corporation's coverage limitation in respect of such account. Withdrawals
therefrom shall be made upon such signature(s) as the General Partner may
designate. No funds of the Partnership shall be kept in any account other than
a Partnership account; funds shall not be commingled with the funds of any
other Person; and the General Partner shall not employ, or permit any other
Person to employ, such funds in any manner except for the benefit of the
Partnership. The General Partner will appoint a member bank or banks of the
Federal Reserve System having an unrestricted surplus of at least $250,000,000
to serve as custodian or custodians of all securities held by the Partnership
and may from time to time and in its sole discretion, change such appointment
to a different member bank or banks.
13.6 Elections. The determinations of the General Partner with
respect to the treatment of any item or its allocation for federal, state or
local tax purposes shall be binding upon all of the Partners so long as such
determination shall not be inconsistent with any express term hereof and
provided that the Partnership's accountants shall not disagree therewith.
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13.7 Other Information. With reasonable promptness, the General
Partner will deliver such other information available to the General Partner,
including financial statements and computations relating to any Person in which
the Partnership then holds Ownership Interests, as any Limited Partner may from
time to time reasonably request.
ARTICLE FOURTEEN
Representations Warranties and Covenants of the Partners
14.1 Representations Warranties and Covenants of the Limited
Partners. Each Limited Partner is fully aware that the Partnership and the
General Partner are relying upon the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
and upon the truth and accuracy of the following representations by each of the
Limited Partners: Each of the Limited Partners hereby represents and warrants
that (i) its Interest in the Partnership was being acquired for investment and
not with a view to the distribution or sale thereof, subject, however, to any
requirement of law that the disposition of its property shall at all times be
within its control; and (ii) unless an asterisk appears next to its name on the
signature page hereto, no portion of the assets invested by it in the
Partnership may consist of assets of an employee benefit plan as defined in
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (whether or not such plan is subject to Title I of ERISA) or
described in section 4975(e)(1) of the Internal Revenue Code, nor is it an
entity whose underlying assets may include plan assets by reason of a plan's
investment in the entity, determined after giving effect to the regulation
issued by the Department of Labor at section 2510.3-101 of Part 2510 of Chapter
XXV, Title 29 of the Code of Federal Regulations.
14.2 Representations, Warranties and Certain Covenants of the
General Partner. The General Partner represents, warrants and covenants to
each Limited Partner that:
(a) Upon the filing of the Partnership's certificate of
limited partnership with the Secretary of State of Delaware, the
Partnership will be a duly organized and validly existing limited
partnership under the laws of the State of Delaware with full power
and authority to conduct its business as contemplated-in this
Agreement.
(b) The General Partner is a duly organized and validly
existing partnership under the laws of the State of Michigan, with
full power and authority to perform its obligations herein.
(c) All action required to be taken by the General
Partner and the Partnership as a condition to the issuance and sale of
the Interests in the Partnership being purchased by
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the Limited Partners has been taken, the Interest in the Partnership
of each Limited Partner represents a duly and validly issued limited
partnership interest in the Partnership; and each Limited Partner of
the Partnership is entitled to all the benefits of a Limited Partner
under this Agreement and the Partnership Act.
(d) This Agreement has been duly authorized, executed and
delivered by the General Partner and, upon due acceptance by each of
the Limited Partners, will constitute the valid and legally binding
agreement of the General Partner enforceable in accordance with its
terms against the General Partner.
(e) The execution and delivery of this Agreement by the
General Partner and the performance of its duties and obligations
hereunder do not result in a breach of any of the terms, conditions or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, credit agreement, note or other evidence of
indebtedness, or any lease or other agreement or understanding, or any
license, permit, franchise or certificate, to which the General
Partner is a party or by which it is bound or to which its properties
are subject, or require any authorization or approval under or
pursuant to any of the foregoing, or violate any statute, regulation,
law, order, writ, injunction, judgment or decree to which the General
Partner is subject.
(f) The General Partner is not in default (nor has any
event occurred which with notice, lapse of time, or both, would
constitute a default) in the performance of any obligation, agreement
or condition contained in this Agreement, any indenture, mortgage,
deed of trust, credit agreement, note or other evidence of
indebtedness or any lease or other agreement or understanding, or any
license, permit, franchise or certificate, to which it is a party or
by which it is bound or which its properties are subject, nor is it in
violation of any statute, regulation, law, order, writ, injunction,
judgment or decree to which it is subject, which default or violation
would materially adversely affect the business or financial condition
of the General Partner or the Partnership or impair its ability to
carry out its obligations under this Agreement.
(g) There is no litigation, investigation or other
proceeding pending or, to the knowledge of the General Partner,
threatened against the General Partner or any of its Affiliates which,
if adversely determined, would materially adversely affect the
business or financial condition of the General Partner.
(h) No consent, approval or authorization of, or filing,
registration or qualification with, any court or governmental
authority on the part of the General Partner or the Partnership
(collectively, "Consents") is required for the execution and delivery
of this Agreement by the General
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Partner, the performance of its or the Partnership's obligations and
duties hereunder, or the issuance of Interests in the Partnership as
contemplated hereby, except (i) the approval of the Bankruptcy Court
in the Partnership's Chapter 11 bankruptcy proceeding; (ii) any
Consents which may be required of the Partnership solely by virtue of
the nature of any Limited Partner; and (iii) certain filings required
under federal and state securities laws, which filings will be timely
made after the date hereof.
(i) The initial general partners of the General Partner
were one Michigan Subchapter S corporation, Jamesco, Inc. (100% of the
voting stock of which is owned by William R. James) and two
individuals, Jim Randolph and C. Timothy Trenary. The present general
partners of the General Partner are Jamesco, Inc. and two individuals,
C. Timothy Trenary and Daniel K. Shoemaker. Neither the General
Partner, the present general partners nor William R. James are in a
condition of Incapacity. The General Partner will promptly give the
Limited Partners notice of any change in the general partners of the
General Partner or any changes in stock ownership thereof, or the
material terms of the general partnership agreement. William R. James
(or his personal representative should he die or suffer Disability of
such nature that he cannot or does not notify the Partnership) will
promptly, and in no event later than 3 days thereafter, give the
Limited Partners notice if he ceases to have Control of the General
Partner. Except as previously disclosed to the Limited Partners in
writing, none of the General Partner, its present general partners, or
Messrs. James, Trenary or Shoemaker or any Affiliates thereof are
subject to any covenants not to compete or similar agreements relating
to Cable Systems. Each of the Partnership, the General Partner and
its Affiliates shall use its best efforts not to cause the Partnership
to violate the provisions of 47 U.S.C. 533 (1987 ) and 47 C.F.R.
Section Section 63.54-63.58 of the FCC regulations or any successor
provisions thereof, and to conduct the business of the Partnership in
accordance with all other federal, state and local laws and
regulations applicable to the cable industry. The General Partner
agrees to cause each holder of a general partnership interest in the
General Partner to disclose to the Partnership Advisory Board any
change in ownership thereof and, in the case of a holder that is a
corporation or other entity, to disclose any changes in the share or
other equity ownership of such entity, in all cases substantially
contemporaneously with entering into a binding agreement to transfer
such ownership. Each of the Limited Partners has been supplied a
true, complete and accurate copy of the General Partnership Agreement
of the General Partner, and upon the request of any Limited Partner,
each Limited Partner shall receive a true, complete and accurate copy
of any amendment thereto. Such copies shall also be provided
substantially contemporaneously upon effectiveness thereof to all
members of the Partnership Advisory Board.
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(j) At all time either or both of the following
statements is or will be true with respect to the Partnership: (x) the
Partnership is an "operating company" or a "venture capital operating
company", as such terms are defined in section 2510.3-101 (c) or (d),
respectively, of Part 2510 of Chapter XXV, Title 29 of the Code of
Federal Regulations; or (y) the equity participation in the
Partnership by "benefit plan investors" is not "significant" as such
terms are defined in section 2510.3-101(f)(2) and section 2510.3-
101(f)(1), respectively, of such regulations.
ARTICLE FIFTEEN
Miscellaneous
15.1 Notices.
15.1.1 Any Notice to any Limited Partner shall be at the
address of such Partner set forth in Schedule A hereto or Schedule B
hereto, as the case may be, or such other mailing address of which
such Limited Partner shall advise the General Partner in writing. Any
notice to the Partnership or the General Partner shall be at the
principal office of the Partnership as set forth in paragraph 2.3.
The General Partner may at any time change the location of such
office. Notice of any such change shall be given to the Partners on
or before the date of any such change.
15.1.2 Any notice shall be deemed to have been duly given if
personally delivered or sent by United States mails as described below
or by telegram or telex confirmed by letter and will be deemed
received, unless earlier received, (i) if sent by certified or
registered mail, return receipt requested, when actually received,
(ii) if sent by United States Express Mail or overnight courier, when
actually received, (iii) if sent by telegram or telex or facsimile
transmission, on the date sent provided confirmatory notice is sent by
United States Express Mail or overnight courier, and (iv) if delivered
by hand, on the date of the receipt.
15.1.3 In any circumstance where notice, information or
reports are required under the terms of this Agreement to be sent to
the Limited Partners, such notice, information or reports shall, at
the same time, be given to Sandler as though Sandler were a Limited
Partner.
15.2 Governing Law: Separability of Provisions. It is the
intention of the parties that the internal laws of the State of Delaware and,
in particular, the provisions of the Partnership Act shall govern the validity
of this Agreement, the construction of its terms and interpretation of the
rights and duties of the parties. If any provision of this Agreement shall be
held to be invalid, the remainder of this Agreement shall not be affected
thereby.
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<PAGE> 59
15.3 Entire Agreement. Subject to the provisions of the Plan of
Reorganization, this Agreement constitutes the entire agreement among the
parties; it supersedes any prior agreement or understandings among them, oral
or written, all of which are hereby cancelled. There are no representations,
agreement, arrangements or understandings, oral or written, between or among
the Partners relating only to the subject matter of this Agreement which are
not fully expressed herein. This Agreement may not be modified or amended
other than pursuant to Article Ten.
15.4 Headings etc. The headings in this Agreement are inserted for
convenience of reference only and shall not affect the interpretation of this
Agreement. Wherever from the context it appears appropriate, each term stated
in either the singular or the plural shall include the singular and the plural,
and pronouns stated in either the masculine or the neuter gender shall include
the masculine, the feminine and the neuter.
15.5 Binding Provisions. The covenants and agreements contained
herein shall be binding upon and inure to the benefit of the heirs, executors,
administrators, personal or legal representatives, successors and assigns of
the respective parties hereto.
15.6 No Waiver; Creditor's Rights. The failure of any Partner to
seek redress for violation, or to insist on strict performance, of any covenant
or condition of this Agreement shall not prevent a subsequent act which would
have constituted a violation from having the effect of an original violation.
To the extent amounts shall be owing to a Partner and not paid pursuant to the
terms of this Agreement or any other instrument to which any entity in which
the Partnership has an Ownership Interest is a party, such Partner shall not be
precluded by virtue of its status as a Partner from bringing an action or
otherwise seeking to enforce any remedies that it may have at law or in equity
against the Partnership or the General Partner or such other entity and shall
not be liable for any loss resulting from such actions to the Partnership or
any Partners.
15.7 Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, Consents, waivers, amendments
and modifications which may hereafter be executed, and certificates and other
information previously or hereafter furnished to any Limited Partner, may be
reproduced by it by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process, and any Limited Partner may
destroy any original document so reproduced. The Partnership, the General
Partner and each Limited Partner agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by a Limited Partner in the regular
course of business) and that any enlargement, facsimile or further reproduction
of such reproduction shall likewise be admissible in evidence.
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<PAGE> 60
15.8 No Right to Partition. The Partners, on behalf of themselves
and their shareholders, partners, heirs, executors, administrators, personal or
legal representatives, successors and assigns, if any, hereby specifically
renounce, waive and forfeit all rights, whether arising under contract or
statute or by operation of law, to seek, bring or maintain any action in any
court of law or equity for partition of the Partnership or any asset of the
Partnership, or any interest which is considered to be Partnership property,
regardless of them manner in which is considered to be Partnership property,
regardless of the manner in which title to any such property may be held.
15.9 ERISA Undertakings. If the assets of the Partnership at any
time are "plan assets" for the purposes of Title I of ERISA or Section 4975 of
the Internal Revenue Code with respect to any employee benefit plan subject to
either such provision: (i) each Limited Partner which is, directly or
indirectly, such a plan or the fiduciary of such plan shall, at the request of
the General Partner, identify to the General Partner the parties in interest
and is a disqualified persons (as defined in sections 3 of ERISA and 4975 of
the Internal Revenue Code, respectively) with respect to any such plan whose
identity or character is such that such Limited Partner might reasonably
expect, based solely on such person's relationship to the plan or fiduciary,
the Partnership to have non-exempt dealings with such person; and (ii) the
General Partner shall take any action that may be necessary to assure that the
operations of the Partnership will not involve a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Internal Revenue Code with respect
to any such plan or any fiduciary thereof.
15.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument, provided that each such counterpart
shall be executed by the General Partner.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as
of the 30th day of June, 1995.
By: JAMES COMMUNICATIONS PARTNERS,
General Partner of James
Cable Partners, L.P. and a
Michigan general partnership
By: JAMESCO, INC., a general partner
of James Communications Partners
and a Michigan corporation
By: /s/ William R. James
---------------------------------
William R. James
President of Jamesco, Inc.
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<PAGE> 1
EXHIBIT 3.2
FILED
JAN 12 1988
CERTIFICATE OF LIMITED PARTNERSHIP
OF
JAMES CABLE PARTNERS, L.P.
This Certificate of Limited Partnership of James Cable Partners, L.P.
(the "Partnership"), dated as of January 12, 1988, is being duly executed and
filed by James Communications Partners, a Michigan partnership, as general
partner, to form a limited partnership under Delaware Revised Uniform Limited
Partnership Act (6 Del.C. Section 17-101, et seq.).
1. Name. The name of the limited partnership formed hereby is
James Cable Partners, L.P.
2. Registered Office. The address of the registered office of
the Partnership in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
3. Registered Agent. The name and address of the registered
agent for service of process on the Partnership in the State of Delaware is The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
4. General Partner. The name and the business address of
the sole general partner of the Partnership is James Communications Partners,
710 N. Woodward Ave., Bloomfield Hills, Michigan 48013.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Limited Partnership as of the date first above-written.
JAMES CABLE PARTNERSHIP, L.P.
JAMES COMMUNICATIONS PARTNERS,
General Partner of James Cable
Partners, L.P. and a Michigan
general partnership
By: C. Timothy Trenary
----------------------------------
C. Timothy Trenary, a General
Partner of James Communications
Partners
-2-
<PAGE> 1
EXHIBIT 3.3
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES -
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
- --------------------------------------------------------------------------------
Date Received
FILED JUNE 19, 1997
- --------------------------------------------------------------------------------
CORPORATION IDENTIFICATION NUMBER: 474-042
- --------------------------------------------------------------------------------
ARTICLES OF INCORPORATION
OF
JAMES CABLE FINANCE CORP.
- --------------------------------------------------------------------------------
These Articles of Incorporation are signed by the incorporator for the
purpose of forming a profit corporation pursuant to the provisions of
Act 284, Public Acts of 1972, as amended, as follows:
ARTICLE I The name of the corporation is James Cable Finance Corp.
ARTICLE II The purpose or purposes for which the corporation is formed is
to engage in any activity within the purposes for which
corporations may be formed under the Business Corporation Act
of Michigan (the "Act").
ARTICLE III The total authorized shares is 60,000 shares of common stock.
ARTICLE IV The corporation has only one class of stock.
ARTICLE V The address and mailing address of the registered office is:
Street Address: 1400 North Woodward, Suite 100
Bloomfield Hills, Michigan 48304
Mailing Address: 1400 North Woodward, Suite 100
Bloomfield Hills, Michigan 48304
The name of the resident agent at the registered office is
J. Kevin Trimmer.
<PAGE> 2
ARTICLE VI The name and address of the incorporator are as follows:
Name Residence or Business Address
---- -----------------------------
J. Kevin Trimmer 1400 N. Woodward
Suite 100
Bloomfield Hills, Michigan 48304
ARTICLE VII The duration of the corporation is perpetual.
ARTICLE VIII A director of the corporation shall not be personally liable to
the corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director. However, this
provision does not eliminate or limit the liability of a
director for any of the following:
(a) any breach of the director's duty of loyalty to the
corporation or its shareholders;
(b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(c) a violation of Section 551(1) of the Act;
(d) a transaction from which the director derived an improper
personal benefit; or
(e) an act or omission occurring prior to the date when this
article becomes effective.
Any repeal, amendment or other modification of this
Article shall not increase the liability or alleged liability
of any director of the corporation then existing with respect
to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of
facts. If the Act is subsequently amended to authorize
corporate action further eliminating or limiting personal
liability of directors, then the liability of directors shall
be eliminated or limited to the fullest extent permitted by the
Act as so amended.
ARTICLE IX Any action required or permitted by the Act, these Articles or
the Bylaws of the corporation to be taken at an annual or
special meeting of shareholders may be taken without a meeting,
without prior notice and without a vote, if consents in
writing, setting forth the action so taken, are signed by the
holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take
the action at a meeting at which all shares entitled to vote on
the action were present and voted. The
<PAGE> 3
written consents shall bear the date of signature of
each shareholder who signs the consent. No written consents
shall be effective to take the corporate action referred to
unless, within 60 days after the record date for determining
shareholders entitled to express consent to or to dissent from
a proposal without a meeting, written consents dated not more
than 10 days before the record date and signed by a sufficient
number of shareholders to take the action are delivered to the
corporation. Delivery shall be to the corporation's registered
office, its principal place of business, or an officer or agent
of the corporation having custody of the minutes of the
proceedings of its shareholders. Delivery made to a
corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. Prompt
notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to
shareholders who would have been entitled to notice of the
shareholder meeting if the action had been taken at a meeting
and who have not consented in writing.
ARTICLE X When a compromise or arrangement or a plan of reorganization of
this corporation is proposed between this corporation
and its creditors or any class of them or between this
corporation and its shareholders or any class of them, a court
of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on
application of a receiver appointed for the corporation, may
order a meeting of the creditors or class of creditors or of
the shareholders or class of shareholders to be affected by the
proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in
number representing 3/4 in value of the creditors or class of
creditors, or of the shareholders or class of shareholders to
be affected by the proposed compromise or arrangement or a
reorganization, agree to a compromise or arrangement or a
reorganization of this corporation as a consequence of the
compromise or arrangement, the compromise or arrangement and
the reorganization, if sanctioned by the court to which the
application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or
class of shareholders and also on this corporation.
I, the sole incorporator, sign my name this 18th day of June, 1997.
/s/ J. Kevin Trimmer
------------------------------------
J. Kevin Trimmer
<PAGE> 4
DOCUMENT WILL BE RETURNED TO NAME AND MAILING ADDRESS
INDICATED IN THE BOX BELOW. Include name, street and number
(or P.O. Box), city, state and ZIP code.
J. Kevin Trimmer
Miller, Canfield, Paddock and Stone, P.L.C.
1400 N. Woodward, Suite 100
Bloomfield Hills, Michigan 48304
Name of person or organization remitting fees:
Miller, Canfield, Paddock and Stone, P.L.C.
Preparer's name and business telephone number:
J. Kevin Trimmer
(248) 645-5000
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
JAMES CABLE FINANCE CORP.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The initial registered office shall be in the
City of Bloomfield Hills, County of Oakland, State of Michigan.
SECTION 2. OTHER OFFICES. The corporation may also have offices at such
other places both in and outside the State of Michigan as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
SHAREHOLDERS
SECTION 1. PLACE OF MEETING. All meetings of the shareholders of the
corporation shall be held at the registered office or such other place, either
within or without the State of Michigan, as may be determined from time to time
by the board of directors.
SECTION 2. ANNUAL MEETING OF SHAREHOLDERS. The annual meeting of
shareholders for election of directors and for such other business as may
properly come before the meeting, commencing with the year 1998, shall be held
on the first Monday of May, if not a legal holiday, and if a legal holiday,
then on the next business day following, at 10:00 a.m., local time, or at such
other date and time as shall be determined from time to time by the board of
directors, unless such action is taken by written consent as provided in
Section 12 of this Article. If the annual meeting is not held on the date
designated therefor, the board shall cause the meeting to be held as soon
thereafter as convenient.
SECTION 3. ORDER OF BUSINESS AT ANNUAL MEETING. The order of business at
the annual meeting of the shareholders shall be as follows:
(a) Reading of notice and proof of mailing,
(b) Reports of Officers,
(c) Election of Directors,
(d) Transaction of other business mentioned in the notice,
(e) Adjournment,
provided that the presiding officer may vary the order of business at his or
her discretion.
<PAGE> 2
SECTION 4. NOTICE OF MEETING OF SHAREHOLDERS. Except as otherwise provided
in the Michigan Business Corporation Act (herein called the "Act"), written
notice of the time, place and purposes of a meeting of shareholders shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting, either personally or by mail, to each shareholder of record
entitled to vote at the meeting. If a meeting is adjourned to another time or
place, it is not necessary to give notice of the adjourned meeting if the time
and place to which the meeting is adjourned are announced at the meeting at
which the adjournment is taken and at the adjourned meeting only business is
transacted as might have been transacted at the original meeting. If after the
adjournment the board of directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder
of record on the new record date entitled to vote at the meeting.
SECTION 5. LIST OF SHAREHOLDERS ENTITLED TO VOTE. The officer or agent
having charge of the stock transfer books for shares of the corporation shall
make and certify a complete list of the shareholders entitled to vote at a
shareholders' meeting or any adjournment thereof. The list shall:
(a) Be arranged alphabetically within each class and series, with the
address of, and the number of shares held by, each shareholder.
(b) Be produced at the time and place of the meeting.
(c) Be subject to inspection by any shareholder during the whole time of
the meeting.
(d) Be prima facie evidence as to who are the shareholders entitled to
examine the list or to vote at the meeting.
SECTION 6. SPECIAL MEETING OF SHAREHOLDERS. A special meeting of
shareholders may be called at any time by the chief executive officer of the
corporation (see Article V, Section 4) or by a majority of the members of the
board of directors then in office, or by shareholders owning, in the aggregate,
not less than ten percent (10%) of all the shares entitled to vote at such
special meeting. The method by which such meeting may be called is as follows:
Upon receipt of a specification in writing setting forth the date and objects
of such proposed special meeting, signed by the chief executive officer, or by
a majority of the members of the board of directors then in office, or by
shareholders as above provided, the secretary of the corporation shall prepare,
sign and mail the notices requisite to such meeting.
SECTION 7. QUORUM OF SHAREHOLDERS. Unless a greater or lesser quorum is
provided in the articles of incorporation, in a bylaw adopted by the
shareholders or incorporators, or in the Act, shares entitled to cast a
majority of the votes at a meeting constitute a quorum at the meeting. The
shareholders present in person or by proxy at the meeting may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum. Whether or not a quorum is present,
the meeting may be adjourned by a vote of the shares present.
SECTION 8. VOTE OF SHAREHOLDERS. Each outstanding share is entitled to one
(1) vote on each matter submitted to a vote, unless otherwise provided in the
articles of incorporation. A vote may be cast either orally or in writing. If
an action, other than the election of directors, is to be taken by vote of the
shareholders, it shall be authorized by a
-2-
<PAGE> 3
majority of the votes cast by the holders of shares entitled to vote on the
action, unless a greater vote is required by the articles of incorporation or
the Act. Except as otherwise provided in the articles of incorporation,
directors shall be elected by a plurality of the votes cast at an election.
SECTION 9. RECORD DATE FOR DETERMINATION OF SHAREHOLDERS. For the purpose
of determining shareholders entitled to notice of and to vote at a meeting of
shareholders or an adjournment of a meeting, the board of directors may fix a
record date, which shall not precede the date on which the resolution fixing
the record date is adopted by the board. The date shall not be more than sixty
(60) nor less than ten (10) days before the date of the meeting. If a record
date is not fixed, the record date for determination of shareholders entitled
to notice of or to vote at a meeting of shareholders shall be the close of
business on the day next preceding the day on which notice is given, or if no
notice is given, the day next preceding the day on which the meeting is held.
When a determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders has been made as provided in this Section, the
determination applies to any adjournment of the meeting, unless the board of
directors fixes a new record date under this Section for the adjourned meeting.
For the purpose of determining shareholders entitled to express consent to or
to dissent from a proposal without a meeting, the board of directors may fix a
record date, which shall not precede the date on which the resolution fixing
the record date is adopted by the board and shall not be more than ten (10)
days after the board resolution. If a record date is not fixed and prior
action by the board of directors is required with respect to the corporate
action to be taken without a meeting, the record date shall be the close of
business on the day on which the resolution of the board is adopted. If a
record date is not fixed and prior action by the board of directors is not
required, the record date shall be the first date on which a signed written
consent is delivered to the corporation as provided in Section 12 of this
Article. For the purpose of determining shareholders entitled to receive
payment of a share dividend or distribution, or allotment of a right, or for
the purpose of any other action, the board of directors may fix a record date,
which shall not precede the date on which the resolution fixing the record date
is adopted by the board. The date shall not be more than sixty (60) days
before the payment of the share dividend or distribution or allotment of a
right or other action. If a record date is not fixed, the record date shall be
the close of business on the day on which the resolution of the board of
directors relating to the corporate action is adopted.
SECTION 10. PROXIES. A shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
one or more other persons to act for him or her by proxy. A proxy shall be
signed by the shareholder or his or her authorized agent or representative. A
proxy is not valid after the expiration of three (3) years from its date unless
otherwise provided in the proxy.
SECTION 11. INSPECTORS OF ELECTION. The board of directors, in advance of a
shareholders' meeting, may appoint one (1) or more inspectors of election to
act at the meeting or any adjournment thereof. If inspectors are not so
appointed, the person presiding at a shareholders' meeting may, and on request
of a shareholder entitled to vote thereat shall, appoint one (1) or more
inspectors. In case a person appointed fails to appear or act, the vacancy may
be filled by appointment made by the board of directors in advance of the
meeting or at the meeting by the person presiding thereat. The inspectors
shall determine the number of shares
-3-
<PAGE> 4
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine challenges and
questions arising in connection with the right to vote, count and tabulate
votes, ballots or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all shareholders. On
request of the person presiding at the meeting or a shareholder entitled to
vote thereat, the inspectors shall make and execute a written report to the
person presiding at the meeting of any of the facts found by them and matters
determined by them. The report is prima facie evidence of the facts stated and
of the vote as certified by the inspectors.
SECTION 12. ACTION BY WRITTEN CONSENT. The articles of incorporation may
provide that any action required or permitted by the Act to be taken at an
annual or special meeting of shareholders may be taken without a meeting,
without prior notice and without a vote, if consents in writing, setting forth
the action so taken, are signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take the action at a meeting at which all shares entitled to vote on the action
were present and voted. The written consents shall bear the date of signature
of each shareholder who signs the consent. No written consents shall be
effective to take the corporate action referred to unless, within sixty (60)
days after the record date for determining shareholders entitled to express
consent to or to dissent from a proposal without a meeting, written consents
dated not more than ten (10) days before the record date and signed by a
sufficient number of shareholders to take the action are delivered to the
corporation. Delivery shall be to the corporation's registered office, its
principal place of business, or an officer or agent of the corporation having
custody of the minutes of the proceedings of its shareholders. Delivery made
to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to shareholders who would have been entitled to notice of the
shareholder meeting if the action had been taken at a meeting and who have not
consented in writing. Any action required or permitted by the Act to be taken
at an annual or special meeting of shareholders may be taken without a meeting,
without prior notice and without a vote if, before or after the action, all the
shareholders entitled to vote consent in writing.
SECTION 13. PARTICIPATION IN MEETING BY TELEPHONE. Unless otherwise
restricted by the articles of incorporation, by oral or written permission of a
majority of the shareholders, a shareholder may participate in a meeting of
shareholders by a conference telephone or by other similar communications
equipment through which all persons participating in the meeting may
communicate with the other participants. All participants shall be advised of
the communications equipment and the names of the participants in the
conference shall be divulged to all participants. Participation in a meeting
pursuant to this Section constitutes presence in person at the meeting.
-4-
<PAGE> 5
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM OF DIRECTORS. The number of directors which
shall constitute the whole board shall be not less than one (1) nor more than
five (5). The first board shall consist of one (1) director. Thereafter, the
number of directors which shall constitute the board of directors for each
ensuing year shall be determined at the annual meeting by vote of the
shareholders prior to such election; provided, however, that if a motion is not
made and carried to increase or decrease the number of directors, the board
shall consist of the same number of directors as were elected for the preceding
year. The shareholders may also increase or decrease the number of directors
at any meeting of the shareholders or by a written consent in lieu thereof.
Either the shareholders or the board of directors may fill the vacancy caused
by an increase in the number of directors. The first board of directors shall
hold office until the first annual meeting of shareholders. At the first
annual meeting of shareholders and at each annual meeting thereafter, the
shareholders shall elect directors to hold office until the succeeding annual
meeting, except in the case of classification of directors as permitted by the
Act. A director shall hold office for the term for which he or she is elected
and until his or her successor is elected and qualified, or until his or her
resignation or removal. Directors need not be shareholders and may serve
continuous terms.
SECTION 2. VACANCIES. Unless otherwise limited by the articles of
incorporation, if a vacancy, including a vacancy resulting from an increase in
the number of directors, occurs in the board of directors, the vacancy may be
filled as follows:
(a) The shareholders may fill the vacancy.
(b) The board may fill the vacancy.
(c) If the directors remaining in office constitute fewer than a quorum of
the board of directors, they may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
Unless otherwise provided in the articles of incorporation, if the holders of
any class or classes of stock or series are entitled to elect one (1) or more
directors to the exclusion of other shareholders, vacancies of that class or
classes or series may be filled only by one (1) of the following:
(a) By a majority of the directors elected by the holders of that class or
classes or series then in office, whether or not those directors
constitute a quorum of the board of directors.
(b) By the holders of shares of that class or classes of shares, or series.
Unless otherwise limited by the articles of incorporation or these bylaws, in
the case of a corporation the board of directors of which are divided into
classes, any director chosen to fill a vacancy shall hold office until the next
election of the class for which the director shall have been chosen, and until
his or her successor is elected and qualified. If because of death,
resignation, or other cause, a corporation has no directors in office, an
officer, a shareholder, a personal representative, administrator, trustee, or
guardian of a shareholder, or other fiduciary
-5-
<PAGE> 6
entrusted with like responsibility for the person or estate of a shareholder,
may call a special meeting of shareholders in accordance with the articles of
incorporation or these bylaws. A vacancy that will occur at a specific date,
by reason of a resignation effective at a later date under Section 4 of this
Article or otherwise, may be filled before the vacancy occurs but the newly
elected or appointed director may not take office until the vacancy occurs.
SECTION 3. REMOVAL. The shareholders may remove one (1) or more directors
with or without cause unless the articles of incorporation provide that
directors may be removed only for cause. The vote for removal shall be by a
majority of shares entitled to vote at an election of directors, unless the
articles of incorporation require a higher vote for removal without cause.
SECTION 4. RESIGNATION. A director may resign by written notice to the
corporation. The resignation is effective upon its receipt by the corporation
or a later time as set forth in the notice of resignation.
SECTION 5. POWERS. The business and affairs of the corporation shall be
managed by its board of directors except as otherwise provided in the Act or in
the articles of incorporation.
SECTION 6. LOCATION OF MEETINGS. Regular or special meetings of the board
of directors may be held either in or outside the State of Michigan.
SECTION 7. ORGANIZATION MEETING OF BOARD. The first meeting of each newly
elected board of directors shall be held at the place of holding the annual
meeting of shareholders, and immediately following the same, for the purpose of
electing officers and transacting any other business properly brought before
it, provided that the organization meeting in any year may be held at a
different time and place than that herein provided by a consent of a majority
of the directors of such new board. No notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, unless said meeting is not held at
the place of holding and immediately following the annual meeting of
shareholders.
SECTION 8. REGULAR MEETING OF BOARD. Any regular meeting of the board of
directors may be held without notice at such time and at such place as shall
from time to time be determined by the board.
SECTION 9. SPECIAL MEETING OF BOARD. Any special meeting of the board of
directors may be called by the chief executive officer, or by a majority of the
persons then comprising the board of directors, at any time by means of notice
of the time and place thereof to each director, given not less than twenty-four
(24) hours before the time such special meeting is to be held.
SECTION 10. COMMITTEES OF DIRECTORS. The board of directors may designate
one (1) or more committees, each committee to consist of one (1) or more of the
directors of the corporation. The board may designate one (1) or more
directors as alternate members of
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any committee, who may replace an absent or disqualified member at a meeting of
the committee. In the absence or disqualification of a member of a committee,
the members thereof present at a meeting and not disqualified from voting,
whether or not they constitute a quorum, may unanimously appoint another member
of the board of directors to act at the meeting in the place of any such absent
or disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors creating such committee, may exercise all
the powers and authority of the board of directors in the management of the
business and affairs of the corporation. A committee does not have the power
or authority to amend the articles of incorporation, adopt an agreement of
merger or share exchange, recommend to the shareholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommend to the shareholders a dissolution of the corporation or a revocation
of a dissolution, amend the bylaws of the corporation or fill vacancies in the
board of directors; and, unless the resolution of the board of directors
creating such committee, the articles of incorporation or bylaws expressly so
provide, a committee does not have the power or authority to declare a
distribution, dividend or to authorize the issuance of stock. Any such
committee, and each member thereof, shall serve at the pleasure of the board of
directors.
SECTION 11. QUORUM AND REQUIRED VOTE OF BOARD AND COMMITTEES. At all
meetings of the board of directors, or of a committee thereof, a majority of
the members of the board then in office, or of the members of a committee of
the board of directors, constitutes a quorum for transaction of business,
unless the articles of incorporation, these bylaws, or in the case of a
committee, the board resolution establishing the committee, provide for a
larger or smaller number. The vote of the majority of members present at a
meeting at which a quorum is present constitutes the action of the board of
directors or of the committee unless the vote of a larger number is required by
the Act, the articles of incorporation, or these bylaws, or in the case of a
committee, the board resolution establishing the committee. Amendment of these
bylaws by the board of directors requires the vote of not less than a majority
of the members of the board then in office. If a quorum shall not be present
at any meeting of the board of directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
SECTION 12. ACTION BY WRITTEN CONSENT. Action required or permitted to be
taken under authorization voted at a meeting of the board of directors or a
committee of the board of directors, may be taken without a meeting if, before
or after the action, all members of the board then in office or of the
committee consent to the action in writing. The written consents shall be
filed with the minutes of the proceedings of the board of directors or
committee. The consent has the same effect as a vote of the board of directors
or committee for all purposes.
SECTION 13. COMPENSATION OF DIRECTORS. The board of directors, by
affirmative vote of a majority of directors in office and irrespective of any
personal interest of any of them, may establish reasonable compensation of
directors for services to the corporation as directors or officers, but
approval of the shareholders is required if the articles of incorporation,
these bylaws or any provisions of the Act so provide.
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SECTION 14. PARTICIPATION IN MEETING BY TELEPHONE. By oral or written
permission of a majority of the board of directors, a member of the board of
directors or of a committee designated by the board may participate in a
meeting by means of conference telephone or similar communications equipment
through which all persons participating in the meeting can communicate with the
other participants. Participation in a meeting pursuant to this Section
constitutes presence in person at the meeting.
ARTICLE IV
NOTICES
SECTION 1. NOTICE. Whenever any notice or communication is required to be
given by mail to any director or shareholder under any provision of the Act, or
of the articles of incorporation or of these bylaws, it shall be given in
writing, except as otherwise provided in the Act, to such director or
shareholder at the address designated by him or her for that purpose or, if
none is designated, at his or her last known address. The notice or
communication is given when deposited, with postage thereon prepaid, in a post
office or official depository under the exclusive care and custody of the
United States postal service. The mailing shall be registered, certified or
other first class mail except where otherwise provided in the Act. Written
notice may also be given in person or by telegram, telecopy, telex, radiogram,
cablegram, or mailgram, and such notice shall be deemed to be given when the
recipient receives the notice personally, or when the notice, addressed as
provided above, has been delivered to the corporation, or to the equipment
transmitting such notice. Neither the business to be transacted at, nor the
purpose of, a regular or special meeting of the board of directors need be
specified in the notice of the meeting.
SECTION 2. WAIVER OF NOTICE. When, under the Act or the articles of
incorporation or these bylaws, or by the terms of an agreement or instrument, a
corporation or the board of directors or any committee thereof may take action
after notice to any person or after lapse of a prescribed period of time, the
action may be taken without notice and without lapse of the period of time, if
at any time before or after the action is completed the person entitled to
notice or to participate in the action to be taken or, in case of a
shareholder, by his or her attorney-in-fact, submits a signed waiver of such
requirements. Neither the business to be transacted at, nor the purpose of, a
regular or special meeting of the board of directors need be specified in the
waiver of notice of the meeting. Attendance of a person at a meeting of
shareholders constitutes a waiver of objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting and a
waiver of objection to consideration of a particular matter at the meeting that
is not within the purpose or purposes described in the meeting notice, unless
the shareholder objects to considering the matter when it is presented. A
director's attendance at or participation in a meeting waives any required
notice to him or her of the meeting unless he or she at the beginning of the
meeting, or upon his or her arrival, objects to the meeting or the transacting
of business at the meeting and does not thereafter vote for or assent to any
action taken at the meeting.
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ARTICLE V
OFFICERS
SECTION 1. SELECTION. The board of directors, at its first meeting and at
its organization meeting following the annual meeting of shareholders, shall
elect or appoint a president, a secretary and a treasurer. The board of
directors may also elect or appoint a chairman of the board, one (1) or more
vice presidents and such other officers, employees and agents as it shall deem
necessary who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
board. Two (2) or more offices may be held by the same person but an officer
shall not execute, acknowledge or verify an instrument in more than one (1)
capacity if the instrument is required by law or the articles or bylaws to be
executed, acknowledged or verified by two (2) or more officers.
SECTION 2. COMPENSATION. The salaries of all officers, employees and agents
of the corporation shall be fixed by the board of directors; provided, however,
that the board may delegate to the officers the fixing of compensation of
assistant officers, employees and agents.
SECTION 3. TERM, REMOVAL AND VACANCIES. Each officer of the corporation
shall hold office for the term for which he or she is elected or appointed and
until his or her successor is elected or appointed and qualified, or until his
or her resignation or removal. An officer elected or appointed by the board of
directors may be removed by the board with or without cause at any time. An
officer may resign by written notice to the corporation. The resignation is
effective upon its receipt by the corporation or at a subsequent time specified
in the notice of resignation. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
SECTION 4. CHIEF EXECUTIVE OFFICER. If the board of directors desires to
elect or appoint a chief executive officer, the board shall designate the
chairman of the board or president as such officer at the first meeting of each
newly elected board of directors; provided, however, that if a motion is not
made and carried to change the designation, the designation shall be the same
as the designation for the preceding year; provided, further, that the
designation of the chief executive officer may be changed at any special
meeting of the board of directors. The president shall be the chief executive
officer whenever the office of chairman of the board is vacant. The chief
executive officer shall be responsible to the board of directors for the
general supervision and management of the business and affairs of the
corporation and shall see that all orders and resolutions of the board are
carried into effect. The chairman of the board or president who is not the
chief executive officer shall be subject to the authority of the chief
executive officer, but shall exercise all of the powers and discharge all of
the duties of the chief executive officer during the absence or disability of
the chief executive officer.
SECTION 5. CHAIRMAN OF THE BOARD OF DIRECTORS. If the board of directors
elects or appoints a chairman of the board, he or she shall be elected or
appointed by, and from among the membership of, the board of directors. He or
she shall preside at all meetings of the shareholders, of the board of
directors and of any executive committee. He or she shall perform such other
duties and functions as shall be assigned to him or her from time
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to time by the board of directors. He or she shall be, ex officio, a member of
all standing committees. Except where by law the signature of the president of
the corporation is required, the chairman of the board of directors shall
possess the same power and authority to sign all certificates, contracts,
instruments, papers and documents of every conceivable kind and character
whatsoever in the name of and on behalf of the corporation which may be
authorized by the board of directors. During the absence or disability of the
president, or while that office is vacant, the chairman of the board of
directors shall exercise all of the powers and discharge all of the duties of
the president.
SECTION 6. PRESIDENT. During the absence or disability of the chairman of
the board, or while that office is vacant, the president shall preside over all
meetings of the board of directors, of the shareholders and of any executive
committee, and shall perform all of the duties and functions, and when so
acting shall have all powers and authority, of the chairman of the board. He
or she shall be, ex officio, a member of all standing committees. The
president shall, in general, perform all duties incident to the office of
president and such other duties as may be prescribed by the board of directors.
SECTION 7. VICE PRESIDENTS. The board of directors may elect or appoint one
or more vice presidents. The board of directors may designate one or more vice
presidents as executive or senior vice presidents. Unless the board of
directors shall otherwise provide by resolution duly adopted by it, such of the
vice presidents as shall have been designated executive or senior vice
presidents and are members of the board of directors in the order specified by
the board of directors (or if no vice president who is a member of the board of
directors shall have been designated as executive or senior vice president,
then such vice presidents as are members of the board of directors in the order
specified by the board of directors) shall perform the duties and exercise the
powers of the president during the absence or disability of the president if
the office of the chairman of the board is vacant. The vice presidents shall
perform such other duties as may be delegated to them by the board of
directors, any executive committee, the chairman of the board or the president.
SECTION 8. SECRETARY. The secretary shall attend all meetings of the
shareholders, and of the board of directors and of any executive committee, and
shall preserve in the books of the corporation true minutes of the proceedings
of all such meetings. He or she shall safely keep in his or her custody the
seal of the corporation, if any, and shall have authority to affix the same to
all instruments where its use is required or permitted. He or she shall give
all notice required by the Act, these bylaws or resolution. He or she shall
perform such other duties as may be delegated to him or her by the board of
directors, any executive committee, the chairman of the board or the president.
SECTION 9. TREASURER. The treasurer shall have custody of all corporate
funds and securities and shall keep in books belonging to the corporation full
and accurate accounts of all receipts and disbursements; he or she shall
deposit all moneys, securities and other valuable effects in the name of the
corporation in such depositories as may be designated for that purpose by the
board of directors. He or she shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors
whenever requested an account of all his or
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her transactions as treasurer and of the financial condition of the
corporation. If required by the board of directors, he or she shall keep in
force a bond in form, amount and with a surety or sureties satisfactory to the
board of directors, conditioned for faithful performance of the duties of his
or her office, and for restoration to the corporation in case of his or her
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and property of whatever kind in his or her possession or under
his or her control belonging to the corporation. He or she shall perform such
other duties as may be delegated to him or her by the board of directors, any
executive committee, the chairman of the board or the president.
SECTION 10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant
secretary or assistant secretaries, in the absence or disability of the
secretary, shall perform the duties and exercise the powers of the secretary.
The assistant treasurer or assistant treasurers, in the absence or disability
of the treasurer, shall perform the duties and exercise the powers of the
treasurer. Any assistant treasurer, if required by the board of directors,
shall keep in force a bond as provided in Section 9 of this Article. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or by the treasurer,
respectively, or by the board of directors, any executive committee, the
chairman of the board or the president.
SECTION 11. DELEGATION OF AUTHORITY AND DUTIES BY BOARD OF DIRECTORS. All
officers, employees and agents shall, in addition to the authority conferred,
or duties imposed, on them by these bylaws, have such authority and perform
such duties in the management of the corporation as may be determined by
resolution of the board of directors not inconsistent with these bylaws.
ARTICLE VI
INDEMNIFICATION
SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS: CLAIMS BY THIRD
PARTIES. The corporation shall, to the fullest extent authorized or permitted
by the Act or other applicable law, as the same presently exist or may
hereafter be amended, but, in the case of any such amendment, only to the
extent such amendment permits the corporation to provide broader
indemnification rights than before such amendment, indemnify a director or
officer (an "Indemnitee") who was or is a party or is threatened to be made a
party to a threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative and whether formal or
informal, other than an action by or in the right of the corporation, by reason
of the fact that he or she is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, or other enterprise,
whether for profit or not, against expenses, including attorneys' fees,
judgments, penalties, fines, and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action, suit, or
proceeding, if the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and with respect to a criminal action or
proceeding, if the Indemnitee had no reasonable cause to
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believe his or her conduct was unlawful. The termination of an action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that
the Indemnitee did not act in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and, with respect to a criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
SECTION 2. INDEMNIFICATION OF DIRECTORS AND OFFICERS: CLAIMS BROUGHT BY OR
IN THE RIGHT OF THE CORPORATION. The corporation shall, to the fullest extent
authorized or permitted by the Act or other applicable law, as the same
presently exist or may hereafter be amended, but, in the case of any such
amendment, only to the extent such amendment permits the corporation to provide
broader indemnification rights than before such amendment, indemnify an
Indemnitee who was or is a party or is threatened to be made a party to a
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise, whether
for profit or not, against expenses, including attorneys' fees, and amounts
paid in settlement actually and reasonably incurred by the Indemnitee in
connection with the action or suit, if the Indemnitee acted in good faith and
in a manner the Indemnitee reasonably believed to be in or not opposed to the
best interests of the corporation or its shareholders. Indemnification shall
not be made under this Section for a claim, issue, or matter in which the
Indemnitee has been found liable to the corporation except to the extent
authorized in Section 6 of this Article.
SECTION 3. ACTIONS BROUGHT BY THE INDEMNITEE. Notwithstanding the
provisions of Sections 1 and 2 of this Article, the corporation shall not be
required to indemnify an Indemnitee in connection with an action, suit,
proceeding or claim (or part thereof) brought or made by such Indemnitee except
as otherwise provided herein with respect to the enforcement of this Article,
unless such action, suit, proceeding or claim (or part thereof) was authorized
by the board of directors of the corporation.
SECTION 4. APPROVAL OF INDEMNIFICATION. An indemnification under Sections 1
or 2 of this Article, unless ordered by the court, shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the Indemnitee is proper in the circumstances because such
Indemnitee has met the applicable standard of conduct set forth in Sections 1
or 2 of this Article, as the case may be, and upon an evaluation of the
reasonableness of expenses and amounts paid in settlement. This determination
and evaluation shall be made in any of the following ways:
(a) By a majority vote of a quorum of the board of directors consisting of
directors who are not parties or threatened to be made parties to the
action, suit, or proceeding.
(b) If a quorum cannot be obtained in subsection (a), by majority vote of a
committee duly designated by the board of directors and consisting
solely of two (2) or more
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directors not at the time parties or threatened to be made parties to the
action, suit or proceeding.
(c) By independent legal counsel in a written opinion, which counsel shall
be selected in one (1) of the following ways:
(i) By the board of directors or its committee in the manner
prescribed in subsection (a) or (b).
(ii) If a quorum of the board of directors cannot be obtained under
subsection (a) and a committee cannot be designated under
subsection (b), by the board of directors.
(d) By all independent directors (if any directors have been designated as
such by the board of directors or shareholders of the corporation) who
are not parties or threatened to be made parties to the action, suit, or
proceeding.
(e) By the shareholders, but shares held by directors, officers, employees,
or agents who are parties or threatened to be made parties to the
action, suit, or proceeding may not be voted.
In the designation of a committee under subsection (b) or in the selection of
independent legal counsel under subsection (c)(ii), all directors may
participate.
SECTION 5. ADVANCEMENT OF EXPENSES. The corporation may pay or reimburse
the reasonable expenses incurred by an Indemnitee who is a party or threatened
to be made a party to an action, suit, or proceeding in advance of final
disposition of the proceeding if all of the following apply:
(a) The Indemnitee furnishes the corporation a written affirmation of his or
her good faith belief that he or she has met the applicable standard of
conduct set forth in Sections 1 and 2 of this Article.
(b) The Indemnitee furnishes the corporation a written undertaking, executed
personally or on his or her behalf, to repay the advance if it is
ultimately determined that he or she did not meet the standard of
conduct.
(c) A determination is made that the facts then known to those making the
determination would not preclude indemnification under the Act.
The undertaking required by subsection (b) must be an unlimited general
obligation of the Indemnitee but need not be secured. Determinations and
evaluations of payments under this Section shall be made in the manner
specified in Section 4 of this Article.
SECTION 6. COURT APPROVAL. An Indemnitee who is a party or threatened to be
made a party to an action, suit, or proceeding may apply for indemnification to
the court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court after giving any notice
it considers necessary may order indemnification if it determines that the
Indemnitee is fairly and reasonably entitled to indemnification in view of all
the relevant circumstances, whether or not he or she met the applicable
standard of conduct set forth in Sections 1 and 2 of this Article or was
adjudged liable as described in Section 2 of this Article, but if he or she was
adjudged liable, his or her indemnification is limited to reasonable expenses
incurred.
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SECTION 7. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled to
indemnification under Sections 1 or 2 of this Article for a portion of
expenses, including reasonable attorneys' fees, judgments, penalties, fines,
and amounts paid in settlement, but not for the total amount, the corporation
shall indemnify the Indemnitee for the portion of the expenses, judgments,
penalties, fines, or amounts paid in settlement for which the Indemnitee is
entitled to be indemnified.
SECTION 8. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Any person who is not
covered by the foregoing provisions of this Article and who is or was an
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, may be indemnified to the fullest
extent authorized or permitted by the Act or other applicable law, as the same
exists or may hereafter be amended, but, in the case of any such amendment,
only to the extent such amendment permits the corporation to provide broader
indemnification rights than before such amendment, but in any event only to the
extent authorized at any time or from time to time by the board of directors.
SECTION 9. OTHER RIGHTS OF INDEMNIFICATION. The indemnification or
advancement of expenses provided under Sections 1 through 8 of this Article is
not exclusive of other rights to which a person seeking indemnification or
advancement of expenses may be entitled under the articles of incorporation,
bylaws, or a contractual agreement. The total amount of expenses advanced or
indemnified from all sources combined shall not exceed the amount of actual
expenses incurred by the person seeking indemnification or advancement of
expenses. The indemnification provided for in Sections 1 through 8 of this
Article continues as to a person who ceases to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, personal
representatives, and administrators of the person.
SECTION 10. DEFINITIONS. "Other enterprises" shall include employee benefit
plans; "fines" shall include any excise taxes assessed on a person with respect
to an employee benefit plan; and "serving at the request of the corporation"
shall include any service as a director, officer, employee, or agent of the
corporation which imposes duties on, or involves services by, the director,
officer, employee or agent with respect to an employee benefit plan, its
participants or its beneficiaries; and a person who acted in good faith and in
a manner he or she reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be considered
to have acted in a manner "not opposed to the best interests of the corporation
or its shareholders" as referred to in Sections 1 and 2 of this Article.
SECTION 11. LIABILITY INSURANCE. The corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity or arising out of his or her status as such,
whether or not the corporation would have power to indemnify him or her against
liability under the pertinent provisions of the Act.
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SECTION 12. ENFORCEMENT. If a claim under this Article is not paid in full
by the corporation within thirty (30) days after a written claim has been
received by the corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim, and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the corporation)
that the claimant has not met the standards of conduct which make it
permissible under the Act for the corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including its board of
directors, a committee thereof, independent legal counsel, or its shareholders)
to have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because such
claimant has met the applicable standard of conduct set forth in the Act nor an
actual determination by the corporation (including its board of directors, a
committee thereof, independent legal counsel or its shareholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
SECTION 13. CONTRACT WITH THE CORPORATION. The right to indemnification
conferred in this Article shall be deemed to be a contract right between the
corporation and each director or officer who serves in any such capacity at any
time while this Article is in effect, and any repeal or modification of this
Article shall not affect any rights or obligations then existing with respect
to any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought or threatened based in whole or in
part upon any such state of facts.
SECTION 14. APPLICATION TO A RESULTING OR SURVIVING CORPORATION OR
CONSTITUENT CORPORATION. The definition for "corporation" found in Section 569
of the Act, as the same exists or may hereafter be amended is, and shall be,
specifically excluded from application to this Article. The indemnification
and other obligations set forth in this Article of the corporation shall be
binding upon any resulting or surviving corporation after any merger or
consolidation with the corporation. Notwithstanding anything to the contrary
contained herein or in Section 569 of the Act, no person shall be entitled to
the indemnification and other rights set forth in this Article for acting as a
director or officer of another corporation prior to such other corporation
entering into a merger or consolidation with the corporation.
SECTION 15. SEVERABILITY. Each and every paragraph, sentence, term and
provision of this Article shall be considered severable in that, in the event a
court finds any paragraph, sentence, term or provision to be invalid or
unenforceable, the validity and enforceability, operation, or effect of the
remaining paragraphs, sentences, terms, or provisions shall not be affected,
and this Article shall be construed in all respects as if the invalid or
unenforceable matter had been omitted.
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ARTICLE VII
STOCK AND TRANSFERS
SECTION 1. SHARE CERTIFICATES: REQUIRED SIGNATURES. The shares of the
corporation shall be represented by certificates which shall be signed by the
chairman of the board of directors, vice chairman of the board of directors,
president or a vice president and which also may be signed by another officer
of the corporation. The certificate may be sealed with the seal of the
corporation or a facsimile of the seal. The signatures of the officers may be
facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the corporation itself or its employee.
If an officer who has signed or whose facsimile signature has been placed upon
a certificate ceases to be an officer before the certificate is issued, it may
be issued by the corporation with the same effect as if he or she were the
officer at the date of issue.
SECTION 2. SHARE CERTIFICATES: REQUIRED PROVISIONS. A certificate
representing shares of the corporation shall state upon its face all of the
following:
(a) That the corporation is formed under the laws of this state.
(b) The name of the person to whom issued.
(c) The number and class of shares, and the designation of the series, if
any, which the certificate represents.
A certificate representing shares issued by a corporation which is authorized
to issue shares of more than one (1) class shall set forth on its face or back
or state on its face or back that the corporation will furnish to a shareholder
upon request and without charge a full statement of the designation, relative
rights, preferences and limitations of the shares of each class authorized to
be issued, and if the corporation is authorized to issue any class of shares in
series, the designation, relative rights, preferences and limitations of each
series so far as the same have been prescribed and the authority of the board
to designate and prescribe the relative rights, preferences and limitations of
other series.
SECTION 3. REPLACEMENT OF LOST OR DESTROYED SHARE CERTIFICATES. The
corporation may issue a new certificate for shares or fractional shares in
place of a certificate theretofore issued by it, alleged to have been lost or
destroyed, and the board of directors may require the owner of the lost or
destroyed certificate, or his or her legal representative, to give the
corporation a bond sufficient to indemnify the corporation against any claim
that may be made against it on account of the alleged lost or destroyed
certificate or the issuance of such new certificate.
SECTION 4. REGISTERED SHAREHOLDERS. The corporation shall have the right to
treat the registered holder of any share as the absolute owner thereof, and
shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part of any other person, whether or not the corporation
shall have express or other notice thereof, save as may be otherwise provided
by the statutes of Michigan.
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<PAGE> 17
SECTION 5. TRANSFER AGENT AND REGISTRAR. The board of directors may appoint
a transfer agent and a registrar in the registration of transfers of its
securities.
SECTION 6. REGULATIONS. The board of directors shall have power and
authority to make all such rules and regulations as the board shall deem
expedient regulating the issue, transfer and registration of certificates for
shares in this corporation.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. DISTRIBUTIONS IN CASH OR PROPERTY. The board of directors may
authorize and the corporation may make distributions to its shareholders
subject to restriction by the articles of incorporation and/or unless otherwise
limited by the articles of incorporation, these bylaws or the Act.
SECTION 2. RESERVES. The board of directors shall have power and authority
to set apart such reserve or reserves, for any proper purpose, as the board in
its discretion shall approve, and the board shall have the power and authority
to abolish any reserve created by the board.
SECTION 3. VOTING SECURITIES. Unless otherwise directed by the board of
directors, the chairman of the board or president, or in the case of their
absence or inability to act, the vice presidents, in order of their seniority,
shall have full power and authority on behalf of the corporation to attend and
to act and to vote, or to execute in the name or on behalf of the corporation a
consent in writing in lieu of a meeting of shareholders or a proxy authorizing
an agent or attorney-in-fact for the corporation to attend and vote at any
meetings of security holders of corporations in which the corporation may hold
securities, and at such meetings he or she or his or her duly authorized agent
or attorney-in-fact shall possess and may exercise any and all rights and
powers incident to the ownership of such securities and which, as the owner
thereof, the corporation might have possessed and exercised if present. The
board of directors by resolution from time to time may confer like power upon
any other person or persons.
SECTION 4. CHECKS. All checks, drafts and orders for the payment of money
shall be signed in the name of the corporation in such manner and by such
officer or officers or such other person or persons as the board of directors
shall from time to time designate for that purpose.
SECTION 5. CONTRACTS, CONVEYANCES, ETC. When the execution of any contract,
conveyance or other instrument has been authorized without specification of the
executing officers, the chairman of the board, president or any vice president,
and the secretary or assistant secretary, may execute the same in the name and
on behalf of this corporation and may affix the corporate seal thereto. The
board of directors shall have power to designate the officers and agents who
shall have authority to execute any instrument on behalf of this corporation.
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<PAGE> 18
SECTION 6. CORPORATE BOOKS AND RECORDS. The corporation shall keep books
and records of account and minutes of the proceedings of its shareholders,
board of directors and executive committees, if any. The books, records and
minutes may be kept outside this state. The corporation shall keep at its
registered office, or at the office of its transfer agent in or outside the
State of Michigan, records containing the names and addresses of all
shareholders, the number, class and series of shares held by each and the dates
when they respectively became holders of record. Any of the books, records or
minutes may be in written form or in any other form capable of being converted
into written form within a reasonable time. The corporation shall convert into
written form without charge any record not in written form, unless otherwise
requested by a person entitled to inspect the records.
SECTION 7. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
SECTION 8. SEAL. If the corporation has a corporate seal, it shall have
inscribed thereon the name of the corporation and the words "Corporate Seal"
and "Michigan." The seal may be used by causing it or a facsimile to be
affixed, impressed or reproduced in any other manner.
ARTICLE IX
AMENDMENTS
SECTION 1. The shareholders or the board of directors may amend or repeal
the bylaws or adopt new bylaws unless the articles of incorporation provide
that the power to adopt new bylaws is reserved exclusively to the shareholders
or that these bylaws or any particular bylaw shall not be altered or repealed
by the board of directors. Such action may be taken by written consent or at
any meeting of shareholders or the board of directors; provided that if notice
of any such meeting is required by these bylaws, it shall contain notice of the
proposed amendment, repeal or new bylaws. Amendment of these bylaws by the
board of directors requires the vote of not less than a majority of the members
of the board then in office.
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<PAGE> 1
EXHIBIT 4.1
===============================================================================
JAMES CABLE PARTNERS, L.P.
and JAMES CABLE FINANCE CORP.,
as Issuers
and
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
----------------------
INDENTURE
Dated as of August 15, 1997
----------------------
$100,000,000
10 3/4% Senior Notes due 2004
===============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
------- ----------
310(a)(1) ............................................. 7.10
(a)(2) ............................................. 7.10
(a)(3) ............................................. N.A.
(a)(4) ............................................. N.A.
(b) ................................................ 7.08; 7.10;
11.02
(b)(1) ............................................. 7.10
(b)(9) ............................................. 7.10
(c) ................................................ N.A.
311(a) ................................................ 7.11
(b) ................................................ 7.11
(c) ................................................ N.A.
312(a) ................................................ 2.05
(b) ................................................ 11.03
(c) ................................................ 11.03
313(a) ................................................ 7.06
(b)(1) ............................................. 7.06
(b)(2) ............................................. 7.06
(c) ................................................ 11.02
(d) ................................................ 7.06
314(a) ................................................ 4.02; 4.04;
11.02
(b) ................................................ N.A.
(c)(1) ............................................. 11.04; 11.05
(c)(2) ............................................. 11.04; 11.05
(c)(3) ............................................. N.A.
(d) ................................................ N.A.
(e) ................................................ 11.05
(f) ................................................ N.A.
315(a) ................................................ 7.01; 7.02
(b) ................................................ 7.05; 11.02
(c) ................................................ 7.01
(d) ................................................ 6.05; 7.01;
7.02
(e) ................................................ 6.11
316(a) (last sentence) ................................ 11.06
(a)(1)(A) .......................................... 6.05
(a)(1)(B) .......................................... 6.04
(a)(2) ............................................. 8.02
(b) ................................................ 6.07
(c) ................................................ 8.04
317(a)(1) ............................................. 6.08
(a)(2) ............................................. 6.09
(b) ................................................ 7.12
318(a) ................................................ 11.01
N.A. means Not Applicable
____________________
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions............................................. 1
Section 1.02. Other Definitions....................................... 21
Section 1.03. Incorporation by Reference of Trust Indenture Act....... 21
Section 1.04. Rules of Construction................................... 22
ARTICLE 2
THE NOTES
Section 2.01. Amount of Notes.......................................... 23
Section 2.02. Form and Dating.......................................... 24
Section 2.03. Execution and Authentication............................. 25
Section 2.04. Registrar and Paying Agent............................... 26
Section 2.05. Paying Agent to Hold Money in Trust...................... 26
Section 2.06. Noteholder Lists......................................... 27
Section 2.07. Transfer and Exchange.................................... 27
Section 2.08. Replacement Notes........................................ 28
Section 2.09. Outstanding Notes........................................ 29
Section 2.10. Treasury Notes........................................... 29
Section 2.11. Temporary Notes.......................................... 30
Section 2.12. Cancellation............................................. 30
Section 2.13. Defaulted Interest....................................... 31
Section 2.14. CUSIP Number............................................. 31
Section 2.15. Deposit of Moneys........................................ 32
Section 2.16. Book-Entry Provisions for Global Notes................... 32
Section 2.17. Special Transfer Provisions.............................. 35
Section 2.18. Computation of Interest.................................. 38
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee....................................... 38
Section 3.02. Selection by Trustee of Notes to Be Redeemed............. 39
Section 3.03. Notice of Redemption..................................... 39
Section 3.04. Effect of Notice of Redemption........................... 40
Section 3.05. Deposit of Redemption Price.............................. 41
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<PAGE> 4
Page
----
Section 3.06. Notes Redeemed in Part................................... 41
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.......................................... 42
Section 4.02. SEC Reports............................................... 42
Section 4.03. Waiver of Stay, Extension or Usury Laws................... 43
Section 4.04. Compliance Certificate.................................... 44
Section 4.05. Taxes..................................................... 45
Section 4.06. Limitation on Incurrence of Indebtedness.................. 45
Section 4.07. Limitation on Preferred Stock of Subsidiaries............. 47
Section 4.08. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.................................... 47
Section 4.09. Limitation on Restricted Payments......................... 48
Section 4.10. Limitation on Certain Asset Sales......................... 50
Section 4.11. Limitation on Transactions with Affiliates................ 54
Section 4.12. Limitation on Liens....................................... 55
Section 4.13. Limitation on Conduct of Finance Corp..................... 55
Section 4.14. Limitation on Creation of Subsidiaries.................... 56
Section 4.15. Legal Existence........................................... 56
Section 4.16. Change of Control......................................... 57
Section 4.17. Maintenance of Office or Agency........................... 60
Section 4.18. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law....................................... 60
Section 4.19. Further Assurance to the Trustee.......................... 61
Section 4.20. Limitation on Sale and Lease-Back Transactions............ 62
Section 4.21. Payments for Consent...................................... 62
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of Assets.... 63
Section 5.02. Successor Person Substituted.............................. 64
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<PAGE> 5
Page
----
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default..................................... 65
Section 6.02. Acceleration.......................................... 67
Section 6.03. Other Remedies........................................ 68
Section 6.04. Waiver of Past Defaults and Events of Default......... 68
Section 6.05. Control by Majority................................... 69
Section 6.06. Limitation on Suits................................... 69
Section 6.07. Rights of Holders to Receive Payment.................. 70
Section 6.08. Collection Suit by Trustee............................ 71
Section 6.09. Trustee May File Proofs of Claim...................... 71
Section 6.10. Priorities............................................ 72
Section 6.11. Undertaking for Costs................................. 72
Section 6.12. Restoration of Rights and Remedies.................... 73
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee..................................... 73
Section 7.02. Rights of Trustee..................................... 75
Section 7.03. Individual Rights of Trustee.......................... 76
Section 7.04. Trustee's Disclaimer.................................. 77
Section 7.05. Notice of Defaults.................................... 77
Section 7.06. Reports by Trustee to Holders......................... 77
Section 7.07. Compensation and Indemnity............................ 78
Section 7.08. Replacement of Trustee................................ 79
Section 7.09. Successor Trustee by Consolidation, Merger, Etc....... 81
Section 7.10. Eligibility; Disqualification......................... 81
Section 7.11. Preferential Collection of Claims Against Company..... 81
Section 7.12. Paying Agents......................................... 82
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders............................ 83
Section 8.02. With Consent of Holders............................... 84
Section 8.03. Compliance with Trust Indenture Act................... 86
Section 8.04. Revocation and Effect of Consents..................... 86
Section 8.05. Notation on or Exchange of Notes...................... 87
Section 8.06. Trustee to Sign Amendments, etc....................... 87
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<PAGE> 6
Page
----
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture................................ 88
Section 9.02. Defeasance............................................ 88
Section 9.03. Conditions to Defeasance.............................. 89
Section 9.04. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous
Provisions.......................................... 91
Section 9.05. Reinstatement......................................... 92
Section 9.06. Moneys Held by Paying Agent........................... 93
Section 9.07. Moneys Held by Trustee................................ 93
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee............................................ 94
Section 10.02. Execution and Delivery of Guarantees................. 96
Section 10.03. Limitation of Guarantee.............................. 96
Section 10.04. Release of Guarantor................................. 96
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls......................... 97
Section 11.02. Notices.............................................. 97
Section 11.03. Communications by Holders with Other Holders......... 99
Section 11.04. Certificate and Opinion as to Conditions Precedent... 99
Section 11.05. Statements Required in Certificate and
Opinion............................................ 100
Section 11.06. When Treasury Notes Disregarded...................... 101
Section 11.07. Rules by Trustee and Agents.......................... 101
Section 11.08. Business Days; Legal Holidays........................ 101
Section 11.09. Governing Law........................................ 102
Section 11.10. No Adverse Interpretation of Other
Agreements......................................... 102
Section 11.11. Personal Liability of Certain Persons................ 102
Section 11.12. Successors........................................... 103
Section 11.13. Multiple Counterparts................................ 103
Section 11.14. Table of Contents, Headings, etc..................... 103
Section 11.15. Separability......................................... 104
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<PAGE> 7
Page
----
Exhibits
- --------
Exhibit A Form of Note......................................... A-1
Exhibit B Form of Legend and Assignment for 144A Note.......... B-1
Exhibit C Form of Legend and Assignment for Regulation
S Note............................................. C-1
Exhibit D Form of Legend for Global Note....................... D-1
Exhibit E Form of Certificate to Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors..... E-1
Exhibit F Form of Certificate to Be Delivered in Connection
with Transfers Pursuant to Regulation S............ F-1
Exhibit G Form of Guarantee.................................... G-1
-v-
<PAGE> 8
INDENTURE, dated as of August 15, 1997, among JAMES CABLE PARTNERS, L.P.,
a Delaware limited partnership (the "Company"), and JAMES CABLE FINANCE CORP.,
a Michigan corporation and a wholly-owned subsidiary of the Company ("Finance
Corp." and, together with the Company, the "Issuers"), and UNITED STATES TRUST
COMPANY OF NEW YORK, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's 10 3/4% Senior
Notes due 2004 (the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person,
and (ii) Indebtedness encumbering any asset acquired by such specified Person.
"Additional Interest" means additional interest on the Notes which the
Issuers agree to pay to the Holders pursuant to Section 4 of the Registration
Rights Agreement.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities), but excluding liabilities under the Guarantee, of such Guarantor
at such date and (y) the present fair salable value of the assets of such
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities and after giving effect to any
collection from any Subsidiary of such Guarantor in respect of the obligations
of such Subsidiary under the Guarantee), excluding Indebtedness in respect of
the Guarantee, as they become absolute and matured.
<PAGE> 9
-2-
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect control
with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Agent" means the Registrar, any Paying Agent, or agent for service of
notices and demands.
"Asset Sale" means the sale, lease, exchange, transfer or other
disposition (other than to the Company or any of its Subsidiaries) in any
single transaction or series of related transactions of (a) any Capital Stock
of or other equity interest in any Subsidiary of the Company, (b) all or
substantially all of the assets of the Company or of any Subsidiary thereof,
(c) real property or (d) all or substantially all of the assets owned by the
Company or any Subsidiary thereof, or a division, line of business or
comparable business segment of the Company or any Subsidiary thereof; provided,
however, that Asset Sales shall not include (i) any transaction consummated in
compliance with Section 4.09 and Section 5.01 and the creation of any Lien not
prohibited by the provisions of Section 4.12, (ii) a transaction or series of
related transactions for which the Company or its Subsidiaries receive
aggregate consideration of less than $500,000, (iii) sales of property or
equipment that has become worn out, obsolete or damaged or otherwise unsuitable
for use in connection with the business of the Company or any Subsidiary, as
the case may be, and (iv) sales, leases, conveyances, transfers or other
dispositions to the Company or to a Subsidiary or to any other Person if after
giving effect to such sale, lease, conveyance, transfer or other disposition
such other Person becomes a Subsidiary.
"Attributable Indebtedness" under this Indenture in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the present
value (discounted at a rate of 10%, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Lease-Back transaction (including any period
for which such lease has been extended).
<PAGE> 10
-3-
"Bankruptcy" means commencement of a voluntary case under the Bankruptcy
Code of 1978, as amended, or commencement of an involuntary case under the
Bankruptcy Code of 1978, as amended.
"Bankruptcy Law" means Title 11, United States Code or any similar
federal, state or foreign law for the relief of debtors.
"Board of Directors" means (i) in the case of the Company or the General
Partner, the partner or partners holding a majority of the Equity Interests in
the General Partner, (ii) in the case of a Person that is a partnership, other
than the Company and the General Partner, the board of directors of such
Person's corporate general partner (or if such general partner is itself a
partnership, the board of directors of such general partner's corporate general
partner), (iii) in the case of a Person that is a corporation, the board of
directors of such Person and (iv) in the case of any other Person, the board of
directors, management committee or similar governing body or any authorized
committee thereof responsible for the management of the business and affairs of
such Person.
"Board Resolution" means a copy of a resolution certified pursuant to an
Officers' Certificate to have been duly adopted by the General Partner for the
Company, the Board of Directors of Finance Corp. for Finance Corp. and/or the
Board of Directors or substantial equivalent of a Guarantor, as appropriate,
and to be in full force and effect, and delivered to the Trustee.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, Partnership Interests and any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, such partnership, limited
liability company or partnership or any other entity.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of
<PAGE> 11
-4-
all securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 50% or more of the total voting power of the outstanding Voting
Stock of the Company, the General Partner or Jamesco, as the case may be; (b)
the Company, the General Partner or Jamesco, as the case may be, consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person consolidates with, or merges with or into,
the Company, the General Partner or Jamesco, as the case may be, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company, the General Partner or Jamesco, as the case may be, is converted into
or exchanged for cash, securities or other property, other than any such
transaction where the outstanding Voting Stock of the Company, the General
Partner or Jamesco, as the case may be, is converted into or exchanged for
Voting Stock (other than Disqualified Equity Interests) of the surviving or
transferee Person and, immediately after such transaction, the Permitted Holders
or the holders of the Voting Stock of the Company, the General Partner or
Jamesco, as the case may be, immediately prior thereto own, directly or
indirectly, more than 50% of the total voting power of the outstanding Voting
Stock of the surviving or transferee Person; (c) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company, the General Partner or Jamesco, as the case may be
(together with (i) one or more Permitted Holders, and (ii) any new directors
whose election to such Board of Directors was approved by the Permitted Holders
or by a vote of at least a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved), cease for any reason (other
than by action of the Permitted Holders) to constitute a majority of the Board
of Directors of the Company, the General Partner or Jamesco, as the case may be,
then in office; (d) the admission of any Person as a general partner of the
Company or the General Partner, as the case may be, after which the General
Partner or Jamesco, Trenary Corp., Ltd. and DKS Holdings, Inc., as the case may
be, together with one or more Permitted Holders, do not have the sole power,
directly or indirectly, to take all of the actions they are entitled or required
to take under the Partnership Agreement of the Company or the General Partner,
as the case may be, as in effect on the Issue Date; provided, however, that a
Change of Control will be deemed not to have occurred with respect to the events
in this clause (d) if such events have been approved by the Permitted Holders
holding a majority in interest of the total outstanding Equity Interests of the
General Partner held by the Permitted Holders; (e) except as permitted by clause
(b) above, the
<PAGE> 12
-5-
adoption by either Issuer of a plan relating to the dissolution or liquidation
of either Issuer or the appointment of a liquidating trustee or the commencement
of any other proceedings to effect such result; or (f) 180 days following the
occurrence of any of certain events provided for in the Partnership Agreement,
as in effect on the Issue Date, which would require that the Company be
dissolved, wound up and terminated (unless prior to the expiration of said
180-day period, the term of the Company is subsequently extended by a vote of
the partners), including, but not limited to, (i) expiration of the term of the
Partnership or (ii) the removal of the General Partner, whether or not such
event creates a dissolution, winding up or termination of the Partnership.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces such party pursuant to Article 5 of this
Indenture and thereafter means the successor.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, in each case
to the extent deducted in computing Consolidated Net Income, (a) an amount
equal to any extraordinary loss; plus (b) an amount equal to any net loss
realized in connection with an Asset Sale, plus (c) provision for taxes based
on income or profits of such Person for such period, plus (d) Consolidated
Interest Expense of such Person for such period, whether paid or accrued, plus
(e) depreciation and amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person for such period, plus (f) other consolidated
non-cash charges, minus (g) non-cash items increasing consolidated revenues for
such period, in each case, on a consolidated basis and determined in accordance
with GAAP.
"Consolidated Interest Expense" means, for any given period and Person,
the aggregate of the interest expense in respect of all Indebtedness of such
Person and its Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount on any such Indebtedness, all non-cash interest payments, the interest
portion of any deferred payment obligation and the interest component of
capital lease obligations).
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, that (i) the Net Income of any Person that is not a Subsidiary or
that is ac-
<PAGE> 13
-6-
counted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income of
any Subsidiary that is subject to any Payment Restriction shall be excluded to
the extent such Payment Restriction would limit the amount that otherwise could
be paid to, or received by, such Person or a Subsidiary of such Person not
subject to any Payment Restriction, (iii) the Net Income of any Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this Indenture is located at United
States Trust Company of New York, 114 West 47th Street, New York, New York
10036.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Depository" means, with respect to the Notes issued in the form of one or
more Global Notes, The Depository Trust Company or another Person designated as
Depository by the Issuers, which Person must be a clearing agency registered
under the Exchange Act.
"Disqualified Stock" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
Maturity Date.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" shall have the meaning assigned thereto in the
Registration Rights Agreement.
<PAGE> 14
-7-
"Existing Indebtedness" means Indebtedness of the Issuers in existence on
the Issue Date, until such Indebtedness is repaid.
"Fair Market Value" means, with respect to any asset, property or Capital
Stock, the price which could be negotiated in an arm's length free market
transaction between a willing seller and a willing buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. "Fair Market
Value" shall be determined by the Board of Directors of the Company and by the
Board of Directors of the applicable Subsidiary, if applicable, acting
reasonably and in good faith and shall be evidenced by a duly and properly
adopted resolution of the Board of Directors of the Company and of such
Subsidiary's Board of Directors, if applicable, set forth in an Officers'
Certificate delivered to the Trustee; except that any determination of Fair
Market Value made with respect to any real property or personal property having
a value in excess of $2 million shall be made by an independent qualified
appraiser.
"Finance Corp." means the party named as such in the first paragraph of
this Indenture.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"General Partner" means James Communications Partners, a Michigan general
partnership and the General Partner of the Company.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantee" means, as the context may require, individually, a guarantee,
or collectively, any and all guarantees, of the obligations of the Issuers with
respect to the Notes by each Guarantor, if any, pursuant to the terms of
Article 10 hereof, substantially in the form set forth in Exhibit G.
<PAGE> 15
-8-
"Guarantor" means each Subsidiary of the Company that hereafter becomes a
Guarantor pursuant to Section 4.14, and "Guarantors" means such entities,
collectively.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements the value of which is tied directly to fluctuations in interest
rates.
"Holder" or "Noteholder" means a Person in whose name a Note is
registered.
"Incentive Fee" means the fee payable to the General Partner pursuant to
the terms of the 1994 Incentive Compensation Agreement.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"incurrence," "incurred," "incurrable" and "incurring" shall have meanings
correlative to the foregoing), provided that the accrual of interest (whether
such interest is payable in cash or in kind) and the accretion of original
issue discount shall not be deemed an incurrence of Indebtedness, provided,
further, that (a) any Indebtedness or Disqualified Stock of a Person existing
at the time such Person becomes (after the Issue Date) a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) of the Company shall be deemed
to be incurred by such Subsidiary at the time it becomes a Subsidiary of the
Company and (b) any amendment, modification or waiver of any document pursuant
to which Indebtedness was previously incurred shall be deemed to be an
incurrence of Indebtedness unless such amendment, modification or waiver does
not (i) increase the principal or premium thereof or interest rate thereon
(including by way of original issue discount), (ii) change to an earlier date
the stated maturity thereof or the date of any scheduled or required principal
payment thereon or the time or circumstances under which such Indebtedness may
or shall be redeemed, (iii) if such Indebtedness is subordinated to the Notes,
modify or affect, in any manner adverse to the Holders, such subordination,
(iv) if the Company is the obligor thereon, provide that a Subsidiary of the
Company not already an obligor thereon shall be an obligor thereon or (v)
violate, or cause the Indebtedness to violate, the provisions described under
Section 4.08 and Section 4.12.
<PAGE> 16
-9-
"Indebtedness" means with respect to any Person, without duplication, (i)
all liabilities, contingent or otherwise, of such Person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof), (b) evidenced by bonds (not
including performance bonds, performance guarantees, surety bonds and appeal
bonds, letters of credit or similar obligations incurred in the ordinary course
of business, including in connection with the requirements of cable television
franchising authorities, and otherwise consistent with industry practice),
notes, debentures, drafts accepted or similar instruments or representing the
balance deferred and unpaid of the purchase price of any property (other than
any such balance that represents an account payable or any other monetary
obligation to a trade creditor created, incurred, assumed or guaranteed by such
Person in the ordinary course of business of such Person in connection with
obtaining goods, materials or services, which account is not overdue by more
than 90 days, according to the original terms of sale, unless such account
payable is being contested or has been renegotiated in good faith) or (c) for
the payment of money relating to Capital Lease Obligations in excess of
$100,000 in the aggregate at any one time outstanding; (ii) reimbursement
obligations of such Person with respect to letters of credit; (iii) obligations
of such Person in excess of $100,000 in the aggregate at any one time
outstanding with respect to Hedging Obligations; (iv) all liabilities of others
of the kind described in the preceding clause (i), (ii) or (iii) that such
Person has guaranteed, that have been incurred by a partnership in which it is
a general partner (to the extent such Person is liable, contingently or
otherwise, therefor) or that is otherwise its legal liability (other than
endorsements for collection in the ordinary course of business); and (v) all
obligations of others secured by a Lien to which any of the properties or
assets (including, without limitation, leasehold interests and any other
tangible or intangible property rights) of such Person are subject, whether or
not the obligations secured thereby shall have been assumed by such Person or
shall otherwise be such Person's legal liability.
"Indenture" means this Indenture as amended, restated or supplemented from
time to time.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) promulgated under Regulation D of the Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Notes.
<PAGE> 17
-10-
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Issue Date" means the date of first issuance of the Notes under this
Indenture.
"Issuer Request" means any written request signed in the names of each of
the Issuers by William R. James, C. Timothy Trenary or Daniel K. Shoemaker for
the Company in their capacity as officers of a corporate general partner of the
General Partner and the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer or the Treasurer for Finance Corp. and
attested to by the Secretary or any Assistant Secretary of each of the Issuers.
"Issuers" means the parties named as such in the first paragraph of this
Indenture until a successor replaces such parties pursuant to Article 5 of this
Indenture and thereafter means the successor and any other obligor on the
Notes.
"Jamesco" means Jamesco, Inc., a Michigan corporation, whose sole
shareholder is William R. James.
"Lien" means, with respect to any asset any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Maturity Date" means August 15, 2004.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the cash
proceeds of such Asset Sale, including payments in respect of deferred payment
obligations (to the extent correspond-
<PAGE> 18
-11-
ing to the principal, but not interest, component thereof) when received in the
form of cash (except to the extent such obligations are financed or sold with
recourse to the Company or any Subsidiary of the Company) and proceeds from the
conversion of other property received when converted to cash, net of (a)
reasonable third-party brokerage commissions and other reasonable third-party
fees and expenses (including fees and expenses of counsel and investment
bankers), related to such Asset Sale, (b) provisions for all taxes, other than
income or similar taxes (whether payable by the Company, any subsidiary or any
partner of the Company), as a result of such Asset Sale, as computed on a
consolidated basis, and (c) payments made to repay Indebtedness or any other
obligation outstanding at the time of such Asset Sale that was incurred in
accordance with this Indenture and that either (i) is secured by a Lien incurred
in accordance with this Indenture on the property or assets sold or (ii) is, by
its original terms, required to be paid as a result of such sale, in each case
to the extent actually repaid in cash.
"Net Equity Proceeds" means (a) in the case of any sale by the Company of
Qualified Capital Stock of the Company, the aggregate net cash proceeds
received by the Company, after payment of expenses, commissions and the like
incurred in connection therewith, and (b) in the case of any exchange,
exercise, conversion or surrender of any outstanding Indebtedness of the
Company for or into shares of Qualified Capital Stock of the Company, the
amount of such Indebtedness (or, if such Indebtedness was issued at an amount
less than the stated principal amount thereof, the accrued amount thereof as
determined in accordance with GAAP) as reflected in the consolidated financial
statements of the Company prepared in accordance with GAAP as of the most
recent date next preceding the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the Holder of such
Indebtedness to the Company upon such exchange, exercise, conversion or
surrender and less any and all payments made to the Holders of such
Indebtedness, and all other expenses incurred by the Company in connection
therewith).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to Sale and Leaseback Transactions), or (b)
the disposition of any securities or the extinguishment of any Indebtedness of
such Person or any of its Subsidiaries, and (ii) any extraordinary gain (but
not loss), together with any re-
<PAGE> 19
-12-
lated provision for taxes on such extraordinary gain (but not loss).
"New Bank Credit Facility" means that certain secured credit facility
entered into on the Issue Date, by and among the Company, the lenders listed
therein, NBD Bank, as Documentation Agent, and Canadian Imperial Bank of
Commerce, as Administration Agent, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as amended, extended, renewed, restated, supplemented or otherwise
modified from time to time, and any agreement governing Indebtedness incurred
to refund or refinance all or a portion of the borrowings and commitments then
outstanding or permitted to be outstanding under the New Bank Credit Facility
as provided under Section 4.06.
"Non-U.S. Person" means a person who is not a U.S. person, as defined in
Regulation S.
"Notes" means the securities that are issued under this Indenture, as
amended or supplemented from time to time pursuant to this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes as described in the Offering
Memorandum.
"Offering Memorandum" means the Offering Memorandum dated August 12, 1997
pursuant to which the Notes were offered.
"Officer", with respect to the Company, means William R. James, C. Timothy
Trenary and Daniel K. Shoemaker in their capacity as officers of a corporate
general partner of the General Partner and, with respect to Finance Corp. or
any Guarantor, means the Chief Executive Officer, the President, any Vice
President and the Chief Financial Officer, the Treasurer or the Secretary of
Finance Corp., or any other officer designated by the Board of Directors of
Finance Corp., as the case may be.
"Officers' Certificate" means a certificate signed by (i) William R. James
and Daniel K. Shoemaker in their capacity as officers of a corporate general
partner of the General Partner on behalf of the Company and (ii) by the Chief
Executive Officer, the President or any Vice President and the Chief Financial
Officer or any Treasurer of Finance Corp. on behalf of Finance Corp.
<PAGE> 20
-13-
"Opinion of Counsel" means a written opinion reasonably satisfactory in
form and substance to the Trustee from legal counsel which counsel is
reasonably acceptable to the Trustee stating the matters required by Section
11.05 and delivered to the Trustee.
"Partnership Advisory Board" means the Partnership Advisory Board of the
Company, as provided for in the Partnership Agreement.
"Partnership Agreement" means that certain amended partnership agreement
of the Company as in effect on the Issue Date and as it may be amended from
time to time.
"Partnership Interest" means any general or limited partnership interest
and any interest as a member of a limited liability company or a limited
liability partnership.
"Payment Restriction" means, with respect to a Subsidiary of any Person,
any encumbrance, restriction or limitation, whether by operation of the terms
of its charter or by reason of any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation, on the ability of (i) such
Subsidiary to (a) pay dividends or make other distributions on its Capital
Stock or make payments on any obligation, liability or Indebtedness owed to
such Person or any other Subsidiary of such Person, (b) make loans or advances
to such Person or any other Subsidiary of such Person, or (c) transfer any of
its properties or assets to such Person or any other Subsidiary of such Person,
or (ii) such Person or any other Subsidiary of such Person to receive or retain
any such (a) dividends, distributions or payments, (b) loans or advances, or
(c) transfer of properties or assets.
"Permitted Holders" means (i) the General Partner, (ii) Jamesco, (iii)
Trenary Corp., Ltd., a Michigan corporation, (iv) DKS Holdings, Inc., a
Michigan corporation, and (v) William R. James, C. Timothy Trenary and Daniel
K. Shoemaker, each of their spouses and their children or other lineal
descendants (whether adoptive or biological), probate estate of any such
individual, and any trust, so long as one or more of the foregoing individuals
is the beneficiary thereunder, and any other corporation, partnership or other
entity all of the shareholders, partners, members or owners of which are any
one or more of the foregoing.
"Permitted Investments" means (i) any Investments in the Company or in a
Wholly Owned Subsidiary of the Company in anticipation of a sale of the stock
of such Wholly Owned Subsidiary in connection with the disposition of assets of
the Company provided
<PAGE> 21
-14-
that the Net Cash Proceeds therefrom are applied as provided under Sections 4.10
and 4.16, (ii) Investments by the Company or any Subsidiary of the Company in a
Person, if as a result of such Investment such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company and that is engaged in the same or
a similar line of business as the Company was engaged in on the Issue Date or as
the Company's business has thereafter evolved in the fields of cable television
systems, enhanced video services, advanced telecommunications services, such as
broadband high speed Internet access and inter- and intra-network data services,
and telephony, and (iii) Related Business Investments of the Company or any
Subsidiary in an amount not exceeding $2 million.
"Permitted Liens" means (a) Liens securing Indebtedness incurred under the
New Bank Credit Facility; (b) Liens in favor of the Issuers; (c) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company, provided that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (d) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such acquisition; (e) Liens imposed by law such as carriers', warehousemans'
or mechanics' Liens, and other Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of
a like nature incurred in the ordinary course of business; (f) Purchase Money
Liens and Liens to secure Capital Lease Obligations and mortgage financing
permitted by clause (f) of the second paragraph of Section 4.06 covering only
the assets acquired with such Indebtedness; (g) Liens existing on the Issue
Date; (h) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded; provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (i) Liens securing Permitted Refinancing
Indebtedness; provided that any such Lien does not extend to or cover any
property or assets other than the property or assets securing Indebtedness so
refunded, refinanced or extended; (j) any extensions, substitutions,
replacements or renewals of the foregoing; and (k) easements, rights-of-way and
other similar encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, licenses, restrictions on the
use of property or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do
<PAGE> 22
-15-
not in any case materially detract from the Issuers' properties subject thereto.
"Permitted Refinancing Indebtedness" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company outstanding on the Issue
Date or other Indebtedness (including, without limitation, Indebtedness under
the New Bank Credit Facility) permitted to be incurred by the Company or its
Subsidiaries pursuant to the terms of this Indenture, but only to the extent
that (i) the Refinancing Indebtedness is subordinated to the Notes to at least
the same extent as the Indebtedness being refunded, refinanced or extended, if
at all, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the maturity date of the Notes, (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the
maturity date of the Notes has a weighted average life to maturity at the time
such Refinancing Indebtedness is incurred that is at least equal to or greater
than the weighted average life to maturity of the portion of the Indebtedness
being refunded, refinanced or extended that is scheduled to mature on or prior
to the maturity date of the Notes, (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid
interest, if any, and premiums owed, if any, not in excess of preexisting
prepayment provisions on such Indebtedness being refunded, refinanced or
extended and (c) the amount of customary fees, expenses and costs related to
the incurrence of such Refinancing Indebtedness, and (v) such Refinancing
Indebtedness is incurred by the same Person that initially incurred the
Indebtedness being refunded, refinanced or extended.
"Person" or "person" means any individual, corporation, partnership,
limited liability company, limited liability partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government (or any agency or political subdivision thereof).
"Physical Notes" means certificated Notes in registered form in
substantially the form set forth in Exhibit A.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock, whether outstanding on the date hereof
or issued after the date of the Indenture, and including, without limitation,
all
<PAGE> 23
-16-
classes and series of preferred or preference stock of such Person.
"Private Exchange Notes" shall have the meaning assigned thereto in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Rule 144A Notes in the form set forth in Exhibit B.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act.
"Pro Forma Consolidated Cash Flow" of any Person means for any period the
Consolidated Cash Flow of such Person for such period calculated on a pro forma
basis to give effect to any Asset Sale or acquisition of assets not in the
ordinary course of business (including acquisitions of other Persons by merger,
consolidation or purchase of Capital Stock) during such period as if such Asset
Sale or acquisition of assets had taken place on the first day of such period.
For purposes of making the computations referred to in Section 4.06, any Asset
Sale or acquisition of assets not in the ordinary course of business made by
the Company, including all mergers and acquisitions subsequent to the last full
fiscal quarter, shall be calculated on a pro forma basis as if such Asset Sale
or acquisition of assets had taken place on the first day of such fiscal
quarter.
"Public Equity Offering" means a public offering of Capital Stock pursuant
to a registration statement under the Securities Act.
"Purchase Money Liens" means Liens to secure or securing Purchase Money
Obligations permitted to be incurred under this Indenture.
"Purchase Money Obligations" means Indebtedness representing, or incurred
to finance, the cost of acquiring any assets (including Purchase Money
Obligations of any other Person at the time such other Person is merged with or
into or is otherwise acquired by the Company), provided that (i) the principal
amount of such Indebtedness does not exceed 100% of such cost, including
construction charges, (ii) any Lien securing such Indebtedness does not extend
to or cover any other asset or property other than the asset or property being
so acquired and (iii) such Indebted-
<PAGE> 24
-17-
ness is incurred, and any Liens with respect thereto are granted within 180 days
of the acquisition of such property or asset.
"Qualified Capital Stock" means, with respect to any Person, any Equity
Interest of such Person that is not Disqualified Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A promulgated under the Securities Act.
"Redemption Date" when used with respect to any Note to be redeemed means
the date fixed for such redemption pursuant to the terms of the Notes.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of August , 1997 among the Issuers, CIBC Wood Gundy Securities Corp.
and First Chicago Capital Markets, Inc., as Initial Purchasers.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Related Business Investment" means (i) any capital expenditure or
Investment, in each case reasonably related to the business of the Company as
conducted on the Issue Date and as such business may thereafter evolve in the
fields of cable television systems, enhanced video services and advanced
telecommunications services, such as broadband high speed Internet access and
inter- and intra-network data services, and telephony; and (ii) any Investment
in any other Person primarily engaged in the same businesses as provided in the
foregoing subparagraph (i).
"Responsible Officer" when used with respect to the Trustee, means an
officer or assistant officer assigned to the corporate trust department of the
Trustee (or any successor group of the Trustee) or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, prior to the
scheduled maturity or prior to any scheduled repayment of principal or sinking
fund payment,
<PAGE> 25
-18-
as the case may be, in respect of Indebtedness that is pari passu with or
subordinate in right of payment to the Notes.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means any (i) Stock Payment, (ii) Restricted
Investment or (iii) Restricted Debt Prepayment.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of
any real or tangible personal Property, which Property has been or is to be
sold or transferred by the Company or such Subsidiary to such Person in
contemplation of such leasing.
"S&P" means Standard & Poor's Corporation and its successors.
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the
same functions.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act as such Regulation is in effect on the Issue
Date.
"Stock Payment" means, with respect to any Person, (i) the declaration or
payment by such Person, directly or indirectly, either in cash or in property,
of any dividend on, or the making of any distribution in respect of, such
Person's Equity Interests (except in the case of the Company, dividends payable
solely in Qualified Capital Stock of the Company), or (ii) the redemption,
repurchase, retirement or other acquisition for value by such Person, directly
or indirectly, of such Person's Equity Interests, or the Equity Interests of
such Person's Subsidiaries or other Affiliates; provided, however, that in the
case of a Subsidiary of the Company, the term Stock Payment shall not include
any such payment with respect to its Equity Interests if such payment is made
solely to the Company.
<PAGE> 26
-19-
"Subordinated Obligations" means any Indebtedness of the Issuers (whether
outstanding on the Issue Date or thereafter incurred) which, by its terms
pursuant to a written agreement, is subordinate or junior in right of payment
to the Notes.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is, at the date of determination, directly or
indirectly, owned by such Person, by one or more subsidiaries of such Person or
by such Person and one or more subsidiaries of such Person, (ii) a partnership
in which such Person or a subsidiary of such Person is, at the date of
determination, a general or limited partner of such partnership, but only if
such Person or its subsidiary is entitled to receive more than 50% of the
assets of such partnership upon its dissolution, or (iii) any limited liability
company or any other Person (other than a corporation or a partnership) in
which such Person, a subsidiary of such Person or such Person and one or more
subsidiaries of such Person, directly or indirectly, at the date of
determination, has (a) at least a majority ownership interest or (b) the power
to elect or direct the election of a majority of the directors or other
governing body of such Person.
"Temporary Cash Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or of any
governmental agency or political subdivision thereof, maturing within 365 days
of the date of purchase; (ii) Investments in certificates of deposit issued by
a bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totalling more than $500,000,000 and rated at least A by S&P
and A-2 by Moody's maturing within 365 days of purchase; or (iii) Investments
not exceeding 365 days in duration in money market funds that invest
substantially all of such funds' assets in the Investments described in the
preceding clauses (i) and (ii).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Section Section
77aaa-77bbbb), as amended and as in effect from time to time.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or
<PAGE> 27
-20-
instrumentality thereof) for the payment of which the full faith and credit of
the United States of America is pledged and which are not callable at the
issuer's option.
"Voting Stock" means, with respect to (a) the Company, the Partnership
Interests of the General Partner, and (b) any Person other than the Company,
(i) one or more classes of the Capital Stock of such Person having general
voting power to elect at least a majority of the Board of Directors of such
Person (irrespective of whether or not at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency) and (ii) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the Holder thereof into
Capital Stock of such Person described in clause (i) above.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment by (b) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which (and
all options, warrants or other rights to acquire any shares of such Capital
Stock or other ownership interests) shall at the time be owned by such Person
or by one or more Wholly Owned Subsidiaries of such Person or by such Person
and one or more Wholly Owned Subsidiaries of such Person.
Section 1.02. Other Definitions.
The definitions of the following terms may be found in the sections
indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
- ---- ------------------
<S> <C>
"Affiliate Transaction" ....................... 4.11
"Agent Members" ............................... 2.14
"Bankruptcy Law" .............................. 6.01
"Business Day" ................................ 11.08
"Change of Control Offer" ..................... 4.19
"Change of Control Payment Date" .............. 4.19
"Custodian" ................................... 6.01
</TABLE>
<PAGE> 28
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"Defeasance" .................................. 9.02
"Euroclear" .................................. 2.16(a)
"Event of Default" ............................ 6.01
"Excess Proceeds" ............................ 4.10
"Excess Proceeds Offer" ....................... 4.10
"Global Notes" ................................ 2.01
"Legal Holiday" ............................... 11.08
"Offer Period" ................................ 4.10
"Other Notes" ................................. 2.02
"Paying Agent" ................................ 2.03
"Payment Default" ............................. 6.01
"Purchase Date" ............................... 4.10
"Registrar" ................................... 2.04
"Regulation S Global Notes" ................... 2.16(a)
"Regulation S Notes" .......................... 2.02
"Restricted Global Note" ...................... 2.16(a)
"Rule 144A Notes" ............................. 2.02
Section 1.03. Incorporation by Reference of
Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on this Indenture securities" means the Company, the
Guarantors or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by SEC rule have
the meanings therein assigned to them.
<PAGE> 29
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) words used herein implying any gender shall apply to every
gender; and
(6) whenever in this Indenture there is mentioned, in any context,
Principal, interest or any other amount payable under or with respect to
any Note, such mention shall be deemed to include mention of the payment
of Additional Interest to the extent that, in such context, Additional
Interest is, was or would be payable in respect thereof.
ARTICLE 2
THE NOTES
Section 2.01. Amount of Notes.
The Trustee shall authenticate Notes for original issue on the Issue
Date in the aggregate principal amount of $100,000,000, upon a written order of
the Company in the form of an Officers' Certificate of the Company. Such
written order shall specify the amount of Notes to be authenticated and the date
on which the Notes are to be authenticated.
Upon receipt of a Company Request and an Officers' Certificate
certifying that a registration statement relating to an exchange offer specified
in the Registration Rights Agreement or, with respect to Notes issued under the
Indenture subsequent to the Issue Date, a registration rights agreement
substantially identical to the Registration Rights Agreement, is effective and
that the conditions precedent to a private exchange thereunder have been met,
the Trustee shall authenticate an additional series of
<PAGE> 30
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Notes in an aggregate principal amount not to exceed $100.0 million for issuance
in exchange for the Notes tendered for exchange pursuant to such exchange offer
registered under the Securities Act not bearing the Private Placement Legend or
pursuant to a Private Exchange. Exchange Notes or Private Exchange Notes may
have such distinctive series designations and such changes in the form thereof
as are specified in the Company Request referred to in the preceding sentence.
Section 2.02. Form and Dating.
The Notes and the Trustee's certificate of authentication with respect
thereto shall be substantially in the form set forth in Exhibit A, which is
incorporated in and forms a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, rule or usage to which the
Issuers are subject. Any such notations, legends or endorsements shall be
furnished to the Trustee in writing. Without limiting the generality of the
foregoing, Notes offered and sold to Qualified Institutional Buyers in reliance
on Rule 144A ("Rule 144A Notes") shall bear the legend and include the form of
assignment set forth in Exhibit B, Notes offered and sold in offshore
transactions in reliance on Regulation S ("Regulation S Notes") shall bear the
legend and include the form of assignment set forth in Exhibit C, and Notes
offered and sold to Institutional Accredited Investors in transactions exempt
from registration under the Securities Act not made in reliance on Rule 144A or
Regulation S ("Other Notes") shall be represented by Physical Notes bearing the
Private Placement Legend. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the Notes shall constitute, and are
expressly made, a part of this Indenture and, to the extent applicable, the
Issuers and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and agree to be bound thereby.
The Notes may be presented for registration of transfer and exchange at
the offices of the Registrar.
Section 2.03. Execution and Authentication.
Two Officers shall sign, or one Officer shall sign and one Officer (each
of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Notes for each of the Issuers by manual
or facsimile signature.
<PAGE> 31
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If an Officer whose signature is on a Note was an Officer at the time of
such execution but no longer holds that office at the time the Trustee
authenticates the Note, the Note shall be valid nevertheless.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder. Notwithstanding the foregoing, if any
Note shall have been authenticated and delivered hereunder but never issued and
sold by the Issuers, and the Issuers shall deliver such Note to the Trustee for
cancellation as provided in Section 2.12, for all purposes of this Indenture
such Note shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Issuers to authenticate the Notes. Unless otherwise provided in the
appointment, an authenticating agent may authenticate the Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Issuers and Affiliates of the Issuers.
Each Paying Agent is designated as an authenticating agent for purposes of
this Indenture.
The Notes shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof.
Section 2.04. Registrar and Paying Agent.
The Issuers shall maintain an office or agency (which shall be located in
the Borough of Manhattan in The City of New York, State of New York) where
Notes may be presented for registration of transfer or for exchange (the
"Registrar"), and an office or agency where Notes may be presented for payment
(the "Paying Agent") and an office or agency where notices and demands to or
upon the Issuers, if any, in respect of the Notes and this Indenture may be
served. The Registrar shall keep a register of the Notes and of their transfer
and exchange. The Issuers may have one or more additional Paying Agents. The
term "Paying Agent" includes any additional Paying Agent. Neither the Issuers
nor any Affiliate thereof may act as Paying Agent.
<PAGE> 32
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The Issuers shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Issuers shall notify the Trustee of the name and
address of any such Agent. If the Issuers fail to maintain a Registrar or
Paying Agent, or fail to give the foregoing notice, the Trustee shall act as
such and shall be entitled to compensation in accordance with Section 7.07.
The Issuers initially appoint the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Notes and this
Indenture.
Section 2.05. Paying Agent to Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of the Noteholders
or the Trustee all money held by the Paying Agent for the payment of principal
of or premium or interest on the Notes (whether such money has been paid to it
by the Issuers or any other obligor on the Notes), and the Issuers and the
Paying Agent shall notify the Trustee of any default by the Issuers (or any
other obligor on the Notes) in making any such payment. Money held in trust by
the Paying Agent need not be segregated except as required by law and in no
event shall the Paying Agent be liable for any interest on any money received
by it hereunder. The Issuers at any time may require the Paying Agent to pay
all money held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any Event of Default
specified in Section 6.01(1) or (2), upon written request to the Paying Agent,
require such Paying Agent to pay forthwith all money so held by it to the
Trustee and to account for any funds disbursed. Upon making such payment, the
Paying Agent shall have no further liability for the money delivered to the
Trustee.
Section 2.06. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Noteholders. If the Trustee is not the Registrar, the Issuers shall
furnish to the Trustee at least five Business Days before each Interest Payment
Date, and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the
names and addresses of the Noteholders.
<PAGE> 33
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Section 2.07. Transfer and Exchange.
Subject to Sections 2.16 and 2.17, when Notes are presented to the
Registrar with a request from the Holder of such Notes to register a transfer
or to exchange them for an equal principal amount of Notes of other authorized
denominations, the Registrar shall register the transfer as requested. Every
Note presented or surrendered for registration of transfer or exchange shall be
duly endorsed or be accompanied by a written instrument of transfer in form
satisfactory to the Issuers and the Registrar, duly executed by the Holder
thereof or his attorneys duly authorized in writing. To permit registrations
of transfers and exchanges, the Issuers shall issue and execute and the Trustee
shall authenticate new Notes evidencing such transfer or exchange at the
Registrar's request. No service charge shall be made to the Noteholder for any
registration of transfer or exchange. The Issuers may require from the
Noteholder payment of a sum sufficient to cover any transfer taxes or other
governmental charge that may be imposed in relation to a transfer or exchange,
but this provision shall not apply to any exchange pursuant to Section 2.11,
3.06, 4.10, 4.16 or 8.05 (in which events the Issuers shall be responsible for
the payment of such taxes). The Issuers shall not be required to exchange or
register a transfer of any Note for a period of 15 days immediately preceding
the selection of Notes to be redeemed or any Note selected for redemption.
Any Holder of the Global Note shall, by acceptance of such Global Note,
agree that transfers of the beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in
the Global Note shall be required to be reflected in a book entry.
Each Holder of a Note agrees to indemnify the Issuers and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Note in violation of any provision of this Indenture and/or
applicable U.S. Federal or state securities law.
Except as expressly provided herein, neither the Trustee nor the Registrar
shall have any duty to monitor the Issuer's compliance with or have any
responsibility with respect to the Issuer's compliance with any Federal or
state securities laws.
Section 2.08. Replacement Notes.
If a mutilated Note is surrendered to the Registrar or the Trustee, or if
the Holder of a Note claims that the Note has
<PAGE> 34
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been lost, destroyed or wrongfully taken, the Issuers shall issue and the
Trustee shall authenticate a replacement Note if the Holder of such Note
furnishes to the Issuers and the Trustee evidence reasonably acceptable to them
of the ownership and the destruction, loss or theft of such Note and if the
requirements of Section 8-405 of the New York Uniform Commercial Code as in
effect on the date of this Indenture are met. If required by the Trustee or the
Issuers, an indemnity bond shall be posted, sufficient in the judgment of both
to protect the Issuers, the Trustee or any Paying Agent from any loss that any
of them may suffer if such Note is replaced. The Issuers may charge such Holder
for the Issuers' reasonable out-of-pocket expenses in replacing such Note and
the Trustee may charge the Issuers for the Trustee's expenses (including,
without limitation, attorneys' fees and disbursements) in replacing such Note.
Every replacement Note shall constitute an additional contractual obligation of
the Issuers.
Section 2.09. Outstanding Notes.
The Notes outstanding at any time are all Notes that have been
authenticated by the Trustee except for (a) those cancelled by it, (b) those
delivered to it for cancellation, (c) to the extent set forth in Sections 9.01
and 9.02, on or after the date on which the conditions set forth in Section
9.01 or 9.03 have been satisfied, those Notes theretofore authenticated and
delivered by the Trustee hereunder and (d) those described in this Section 2.09
as not outstanding. Subject to Section 2.10, a Note does not cease to be
outstanding because an Issuer or one of either of its Affiliates holds the
Note.
If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee receives written notice that the replaced Note
is held by a bona fide purchaser in whose hands such Note is a legal, valid and
binding obligation of the Issuers.
If the Paying Agent holds, in its capacity as such, on any Maturity Date
or on any optional redemption date, money sufficient to pay all accrued
interest and principal with respect to the Notes payable on that date and is
not prohibited from paying such money to the Holders thereof pursuant to the
terms of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
Section 2.10. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any declaration of accel-
<PAGE> 35
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eration or notice of default or direction, waiver or consent or any amendment,
modification or other change to this Indenture, Notes owned by an Issuer or any
other Affiliate of an Issuer shall be disregarded as though they were not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such declaration, notice, direction, waiver
or consent or any amendment, modification or other change to this Indenture,
only Notes as to which a Responsible Officer of the Trustee has received an
Officers' Certificate stating that such Notes are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith shall not be
disregarded if the pledgee establishes the pledgee's right so to act with
respect to the Notes and that the pledgee is not either of the Issuers, any
other obligor on the Notes or any of their respective Affiliates.
Section 2.11. Temporary Notes.
Until definitive Notes are prepared and ready for delivery, the Issuers
may prepare and the Trustee shall authenticate temporary Notes. Temporary
Notes shall be substantially in the form of definitive Notes but may have
variations that the Issuers consider appropriate for temporary Notes. Without
unreasonable delay, the Issuers shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
Section 2.12. Cancellation.
The Issuers at any time may deliver Notes to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall (subject to the
record-retention requirements of the Exchange Act) destroy cancelled Notes and
deliver a certificate of destruction thereof to the Issuers. The Issuers may
not reissue or resell, or issue new Notes to replace, Notes that the Issuers
have redeemed or paid, or that have been delivered to the Trustee for
cancellation.
Section 2.13. Defaulted Interest.
If the Issuers default on a payment of interest on the Notes, they shall
pay the defaulted interest, plus (to the extent permitted by law) any interest
payable on the defaulted interest, in accordance with the terms hereof, to the
Persons who are Note-
<PAGE> 36
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holders on a subsequent special record date, which date shall be at least five
Business Days prior to the payment date. The Issuers shall fix such special
record date and payment date and provide the Trustee at least 20 days notice of
the proposed amount of defaulted interest to be paid and the special payment
date and at the same time the Issuers shall deposit with the Trustee the
aggregate amount proposed to be paid in respect of such defaulted interest. At
least 15 days before such special record date, the Issuers shall mail to each
Noteholder a notice that states the special record date, the payment date and
the amount of defaulted interest, and interest payable on defaulted interest, if
any, to be paid. The Issuers may make payment of any defaulted interest in any
other lawful manner not inconsistent with the requirements (if applicable) of
any securities exchange on which the Notes may be listed and, upon such notice
as may be required by such exchange, if, after written notice given by the
Issuers to the Trustee of the proposed payment pursuant to this sentence, such
manner of payment shall be deemed practicable by the Trustee.
Section 2.14. CUSIP Number.
The Issuers in issuing the Notes may use a "CUSIP" number, and if so, such
CUSIP number shall be included in notices of redemption or exchange as a
convenience to Holders; provided, that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Issuers shall
promptly notify the Trustee of any such CUSIP number used by the Issuers in
connection with the issuance of the Notes and of any change in the CUSIP
number.
Section 2.15. Deposit of Moneys.
Prior to 10:00 a.m., New York City time, on each Interest Payment Date and
Maturity Date, the Issuers shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Trustee to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be. The principal and
interest on Global Notes shall be payable to the Depository or its nominee, as
the case may be, as the sole registered owner and the sole holder of the Global
Notes represented thereby. The principal and interest on Physical Notes shall
be payable at the office of the Paying Agent.
<PAGE> 37
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Section 2.16. Book-Entry Provisions for Global Notes.
(a) Rule 144A Notes initially shall be represented by one or more notes in
registered, global form without interest coupons (collectively, the "Restricted
Global Note"). Regulation S Notes initially shall be represented by one or
more notes in registered, global form without interest coupons (collectively,
the "Regulation S Global Note," and, together with the Restricted Global Note
and any other global notes representing Notes, the "Global Notes"). The Global
Notes shall bear legends as set forth in Exhibit D. The Global Notes initially
shall (i) be registered in the name of the Depository or the nominee of such
Depository, in each case for credit to an account of an Agent Member (or, in
the case of the Regulation S Global Notes, of Euroclear System ("Euroclear")
and Cedel Bank, S.A. ("CEDEL")), (ii) be delivered to the Trustee as custodian
for such Depository and (iii) bear legends as set forth in Exhibit B with
respect to Restricted Global Notes and Exhibit C with respect to Regulation S
Global Notes and Exhibit D.
Members of, or direct or indirect participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depository, or the Trustee as its custodian,
or under the Global Notes, and the Depository may be treated by the Issuers,
the Trustee and any agent of the Issuers or the Trustee as the absolute owner
of the Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Trustee or any agent of the Issuers or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfer in whole, but
not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in the Global Notes may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.17. In addition, a Global Note
shall be exchangeable for Physical Notes if (i) the Depository (x) notifies the
Issuers that it is unwilling or unable to continue as depository for such
Global Note and the Issuers thereupon fail to appoint a successor depository or
(y) has ceased to be a clearing agency registered under the Exchange Act, (ii)
the Issuers, at their option, notify the Trustee in writing that they elect to
cause the issuance of such Physical Notes or (iii) there shall have occurred
and be continuing a Default or an Event of De-
<PAGE> 38
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fault with respect to the Notes. In all cases, Physical Notes delivered in
exchange for any Global Note or beneficial interests therein shall be
registered in the names, and issued in any approved denominations, requested by
or on behalf of the Depository (in accordance with its customary procedures).
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the
Issuers shall execute, and the Trustee shall upon receipt of a written order
from the Issuers authenticate and make available for delivery, one or more
Physical Notes of like tenor and amount.
(d) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed
to be surrendered to the Trustee for cancellation, and the Issuers shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in writing in exchange for its beneficial
interest in the Global Notes, an equal aggregate principal amount of Physical
Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Note delivered in exchange
for an interest in a Global Note pursuant to paragraph (b), (c) or (d) shall,
except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section 2.17,
bear the Private Placement Legend or, in the case of the Regulation S Global
Note, the legend set forth in Exhibit C, in each case, unless the Issuers
determine otherwise in compliance with applicable law.
(f) On or prior to the 40th day after the later of the commencement of the
offering of the Notes represented by a Regulation S Global Note and the
original issue date of such Notes (such period through and including such 40th
day, the "Restricted Period"), a beneficial interest in the Regulation S Global
Note may be held only through Euroclear or CEDEL, as indirect participants in
DTC, unless transferred to a Person who takes delivery in the form of an
interest in the corresponding Restricted Global Note only upon receipt by the
Trustee of a written certification from the transferor to the effect that such
transfer is being made (i)(a) to a Person whom the transferor reasonably
believes is a Qualified Institutional Buyer in a transaction meeting the
requirements of Rule 144A or (b) pursuant to another exemption from the
registration requirements under the Securities Act which is
<PAGE> 39
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accompanied by an opinion of counsel regarding the availability of such
exemption and (ii) in accordance with all applicable securities laws of any
state of the United States or any other jurisdiction.
(g) Beneficial interests in the Restricted Global Note may be transferred
to a Person who takes delivery in the form of an interest in the Regulation S
Global Note, whether before or after the expiration of the Restricted Period,
only if the transferor first delivers to the Trustee a written certificate to
the effect that such transfer is being made in accordance with Rule 903 or 904
of Regulation S or Rule 144 (if available) and that, if such transfer occurs
prior to the expiration of the Restricted Period, the interest transferred will
be held immediately thereafter through Euroclear or CEDEL.
(h) Any beneficial interest in one of the Global Notes that is transferred
to a Person who takes delivery in the form of an interest in another Global
Note shall, upon transfer, cease to be an interest in such Global Note and
become an interest in such other Global Note and, accordingly, shall thereafter
be subject to all transfer restrictions and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such
an interest.
(i) The Holder of any Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
Section 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted Note
to any Institutional Accredited Investor which is not a QIB or to any Non-U.S.
Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Note, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after
, 1999 or such other date as such Note shall be freely transferable under
Rule 144 as certified in an Officer's Certificate or (y) (1) in the case
of a transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in
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the form of Exhibit E hereto or (2) in the case of a transfer to a
Non-U.S. Person (including a QIB), the proposed transferor has delivered
to the Registrar a certificate substantially in the form of Exhibit F
hereto; provided that in the case of a transfer of a Note bearing the
Private Placement Legend for a Note not bearing the Private Placement
Legend, the Registrar has received an Officers' Certificate authorizing
such transfer; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Registrar shall reflect on its books and records the date and an
increase in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note transferred or
the Issuers shall execute and the Trustee shall authenticate and make available
for delivery one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed registration of transfer of a Note
constituting a Restricted Note to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for
on such Holder's Note stating, or has otherwise advised the Issuers and
the Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on such Holder's Note stating, or has
otherwise advised the Issuers and the Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Issuers as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the trans-
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feror is relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Restricted Global Note, upon receipt by
the Registrar of instructions given in accordance with the Depository's
and the Registrar's procedures, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of the
Restricted Global Note in an amount equal to the principal amount of the
Physical Notes to be transferred, and the Trustee shall cancel the
Physical Notes so transferred.
(c) Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) it has received the Officers' Certificate
required by paragraph (a)(i)(x) of this Section 2.17, (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Issuers to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act or (iii) such Note has been sold pursuant to an effective registration
statement under the Securities Act and the Registrar has received an Officers'
Certificate from the Issuers to such effect.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain for a period of two years copies of all
letters, notices and other written communications received pursuant to Section
2.16 or this Section 2.17. The Issuers shall have the right (at the expense of
the Issuers) to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
notice to the Registrar.
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Section 2.18. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360-day year of
twelve 30-day months.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Issuers elect to redeem Notes pursuant to paragraph 5 of the Notes,
at least 45 days prior to the Redemption Date the Issuers shall notify the
Trustee in writing of the Redemption Date, the principal amount of Notes to be
redeemed and the redemption price, and deliver to the Trustee an Officers'
Certificate stating that such redemption will comply with the conditions
contained in paragraph 5 of the Notes, as appropriate.
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
In the event that fewer than all of the Notes are to be redeemed, the
Trustee shall select the Notes to be redeemed, on a pro rata basis or by lot,
or such other method as it shall deem fair and equitable. The Trustee shall
promptly notify the Issuers of the Notes selected for redemption and, in the
case of any Notes selected for partial redemption, the principal amount thereof
to be redeemed. The Trustee may select for redemption portions of the
principal of the Notes that have denominations larger than $1,000. Notes and
portions thereof the Trustee selects shall be redeemed in amounts of $1,000 or
whole multiples of $1,000. For all purposes of this Indenture unless the
context otherwise requires, provisions of this Indenture that apply to Notes
called for redemption also apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
At least 30 days, and no more than 60 days, before a Redemption Date, the
Issuers shall mail, or cause to be mailed, a notice of redemption by
first-class mail to each Holder of Notes to be redeemed at his or her last
address as the same appears on the registry books maintained by the Registrar
pursuant to Section 2.04 hereof.
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The notice shall identify the Notes to be redeemed (including the
CUSIP numbers thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of premium and accrued
interest to be paid;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date and upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that unless the Issuers default in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date;
(7) the provision of paragraph 5 of the Notes pursuant to which the
Notes called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being redeemed.
At the Issuers' written request made at least five Business Days
prior to the date on which notice is to be given, the Trustee shall give the
notice of redemption in the Issuers' name and at the Issuers' sole expense.
Section 3.04. Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.03 is mailed,
Notes called for redemption become due and payable on the Redemption Date and at
the redemption price, including any premium, plus interest accrued to the
Redemption Date. Upon surrender to the Paying Agent, such Notes shall be paid
at the redemption price, including any premium, plus interest accrued to the
Redemption Date, provided that if the Redemption Date is after a regular record
date and on or prior to the Interest Payment Date, the accrued interest shall be
payable to the Holder of the redeemed Notes registered on the relevant record
date, and provided, further, that if a Redemption Date is a Legal Holiday,
pay-
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ment shall be made on the next succeeding Business Day and no interest shall
accrue for the period from such Redemption Date to such succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
On or prior to 10:00 A.M., New York City time, on each Redemption Date,
the Issuers shall deposit with the Paying Agent in immediately available funds
money sufficient to pay the redemption price of and accrued interest on all
Notes to be redeemed on that date other than Notes or portions thereof called
for redemption on that date which have been delivered by the Issuers to the
Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay the
redemption price of and accrued interest on Notes called for redemption shall
have been made available in accordance with the preceding paragraph, the Notes
called for redemption will cease to accrue interest and the only right of the
Holders of such Notes will be to receive payment of the redemption price of
and, subject to the first proviso in Section 3.04, accrued and unpaid interest
on such Notes to the Redemption Date. If any Note surrendered for redemption
shall not be so paid, interest will be paid, from the Redemption Date until
such redemption payment is made, on the unpaid principal of the Note and any
interest not paid on such unpaid principal, in each case, at the rate and in
the manner provided in the Notes.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for a Holder a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Issuers shall, jointly and severally, pay the principal of and
interest (including all Additional Interest as provided in the Registration
Rights Agreement) on the Notes on the dates and in the manner provided in the
Notes and this Indenture. An installment of principal or interest shall be
considered paid
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on the date it is due if the Trustee or Paying Agent holds on
that date money designated for and sufficient to pay such installment.
The Issuers shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.
Section 4.02. SEC Reports.
(a) The Issuers will file with the SEC all information, documents and
reports to be filed with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act, in the case of the Company, whether or not the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act, and in the case of Finance Corp., only to the extent subject to such
filing requirements. The Issuers (at their own expense) will file with the
Trustee within 15 days after they file them with the SEC, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Issuers file with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act. Upon qualification of this Indenture under the TIA, the
Issuers shall also comply with the provisions of TIA Section 314(a). Delivery
of such reports, information and documents to the Trustee is for informational
purposes only and the Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Issuers' compliance with any of
their covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officers' Certificates).
(b) At the Issuers' expense, regardless of whether the Issuers are
required to furnish such reports and other information referred to in paragraph
(a) above to their equityholders pursuant to the Exchange Act, the Company
shall cause such reports and other information to be mailed to the Holders at
their addresses appearing in the register of Notes maintained by the Registrar
within 15 days after they file them with the SEC.
(c) The Issuers shall, upon request, provide to any Holder of Notes or any
prospective transferee of any such Holder any information concerning the
Issuers (including financial statements) necessary in order to permit such
Holder to sell or transfer Notes in compliance with Rule 144A under the
Securities Act; provided, however, that the Issuers shall not be required to
furnish such information in connection with any request made on or after the
date which is two years from the later of (i) the date
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such Note (or any predecessor Note) was acquired from the Issuers or (ii) the
date such Note (or any predecessor Note) was last acquired from an "affiliate"
of the Issuers within the meaning of Rule 144 under the Securities Act.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
The Issuers covenant (to the extent that they may lawfully do so) that
they will not at any time insist upon, or plead (as a defense or otherwise) or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
Issuers from paying all or any portion of the principal of, premium, if any,
and/or interest on the Notes as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that they may lawfully do so)
the Issuers hereby expressly waive all benefit or advantage of any such law,
and covenant that they will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution
of every such power as though no such law had been enacted.
Section 4.04. Compliance Certificate.
(a) The Issuers shall deliver to the Trustee, within 100 days after the
end of each fiscal year and on or before 50 days after the end of the first,
second and third quarters of each fiscal year, an Officers' Certificate (one of
the signers on behalf of each of the Issuers of which shall be the principal
executive officer, principal financial officer or principal accounting officer
of such Issuer) stating that a review of the activities of the Issuers and
their Subsidiaries during such fiscal year or fiscal quarter, as the case may
be, has been made under the supervision of the signing Officers with a view to
determining whether the Issuers have kept, observed, performed and fulfilled
their obligations under this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of his or her knowledge the
Issuers have kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and are not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults
or Events of Default of which he or she may have knowledge and what action they
are taking or propose to take with respect thereto) and that to the best of his
or her knowledge no event has occurred and remains in existence by reason of
which payments on account of the principal of or interest, if any, on the Notes
is prohibited
<PAGE> 47
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or if such event has occurred, a description of the event and what action the
Issuers are taking or propose to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.02 above shall be accompanied by a
written statement of the Issuers' independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention which would lead them to believe that the Issuers have violated
any provisions of this Article 4 or Article 5 of this Indenture or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly for any failure to obtain knowledge of any such violation.
(c) The Issuers will, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Issuers are taking or propose to take with respect
thereto.
(d) The Company's fiscal year currently ends on December 31. The Company
will provide notice to the Trustee of any change in its fiscal year.
Section 4.05. Taxes.
The Issuers shall, and shall cause each of their Subsidiaries to, pay
prior to delinquency all material taxes, assessments, and governmental levies
except as contested in good faith and by appropriate proceedings.
Section 4.06. Limitation on Incurrence of Indebtedness.
The Issuers shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, incur any Indebtedness (including
Acquired Debt) or issue any Disqualified Stock, except for Permitted
Indebtedness; provided, however, that if no Default or Event of Default with
respect to the Notes shall have occurred and be continuing, or shall occur as a
consequence of the incurrence of such Indebtedness, the Company may incur
Indebtedness and the Company and its Subsidiaries may issue Disqualified Stock
if, at the time of such incurrence or issuance and
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after giving effect to the incurrence of such Indebtedness (and any other
Indebtedness incurred since the end of the last full fiscal quarter or fiscal
year for which internal financial statements are available and the application
of the proceeds thereof), the ratio (the "Debt Ratio") of (a) the aggregate
principal amount of consolidated Indebtedness of the Company and its
Subsidiaries outstanding as of the end of the last full fiscal quarter or fiscal
year for which internal financial statements are available to (b) four times the
Pro Forma Consolidated Cash Flow of the Company and its Subsidiaries for the
last full fiscal quarter immediately preceding the date of the incurrence,
determined on a pro forma basis as if any such Indebtedness had been incurred
and the proceeds thereof had been applied at the beginning of such preceding
fiscal quarter ("Pro Forma Annual Cash Flow"), would be less than or equal to
(i) 6.75 to 1.0 if the date of such incurrence is on or before September 30,
1999 and (ii) 6.50 to 1.0 thereafter; provided that this covenant shall not
apply to the incurrence of Indebtedness by the Company so long as all of the
proceeds of such Indebtedness are applied to the repurchase of outstanding Notes
by the Company pursuant to an offer to purchase Notes pursuant to (x) Article 3
of this Indenture and paragraph 5 of the Notes or (y) a tender offer made to all
Holders of the Notes effected in accordance with all federal and state
securities laws, including, without limitation, Rule 14e-1 under the Exchange
Act and any other applicable federal or state regulations.
The foregoing limitations will not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"): (a) Indebtedness under the
New Bank Credit Facility in an aggregate principal amount not to exceed $30
million in principal amount at any one time outstanding, less the amount of all
permanent reductions in the outstanding borrowings and related commitments
under the New Bank Credit Facility resulting from any application of Net Cash
Proceeds from any Asset Sale after the Issue Date (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability of
the Company thereunder); (b) the incurrence by the Issuers of Existing
Indebtedness; (c) the incurrence by the Issuers of the Indebtedness represented
by the Notes; (d) the incurrence of Permitted Refinancing Indebtedness; (e)
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding; (f) the incurrence
by the Company of Indebtedness represented by Capital Lease Obligations,
mortgage financings, or Purchase Money Obligations, in each case incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property used in the business of the Company in
an aggregate principal
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amount not to exceed $2,500,000 at any one time outstanding; (g) guarantees by
any Subsidiary of Indebtedness of the Company; and (h) other Indebtedness of the
Company, including any Indebtedness under the New Bank Credit Facility that
utilizes this clause, having an aggregate principal amount not to exceed
$2,500,000 at any time outstanding.
Section 4.07. Limitation on Preferred Stock of Subsidiaries.
The Company shall not permit any Subsidiary to issue any Preferred Stock
(except Preferred Stock to the Company or a Subsidiary) or permit any Person
(other than the Company or a Subsidiary) to hold any such Preferred Stock
unless the Company or such Subsidiary would be entitled to incur or assume
Indebtedness (other than Permitted Indebtedness) under the first paragraph of
Section 4.06 in the aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
Section 4.08. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
The Issuers shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any Payment Restriction, except for such Payment
Restrictions existing under or by reason of (i) the New Bank Credit Facility,
(ii) this Indenture or the Notes, (iii) applicable law, (iv) any instrument
governing Indebtedness of a Person acquired by the Company or any of its
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired; provided that the Consolidated
Cash Flow of such Person, to the extent that it is subject to an effective
Payment Restriction and has not been paid or made available to the Company, is
not taken into account in determining whether such acquisition was permitted by
the terms of this Indenture, (v) by reason of customary nonassignment
provisions in leases or franchise agreements entered into in the ordinary
course of business and consistent with past practices, (vi) Purchase Money
Obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (i)(c) of the definition
of "Payment Restriction" on the property so acquired, or (vii) Permitted
Refinancing Indebtedness with respect to the Indebtedness referred to in
clauses (i), (ii) or (iv) above; provided that the Payment Restrictions
contained in
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the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
Section 4.09. Limitation on Restricted Payments.
The Issuers shall not, nor shall the Company permit any of its
Subsidiaries to, directly or indirectly, make any Restricted Payment unless, at
the time of any such Restricted Payment and after giving effect thereto on a
pro forma basis:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) the Company would have been permitted to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under Section
4.06; and
(c) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Subsidiaries (the
value of any such payment, if other than cash, being determined by the
Board of Directors of the Company and evidenced by a Board Resolution set
forth in an Officers' Certificate delivered to the Trustee) since the
Issue Date is less than the sum of (a) the difference between (x) 100% of
cumulative Consolidated Cash Flow for the period (taken as one accounting
period) from the end of the first fiscal quarter during which the Issue
Date occurs to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available and (y)
140% of cumulative Consolidated Interest Expense for the period (taken as
one accounting period) from the end of the first fiscal quarter during
which the Issue Date occurs to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are
available, plus (b) 100% of the aggregate Net Equity Proceeds received by
the Company from any Person (other than a Subsidiary of the Company)
subsequent to the Issue Date and on or prior to the time of such
Restricted Payment, from the issuance and sale of Qualified Capital Stock
(other than (1) Qualified Capital Stock paid as a dividend on any Capital
Stock or as interest on any Indebtedness or (2) any such Net Equity
Proceeds from issuances and sales financed directly or indirectly using
funds borrowed from the Company or any Subsidiary, until and to the
extent such borrowing is repaid).
The provisions of this covenant shall not prohibit (i) the payment
of any dividend within 60 days after the date of dec-
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laration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture; (ii) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of Qualified
Capital Stock of the Company, (iii) the defeasance, redemption or repurchase of
Indebtedness of the Company which is subordinate to the Notes, with an
incurrence of Permitted Refinancing Indebtedness, (iv) the payment of any
dividend or distribution on Equity Interests of the Company or any Subsidiary
of the Company to the extent necessary to permit the direct or indirect
beneficial owners of such Equity Interests to pay federal and state income tax
liabilities arising from income of the Company or such Subsidiary and
attributable to them solely as a result of the Company or such Subsidiary (and
any intermediate entity through which such holder owns such Equity Interests)
being a partnership or similar pass-through entity for federal income tax
purposes, and (v) the payment of annual fees for management services to the
General Partner pursuant to the terms of the Partnership Agreement as currently
in effect on the Issue Date (including any extensions of such agreement on
terms substantially the same as those in existence on the Issue Date) and in
any event not to exceed in any fiscal year 4% of the Company's annual revenues
plus $5.00 multiplied by the average aggregate number of subscribers to the
Systems owned by the Company during such year; in the case of an event under
clause (ii) or (iii) above (but not in the case of an event under clause (i),
(iv) or (v) above), provided that no Default or Event of Default shall have
occurred and be continuing. In determining the amount of Restricted Payments
permissible under this covenant, amounts expended pursuant to clause (i) above
shall be included as Restricted Payments.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.09 were computed, which calculations
may be based upon the Company's latest available financial statements.
Section 4.10. Limitation on Certain Asset Sales.
(a) The Issuers shall not, and the Company shall not permit any of its
Subsidiaries to, consummate any Asset Sale unless (i) such Issuer (or the
Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the assets sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by
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such Issuer or Subsidiary consists of (1) cash or Temporary Cash Investments or
(2) properties and capital assets (including franchises and licenses required to
own and operate such properties) to be used in the same lines of business being
conducted by such Issuer or Subsidiary at such time, or Equity Interests in one
or more Persons which thereby become Wholly Owned Subsidiaries of the Company
whose assets consist primarily of such properties and capital assets; provided,
however, that the amount of (x) any liabilities (as shown on such Issuer's or
such Subsidiary's most recent balance sheet or in the notes thereto), of such
Issuer or any Subsidiary of the Company (other than liabilities that are by
their terms subordinated to the Notes or any guarantee thereof) that are assumed
by the transferee of any such assets and (y) any notes or other obligations
received by such Issuer or any such Subsidiary of the Company from such
transferee that are immediately converted by such Issuer or such Subsidiary into
cash (to the extent of the cash received), shall be deemed to be cash for the
purposes of this provision.
(b) Within 365 days after any Asset Sale, such Issuer or Subsidiary of the
Company, as the case may be, may either (i) apply such Net Cash Proceeds to
permanently reduce outstanding borrowings and related commitments under the New
Bank Credit Facility or (ii) commit to apply the Net Cash Proceeds from such
Asset Sale to a Related Business Investment; provided that any Net Cash
Proceeds that are committed to be used pursuant to this clause (ii) are so used
within 365 days after any Asset Sale. Pending the final application of any
such Net Cash Proceeds, the Issuers may temporarily reduce Indebtedness under
the New Bank Credit Facility or otherwise invest such Net Cash Proceeds in any
manner that is not prohibited by this Indenture. Any Net Cash Proceeds from an
Asset Sale that are not applied or invested as provided in the first sentence
of this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $3 million, the Issuers shall
commence an offer to all Holders of Notes (an "Asset Sale Offer") to purchase
the maximum principal amount of Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase, in accordance with the procedures set forth in this Indenture.
(c) If the Issuers are required to make an Asset Sale Offer, the Issuers
shall mail, within 30 days after the date on which the aggregate amount of
Excess Proceeds exceeds $3 million, a notice to the Holders (with a copy to the
Trustee) stating, among other things: (i) that such Holders have the right to
require the Issuers to apply the Excess Proceeds to repurchase such
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Notes at a purchase price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase; (ii) the
purchase date (the "Purchase Date"), which shall be no earlier than 30 days and
not later than 40 days from the date such notice is mailed; (iii) the
instructions, determined by the Issuers, that each Holder must follow in order
to have such Notes repurchased; and (iv) the calculations used in determining
the amount of Excess Proceeds to be applied to the repurchase of such Notes.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement (the "Offer Period"). The notice, which shall govern
the terms of the Excess Proceeds Offer, shall state:
(1) that the Asset Sale Offer is being made pursuant to this Section
4.10 and the length of time the Asset Sale Offer will remain open;
(2) the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment will continue
to accrue interest;
(4) that any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest on and after the Purchase Date and
the deposit of the purchase price with the Trustee;
(5) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Issuers, a depositary, if appointed by the Issuers, or
a Paying Agent at the address specified in the notice prior to the close
of business on the Business Day preceding the Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Issuers, depositary or Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have the Note purchased;
(7) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Excess Proceeds, the Issuers shall select the Notes
to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Is-
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suers so that only Notes in denominations of $1,000, or integral
multiples thereof, shall be purchased); and
(8) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered.
On or before the Purchase Date, the Issuers shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, Notes
or portions thereof tendered pursuant to the Asset Sale Offer, deposit with the
Paying Agent U.S. legal tender sufficient to pay the purchase price plus accrued
interest, if any, on the Notes to be purchased and deliver to the Trustee an
Officers' Certificate stating that such Notes or portions thereof were accepted
for payment by the Issuers in accordance with the terms of this Section 4.10.
The Paying Agent shall promptly (but in any case not later than 5 days after the
Purchase Date) mail or deliver to each tendering Holder an amount equal to the
purchase price of the Note tendered by such Holder and accepted by the Issuers
for purchase, and the Issuers shall promptly issue a new Note, the Guarantors
shall endorse the Guarantee thereon and the Trustee shall authenticate and mail
or make available for delivery such new Note to such Holder equal in principal
amount to any unpurchased portion of the Note surrendered. Any Note not so
accepted shall be promptly mailed or delivered by the Issuers to the Holder
thereof. The Issuers will publicly announce the results of the Excess Proceeds
Offer on the Purchase Date by sending a press release to the Dow Jones News
Service or similar business news service in the United States. If an Asset Sale
Offer is not fully subscribed, the Issuers may retain that portion of the Excess
Proceeds not required to repurchase Notes.
The Issuers shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer. Upon completion of any
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Section 4.11. Limitation on Transactions with Affiliates.
The Issuers shall not, and the Company shall not permit any of its
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are
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no less favorable to the Company or the relevant Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person; (b) such Affiliate Transaction relates to
and is in furtherance of the lines of business the Company was engaged in on the
Issue Date or as the Company's business has thereafter evolved in the fields of
cable television systems, enhanced video services, advanced telecommunications
services, such as broadband high speed Internet access and inter- and
intra-network data services, and telephony; (c) in the case of any such
Affiliate Transaction involving aggregate payments in excess of $3 million, the
Company delivers to the Trustee a resolution of the Partnership Advisory Board
set forth in an Officers' Certificate certifying that (i) such Affiliate
Transaction complies with clauses (a) and (b) above, (ii) such Affiliate
Transaction is in the best interests of the Company or the relevant Subsidiary
and (iii) such Affiliate Transaction is approved by a majority of the
disinterested members of the Partnership Advisory Board; and (d) with respect to
any Affiliate Transaction involving aggregate payments in excess of $5 million,
an opinion as to the fairness to the Company or the applicable Subsidiary from a
financial point of view which is issued by an investment banking firm of
national standing.
The provisions in the foregoing paragraph shall not apply to (i) annual
fees for management services to the General Partner pursuant to the terms of
the Partnership Agreement as in effect on the Issue Date (including any
extensions of such agreement on terms substantially the same as those in
existence on the Issue Date) and in any event not to exceed in any fiscal year
4% of the Company's annual revenues plus $5.00 multiplied by the average
aggregate number of subscribers to the Systems owned by the Company during such
year, (ii) transactions between or among the Company and/or its Wholly Owned
Subsidiaries and (iii) transactions permitted by Section 4.09. In addition,
the provisions of this covenant shall not apply to the 1994 Incentive
Compensation Agreement between the Company and the General Partner; provided
that (i) the payment of any amounts pursuant to such 1994 Incentive
Compensation Agreement shall not be payable prior to the earliest to occur of:
(a) the date all principal, premium, if any, or interest on the Notes has been
indefeasibly paid in full, or (b) in the event of the occurrence of a Change of
Control, the Change of Control Payment Date, provided that all Notes properly
tendered for payment on said date have been purchased, or (c) any other date on
which the Incentive Fee has been earned and is payable to the General Partner
under the 1994 Incentive Compensation Agreement, so long as such payment is
permitted by Section 4.09; and (ii) any claim to such amounts is subordinated
until the date permitted to be paid under clause (i)(a), (i)(b) or (i)(c) above
to
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the prior repayment in full of all principal, premium, if any, or interest on
the Notes.
Section 4.12. Limitation on Liens.
The Issuers shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or otherwise
cause or suffer to exist or become effective any Lien of any kind (other than
Permitted Liens) upon any of their property or assets, now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, unless (i) if such Lien secures Indebtedness which is
pari passu with the Notes, then the Notes are secured on an equal and ratable
basis with the obligation so secured until such time as such obligation is no
longer secured by a Lien or (ii) if such Lien secures Indebtedness which is
subordinated to the Notes, any such Lien shall be subordinated to the Lien
granted to the holders of the Notes to the same extent as such Indebtedness is
subordinated to the Notes.
Section 4.13. Limitation on Conduct of Finance Corp.
Finance Corp. shall not hold any operating assets or other properties or
conduct any business other than to serve as an Issuer and co-obligor with
respect to the Notes and will not own any Capital Stock of any other Person.
Section 4.14. Limitation on Creation of Subsidiaries.
Neither Issuer shall create or acquire, or permit any of its Subsidiaries
to create or acquire, any Subsidiary other than (i) Finance Corp. and (ii) any
Subsidiary of the Company that shall, at the time it has either assets or net
worth in excess of $5,000, execute a Guarantee, in the form attached to this
Indenture and reasonably satisfactory in form and substance to the Trustee (and
with such documentation relating thereto as the Trustee shall require,
including, without limitation a supplement or amendment to this Indenture and
Opinions of Counsel as to the enforceability of such Guarantee).
Section 4.15. Legal Existence.
Subject to Article 5 hereof, the Issuers shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) their legal
existence, and the corporate, partnership or other existence of each
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and the rights
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(charter and statutory), licenses and franchises of the Issuers and their
Subsidiaries; provided, however, that the Issuers shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of their Subsidiaries if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Issuers and their Subsidiaries, taken as a
whole, and that the loss thereof is not adverse in any material respect to the
Holders.
Section 4.16. Change of Control.
(a) Within 30 days of the occurrence of a Change of Control, the
Company shall notify the Trustee in writing of such occurrence and shall make an
offer to purchase (the "Change of Control Offer") the outstanding Notes at a
purchase price equal to 101% of the principal amount thereof plus any accrued
and unpaid interest thereon to the Change of Control Payment Date (such
applicable purchase price being hereinafter referred to as the "Change of
Control Purchase Price") in accordance with the procedures set forth in this
Section 4.16.
(b) Within 30 days of the occurrence of a Change of Control, the
Company also shall (i) cause a notice of the Change of Control Offer to be sent
at least once to the Dow Jones News Service or similar business news service in
the United States and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each Holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.16 and that all Notes tendered will be accepted for payment,
and otherwise subject to the terms and conditions set forth herein;
(ii) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 20 Business Days from the
date such notice is mailed (the "Change of Control Payment Date"));
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the Change
of Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change
of Control Payment Date;
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(v) that Holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(vi) that Holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have such
Notes purchased;
(vii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, provided that each Note purchased and
each such new Note issued shall be in an original principal amount in
denominations of $1,000 and integral multiples thereof;
(viii) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance;
(ix) the name and address of the Paying Agent; and
(x) in the event the incentive fee has been earned and is
payable to the General Partner of the Company under the terms of the 1994
Incentive Compensation Agreement, that the Incentive Fee will be paid to
the General Partner on the Change of Control Payment Date after payment of
all Notes tendered pursuant to the Change of Control Offer, and the pro
forma effects of such payment on the Company's financial statements, with
differing percentages of Notes being tendered and offered for payment.
On the Change of Control Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent of
all Notes or portions thereof so tendered, and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the Notes or portions thereof tendered to the Company. The
Paying Agent shall promptly mail to each Holder of Notes so accepted the Change
of Control Payment for such Notes,
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and the Trustee shall promptly authenticate and mail to each Holder, a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered;
provided that each such new Note shall be in a principal amount of $1,000 or an
integral multiple thereof. In addition, in the event of any Change of Control,
the Issuers will not, and the Company will not permit any of its Subsidiaries
to, purchase or otherwise redeem any Indebtedness ranking junior to the Note
pursuant to any analogous provisions, or pay any Incentive Fee payable to the
General Partner of the Company under the terms of the 1994 Incentive
Compensation Agreement, on or prior to the date that all Notes tendered pursuant
to a Change of Control Offer have been accepted for payment and the necessary
Change of Control Payment has been irrevocably deposited with the Paying Agent.
(c) (i) If the Company or any Subsidiary thereof has issued any
outstanding (A) Indebtedness that is subordinated in right of payment to the
Notes or (B) Preferred Stock, and the Company or such Subsidiary is required to
make a Change of Control Offer or to make a distribution with respect to such
subordinated Indebtedness or Preferred Stock in the event of a Change of
Control, the Issuers shall not consummate any such offer or distribution with
respect to such subordinated Indebtedness or Preferred Stock until such time as
the Company shall have paid the Change of Control Purchase Price in full to the
holders of Notes that have accepted the Company's Change of Control Offer and
otherwise have consummated the Change of Control Offer made to holders of the
Notes and (ii) the Company will not issue Indebtedness that is subordinated in
right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock prior
to the payment of the Notes in the event of a Change in Control under the
Indenture.
In the event that a Change of Control occurs and the Holders of Notes
exercise their right to require the Issuers to purchase Notes, if such purchase
constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act
at that time, the Issuers will comply with the requirements of Rule 14e-1 as
then in effect with respect to such repurchase.
Section 4.17. Maintenance of Office or Agency.
The Issuers shall maintain an office or agency where Notes may be
surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Issuers in respect of the
Notes and this Indenture may be served. The Issuers shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
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office or agency. If at any time the Issuers shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee as set forth in Section 11.02.
The Issuers may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations. The Issuers
shall give prompt written notice to the Trustee of such designation or
rescission and of any change in the location of any such other office or
agency.
The Issuers hereby initially designate the Corporate Trust Office of the
Trustee set forth in Section 11.02 as such office of the Issuers.
Section 4.18. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law.
(a) The Issuers shall, and the Company shall cause each of its
Subsidiaries to, at all times cause all material properties used or useful in
the conduct of their business to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied with
all necessary equipment, and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereto.
(b) The Issuers shall, and the Company shall cause each of its
Subsidiaries to, maintain insurance (which may include self-insurance) in such
amounts and covering such risks as are usually and customarily carried with
respect to similar facilities according to their respective locations.
(c) The Issuers shall, and the Company shall cause each of its
Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Issuers and each Subsidiary of the Company, in accordance with
GAAP consistently applied to the Issuers and such Subsidiaries taken as a
whole.
(d) The Issuers shall and the Company shall cause each of its Subsidiaries
to comply with all statutes, laws, ordinances or government rules and
regulations to which they are subject, non-compliance with which would
materially adversely affect the business, prospects, earnings, properties,
assets or financial condition of the Issuers and the Company's Subsidiaries
taken as a whole.
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Section 4.19. Further Assurance to the Trustee.
The Issuers shall, upon the reasonable request of the Trustee, execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the provisions of this
Indenture.
Section 4.20. Limitation on Sale and Lease-Back Transactions.
The Issuers shall not, and the Company shall not permit any of its
Subsidiaries to, enter into any Sale and Lease-Back Transaction unless (i) the
consideration received in such Sale and Lease-Back Transaction is at least
equal to the fair market value of the property sold, as determined, in good
faith, by the Board of Directors of the Company and (ii) the Company could
incur the Attributable Indebtedness in respect of such Sale and Lease-Back
Transaction in compliance with Section 4.06.
Section 4.21. Payments for Consent.
Neither the Issuers nor any of the Guarantors shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all Holders of the Notes which so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and
Sale of Assets.
(a) Neither of the Issuers will, nor will they permit any Guarantor to,
consolidate with, merge with or into, or transfer all or substantially all of
its assets (as an entirety or substantially as an entirety in one transaction
or a series of related transactions), to any Person unless (in the case of the
Company or any Guarantor): (i) the Company or such Guarantor, as the case may
be, shall be the continuing Person, or the Person (if other than the Company or
such Guarantor) formed by such consoli-
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dation or into which the Company or such Guarantor, as the case may be, is
merged or to which the properties and assets of the Company or such Guarantor,
as the case may be, are transferred shall be a corporation (or in the case of
the Company, a corporation, a limited partnership, limited liability company or
a limited liability partnership) organized and existing under the laws of the
United States or any State thereof or the District of Columbia; provided that at
any time the Company or its successor is a limited partnership, limited
liability company or limited liability partnership there shall be a co-issuer of
the Notes that is a corporation; (ii) the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company or such
Guarantor) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company or such Guarantor, as the case may be, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Notes and this Indenture; (iii) immediately after such transaction no
Default or Event of Default exists; and (iv) the Company or such Guarantor or
any entity or Person formed by or surviving any such consolidation or merger, or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable period, be permitted to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the first paragraph
of Section 4.06; provided, however, that such Person shall not be required to
meet the Debt Ratio if such Person has, at the time of such transaction and
after giving pro forma effect thereto, a long-term indebtedness credit rating at
least equal to the greater of (i) BB by S&P or Ba(2) by Moody's or (ii) one full
credit rating above the Company's credit rating, provided the Company received
such credit rating within the 12 months preceding any such determination.
(b) In connection with any consolidation, merger or transfer of assets
contemplated by this Section 5.01, the Issuers shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this Section 5.01 and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
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Section 5.02. Successor Person Substituted.
Upon any consolidation or merger, or any transfer of all or substantially
all of the assets of the Company or any Guarantor in accordance with Section
5.01 above, the successor corporation formed by such consolidation or into
which the Company or such Guarantor is merged or to which such transfer is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company or such Guarantor under this Indenture with the same
effect as if such successor corporation had been named as the Company or such
Guarantor herein, and thereafter the predecessor corporation shall be relieved
of all obligations and covenants under this Indenture and the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if
(1) there is a default in the payment of any interest on any Note
when the same becomes due and payable and the Default continues for a
period of 30 days;
(2) there is a default in the payment of any principal of, or
premium, if any, on the Notes when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise including the
failure to repurchase Notes tendered pursuant to the requirements of
Sections 4.10 and 4.16;
(3) there is a failure by the Issuers to comply with the provisions
described under Sections 4.06, 4.07, 4.09, 4.10, 4.16 or 5.01;
(4) either of the Issuers defaults in the observance or performance
of any other covenant in the Notes or this Indenture for 60 days after
written notice from the Trustee or the Holders of not less than 25% in
the aggregate principal amount of the Notes then outstanding;
(5) there is a default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of
its Subsidiaries (or the pay-
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ment of which is guaranteed by the Company or any of its Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the
date of the Indenture, which default (a) is caused by a failure to pay
principal of or premium if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity without
such declaration having been rescinded or annulled within a period of 10
days, and in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5 million or more at any one time;
(6) failure by the Issuers or any of the Company's Subsidiaries to
pay final judgments aggregating in excess of $5 million (net of amounts
covered by reputable and creditworthy insurance companies) which
judgments are not paid, discharged or stayed for a period of 60 days;
(7) either of the Issuers, the General Partner or any Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not paying its debts as they become due; or
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against either of the Issuers, the General
Partner or any Significant Subsidiary in an involuntary case,
(B) appoints a Custodian of either of the Issuers, the General
Partner or any Significant Subsidiary or for
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all or substantially all of the property of either of the Issuers
or any Significant Subsidiary, or
(C) orders the liquidation of either of the Issuers, the
General Partner or any Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Section 6.02. Acceleration.
If an Event of Default (other than an Event of Default arising under
Section 6.01(7) or (8) with respect to either of the Issuers the General
Partner or any Significant Subsidiary) occurs and is continuing, the Trustee by
notice to the Issuers, or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may by written notice to the
Issuers and the Trustee declare to be immediately due and payable the entire
principal amount of all the Notes then outstanding plus accrued but unpaid
interest to the date of acceleration and such amounts shall become immediately
due and payable; provided, however, that after such acceleration but before a
judgment or decree based on such acceleration is obtained by the Trustee, the
Holders of a majority in aggregate principal amount of the outstanding Notes
may rescind and annul such acceleration and its consequences if all existing
Events of Default, other than the nonpayment of accelerated principal, premium,
if any, or interest that has become due solely because of the acceleration,
have been cured or waived and if the rescission would not conflict with any
judgment or decree. No such rescission shall affect any subsequent Default or
impair any right consequent thereto. In case an Event of Default specified in
Section 6.01(7) or (8) with respect to either of the Issuers, the General
Partner or any Significant Subsidiary occurs, such principal, premium, if any,
and interest amount with respect to all of the Notes shall be due and payable
immediately without any declaration or other act on the part of the Trustee or
the Holders of the Notes.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any,
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and interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture and may take any necessary action requested of it as
Trustee to settle, compromise, adjust or otherwise conclude any proceedings to
which it is a party.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.04. Waiver of Past Defaults and Events of Default.
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of a majority
in principal amount of the Notes then outstanding have the right to waive any
existing Default or Event of Default or compliance with any provision of this
Indenture or the Notes. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto.
Section 6.05. Control by Majority.
The Holders of a majority in principal amount of the Notes then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee by this Indenture. The Trustee, however, may refuse
to follow any direction that conflicts with law or this Indenture or that the
Trustee determines may be unduly prejudicial to the rights of another
Noteholder not taking part in such direction, and the Trustee shall have the
right to decline to follow any such direction if the Trustee, being advised by
counsel, determines that the action so directed may not lawfully be taken or if
the Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed may involve it in personal liability; provided that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
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Section 6.06. Limitation on Suits.
Subject to Section 6.07 below, a Noteholder may not institute any
proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer and if requested provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer, and, if requested, provision
of indemnity; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60 day period by the Holders of a
majority in aggregate principal amount of the Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal of, or premium, if any, and
interest of the Note (including Additional Interest) on or after the respective
due dates expressed in the Note, or to bring suit for the enforcement of any
such payment on or after such respective dates, is absolute and unconditional
and shall not be impaired or affected without the consent of the Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in Section 6.01(1) or (2) hereof occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Issuers or the Guarantors (or any other obligor on the Notes) for
the whole
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amount of unpaid principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate set forth in the Notes, and such further amounts as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, and reasonable expenses, disbursements and advances of the
Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the compensation, and reasonable expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Issuers or the
Guarantors (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same
after deduction of its charges and expenses to the extent that any such charges
and expenses are not paid out of the estate in any such proceedings and any
custodian in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the compensation and
reasonable expenses, disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
or reorganization, arrangement, adjustment or composition affecting the Notes
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Noteholder in any such proceedings.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest
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(including Additional Interest, if any) as to each, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes; and
THIRD: to the Issuers or, to the extent the Trustee collects any
amount from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 hereof or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
Section 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Issuers, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default actually known to a Responsible Officer
of the Trustee has occurred and is continuing, the
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Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the same circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture but, in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to this Indenture and in particular pursuant to
Sections 6.02, 6.05 or 6.06 hereof.
(4) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its rights, powers or duties or to take or
omit to take any action under the Indenture or take any action at the
request of or direc-
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tion of Holders if it shall have reasonable grounds for believing that
repayment of such funds is not assured to it or it does not receive an
indemnity satisfactory to it in its sole discretion against such risk,
liability, loss, fee or expense which might be incurred by it in
compliance with such request or direction.
(5) Notwithstanding anything to the contrary contained herein, the
Trustee shall not be charged with knowledge of any Default or Event of
Default (other than those under Section 6.01 or 6.02) unless and until a
Responsible Officer receives written notice thereof.
(d) Whether or not therein expressly so provided, paragraphs (a),
(b), (c) and (e) of this Section 7.01 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(e) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it in its sole
discretion against any loss, liability, expense or fee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers or
any Guarantor. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by the law.
Section 7.02. Rights of Trustee.
Subject to Section 7.01 hereof:
(1) The Trustee may rely and shall be protected in acting or
refraining from action on any document reasonably believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both, which shall
conform to the provisions of Section 11.05 hereof. The Trustee shall be
protected and shall not be liable for any action it takes or omits to
take in good faith in reliance on such certificate or opinion.
(3) The Trustee may act through its attorneys, agents, custodians
and nominees and shall not be responsible for the
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misconduct or negligence of any attorney, agent, custodian or nominee
appointed by it with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(5) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for or otherwise deal with either of the Issuers, the General Partner
or any Subsidiary, or any Affiliates thereof, with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. The
Trustee, however, shall be subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Issuers' use of the proceeds from the sale of
Notes or any money paid to the Issuers pursuant to the terms of this Indenture
and it shall not be responsible for any statement in the Notes or this Indenture
other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default occurs and is continuing and a Responsible Officer of
the Trustee has received written notice thereof, the Trustee shall mail to each
Noteholder notice of the Default within 90 days after it occurs. Except in the
case of a Default in payment of the principal of, or premium, if any, or
interest on any Note the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determine(s) that
withholding the notice is in the interests of the Noteholders.
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Section 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after August 15
of any year, commencing August 15, 1998, the Trustee shall mail to each
Noteholder a brief report dated as of such August 15 that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c) and TIA Section 313(d).
Reports pursuant to this Section 7.06 shall be transmitted by mail:
(1) to all registered Holders of Notes, as the names and addresses
of such Holders appear on the Registrar's books; and
(2) to such Holder of Notes as have, within the two years preceding
such transmission, filed their names and addresses with the Trustee for
that purpose.
A copy of each report at the time of its mailing to Noteholders
shall be filed with the SEC and each stock exchange on which the Notes are
listed. The Issuers shall promptly notify the Trustee when the Notes are listed
on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Issuers and the Guarantors shall pay to the Trustee and Agents
from time to time such compensation as shall be agreed in writing between the
Company and the Trustee or such Agent for its services hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust). The Issuers and the Guarantors
shall reimburse the Trustee and Agents upon request for all reasonable
disbursements, expenses and advances incurred or made by it in connection with
its duties under this Indenture, including the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Issuers and the Guarantors shall indemnify each of the Trustee
and any predecessor Trustee for, and hold each of them harmless against, any and
all loss, damage, claim, liability or expense, including without limitation
taxes (other than taxes based on the income of the Trustee or such Agent) and
reasonable attorneys' fees and expenses incurred by each of them in connection
with the acceptance or performance of its duties under this Indenture including
the reasonable costs and expenses of defending itself against any claim or
liability in connection with the exer-
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cise or performance of any of its powers or duties hereunder (including, without
limitation, settlement costs). The Trustee or Agent shall notify the Issuers in
writing promptly of any claim asserted against the Trustee or any Agent for
which it may seek indemnity. However, the failure by the Trustee or Agent to so
notify the Issuers shall not relieve the Issuers and Guarantors of their
obligations hereunder except to the extent the Issuers and the Guarantors are
prejudiced thereby.
Notwithstanding the foregoing, the Issuers and the Guarantors need not
reimburse the Trustee for any expense or indemnify it against any loss or
liability incurred by the Trustee through its negligence or bad faith. To
secure the payment obligations of the Issuers and the Guarantors in this
Section 7.07, the Trustee shall have a lien prior to the Notes on all money or
property held or collected by the Trustee except such money or property held in
trust to pay principal of and interest on particular Notes. The obligations of
the Issuers and the Guarantors under this Section 7.07 to compensate and
indemnify the Trustee, Agents and each predecessor Trustee and to pay or
reimburse the Trustee, Agents and each predecessor Trustee for expenses,
disbursements and advances shall be joint and several liabilities of each of
the Issuers and each of the Guarantors and shall survive the satisfaction,
discharge and termination of this Indenture, including any termination or
rejection hereof under any bankruptcy law.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(7) or (8) hereof occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall include any
trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Issuers in writing. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by notifying the removed Trustee in writing and may appoint a
successor Trustee with the Issuers' written consent which consent shall not be
unreasonably withheld. The Issuers may remove the Trustee at their election
if:
(1) the Trustee fails to comply with Section 7.10 hereof;
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(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property;
(4) the Trustee otherwise becomes incapable of acting; or
(5) a successor corporation becomes successor Trustee pursuant to
Section 7.09 below.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or
the Holders of a majority in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Issuers' obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Consolidation, Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
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Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2) in every respect. The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311 (b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
Section 7.12. Paying Agents.
The Issuers shall cause each Paying Agent other than the Trustee to
execute and deliver to them and the Trustee an instrument in which such Agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
(A) that it will hold all sums held by it as agent for the payment
of principal of, or premium, if any, or interest on, the Notes (whether
such sums have been paid to it by the Issuers or by any obligor on the
Notes) in trust for the benefit of Holders of the Notes or the Trustee;
(B) that it will at any time during the continuance of any Event of
Default, upon written request from the Trustee, deliver to the Trustee
all sums so held in trust by it together with a full accounting thereof;
and
(C) that it will give the Trustee written notice within three (3)
Business Days of any failure of the Issuers (or by any obligor on the
Notes) in the payment of any installment of the principal of, premium, if
any, or interest on, the Notes when the same shall be due and payable.
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ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
The Issuers and the Guarantors, when authorized by a Board
Resolution of each of them, and the Trustee may amend, waive or supplement this
Indenture or the Notes without notice to or consent of any Noteholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(3) to comply with any requirements of the SEC under the TIA;
(4) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not adversely affect the rights of any Noteholder;
(5) to make any other change that does not adversely affect the
rights of any Noteholders hereunder; or
(6) to add a Guarantor.
The Trustee is hereby authorized to join with the Issuers and the
Guarantors in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not be obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
The Issuers (each when authorized by a Board Resolution), the
Guarantors (each when authorized by a Board Resolution) and the Trustee may
modify or supplement this Indenture or the Notes with the written consent of the
Holders of not less than a majority in aggregate principal amount of the
outstanding Notes. The Holders of not less than a majority in aggregate
principal amount of the outstanding Notes may waive compliance in a particular
instance by the Issuers or Guarantors with any provision of this Indenture or
the Notes. Subject to Section 8.04, without the
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consent of each Noteholder affected, however, an amendment, supplement or
waiver, including a waiver pursuant to Section 6.04, may not:
(1) reduce the principal amount of the Notes whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture or the Notes;
(2) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes other
than as set forth under Sections 4.10 and 4.16 or reduce the purchase
price payable in connection with repurchases of the Notes pursuant to
Sections 4.10 and 4.16;
(3) reduce the rate of or change the time for payment of interest on
any Note;
(4) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(5) make the principal of, or the interest on, any Note payable in
money other than that stated in the Notes;
(6) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of the Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(7) waive a redemption payment with respect to any Note (other than
a payment required by Sections 4.10 and 4.16);
(8) make a change that adversely affects the ranking of the Notes or
the Guarantees; or
(9) make any change in the foregoing amendment and waiver
provisions.
After an amendment, supplement or waiver under this Section 8.02
becomes effective, the Issuers shall mail to the Holders a notice briefly
describing the amendment, supplement or waiver.
Upon the written request of the Issuers, accompanied by a Board
Resolution of each of them authorizing the execution of
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any such supplemental indenture, and upon the receipt by the Trustee of evidence
reasonably satisfactory to the Trustee of the consent of the Noteholders as
aforesaid and upon receipt by the Trustee of the documents described in Section
8.06 hereof, the Trustee shall join with the Issuers and the Guarantors in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture, in
which case the Trustee may, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
Section 8.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
Until an amendment, supplement, waiver or other action becomes effective,
a consent to it by a Holder of a Note is a continuing consent conclusive and
binding upon such Holder and every subsequent Holder of the same Note or
portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such Holder or subsequent Holder, however, may
revoke the consent as to his Note or portion of a Note, if the Trustee receives
the written notice of revocation before the date the amendment, supplement,
waiver or other action becomes effective.
The Issuers may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement, or waiver. If a record date is fixed, then, notwithstanding the
preceding paragraph, those Persons who were Holders at such record date (or
their duly designated proxies), and only such Persons, shall be entitled to
consent to such amendment, supplement, or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date unless the consent of the requisite number of Holders
has been obtained.
After an amendment, supplement, waiver or other action becomes effective,
it shall bind every Noteholder, unless it makes
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a change described in any of clauses (1) through (9) of Section 8.02 hereof. In
that case the amendment, supplement, waiver or other action shall bind each
Holder of a Note who has consented to it and every subsequent Holder of a Note
or portion of a Note that evidences the same debt as the consenting Holder's
Note.
Section 8.05. Notation on or Exchange of Notes.
If an amendment, supplement, or waiver changes the terms of a Note, the
Trustee (in accordance with the specific written direction of the Issuers)
shall request the Holder of the Note (in accordance with the specific written
direction of the Issuers) to deliver it to the Trustee. In such case, the
Trustee shall place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Issuers or the Trustee so
determine, the Issuers in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Failure to make
the appropriate notation or issue a new Note shall not affect the validity and
effect of such amendment supplement or waiver.
Section 8.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article 8 if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing or refusing to
sign such amendment, supplement or waiver the Trustee shall be entitled to
receive and, subject to Section 7.01 hereof, shall be fully protected in
relying upon an Officers' Certificate and an Opinion of Counsel stating that
such amendment, supplement or waiver is authorized or permitted by this
Indenture and is a legal, valid and binding obligation of the Issuers and
Guarantors, enforceable against the Issuers and Guarantors in accordance with
its terms (subject to customary exceptions).
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
The Issuers and the Guarantors may terminate their obligations under the
Notes, the Guarantees and this Indenture, except the obligations referred to in
the last paragraph of this Sec-
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tion 9.01, if there shall have been cancelled by the Trustee or delivered to the
Trustee for cancellation all Notes theretofore authenticated and delivered
(other than any Notes that are asserted to have been destroyed, lost or stolen
and that shall have been replaced as provided in Section 2.07 hereof) and the
Issuers have paid all sums payable by them hereunder or deposited all required
sums with the Trustee.
After such delivery the Trustee upon Issuer Request shall acknowledge in
writing the discharge of the Issuers' and the Guarantors' obligations under the
Notes, the Guarantees and this Indenture except for those surviving obligations
specified below.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuers and Guarantors in Sections 7.07, 9.05, 9.06 and 9.07
hereof shall survive.
Section 9.02. Defeasance.
The Issuers may at their option, by Board Resolution of the Board of
Directors of each of the Issuers, be discharged from their obligations with
respect to the Notes and the Guarantors discharged from their obligations under
the Guarantees on the date the conditions set forth in Section 9.03 below are
satisfied (hereinafter, "Defeasance"). For this purpose, such Defeasance means
that the Issuers shall be deemed to have paid and discharged the entire
indebtedness represented by the Notes and to have satisfied all their other
obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the expense of the Issuers, shall, subject to
Section 9.06 hereof, execute instruments in form and substance reasonably
satisfactory to the Trustee and Issuers acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of outstanding Notes to receive solely
from the trust funds described in Section 9.03 hereof and as more fully set
forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (B) the Issuers'
obligations with respect to such Notes under Sections 2.03, 2.04, 2.05, 2.06,
2.07, 2.08, 2.09 and 4.17 hereof, (C) the rights, powers, trusts, duties, and
immunities of the Trustee hereunder (including claims of, or payments to, the
Trustee under or pursuant to Section 7.07 hereof) and (D) this Article 9.
Section 9.03. Conditions to Defeasance.
The following shall be the conditions to application of Section 9.02
hereof to the outstanding Notes:
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(1) the Issuers shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Article 9 applicable to it) as funds in trust for the
purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of the
Notes, (A) money in an amount, or (B) U.S. Government Obligations which
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than the
due date of any payment, money in an amount, or (C) a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of, premium, if any, and accrued interest on the
outstanding Notes at the maturity date of such principal, premium, if
any, or interest, or on dates for payment and redemption of such
principal, premium, if any, and interest selected in accordance with the
terms of this Indenture and of the Notes;
(2) no Event of Default or Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit, or shall
have occurred and be continuing at any time during the period ending on
the 91st day after the date of such deposit or, if longer, ending on the
day following the expiration of the longest preference period under any
Bankruptcy Law applicable to the Issuers in respect of such deposit (it
being understood that this condition shall not be deemed satisfied until
the expiration of such period);
(3) such Defeasance shall not cause the Trustee to have a
conflicting interest for purposes of the TIA with respect to any
securities of the Company;
(4) such Defeasance shall not result in a breach or violation of, or
constitute a default under, any material agreement or instrument (other
than this Indenture) to which the Issuers or any of the Company's
Subsidiaries are a party or by which they are bound;
(5) the Issuers shall have delivered to the Trustee an Opinion of
Counsel stating that, as a result of such Defeasance, neither the trust
nor the Trustee will be required to register as an investment company
under the Investment Company Act of 1940, as amended;
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(6) the Issuers shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the Trustee stating
that (i) the Issuers have received from, or there has been published by,
the Internal Revenue Service a ruling to the effect that or (ii) since
the date of this Indenture there has been a change in the applicable
Federal income tax law with the effect that, and such opinion shall
confirm that, the Holders of the outstanding Notes or persons in their
positions will not recognize income, gain or loss for Federal income tax
purposes as a result of such Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner, including as a result
of prepayment, and at the same times as would have been the case if such
Defeasance had not occurred;
(7) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to the Defeasance have been complied
with;
(8) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit under clause (1) was not made by the
Issuers with the intent of preferring the Holders of Notes over the other
creditors of the Issuers with the intent of defeating, hindering,
delaying or defrauding any creditors of the Issuers or others;
(9) the Issuers shall have paid or duly provided for payment under
terms mutually satisfactory to the Issuers and the Trustee all amounts
then due to the Trustee pursuant to Section 7.07 hereof;
(10) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (to the extent matters of law are
involved), each stating that (x) all conditions precedent herein provided
for relating to the Defeasance have been complied with and (y) if any
other Indebtedness of the Issuers shall then be outstanding or committed,
such Defeasance will not violate the provisions of the agreements or
instruments evidencing such Indebtedness; and
(11) the Issuers shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
<PAGE> 84
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Section 9.04. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
All money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee pursuant to Section 9.03 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent, to the Holders of such
Notes, of all sums due and to become due thereon in respect of principal,
premium, if any, and accrued interest, but such money need not be segregated
from other funds except to the extent required by law.
The Issuers and the Guarantors shall (on a joint and several basis) pay
and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to Section
9.03 hereof or the principal, premium, if any, and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of the outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Issuers from time to time upon an Issuer Request
any money or U.S. Government Obligations held by it as provided in Section 9.03
hereof which, in the opinion of a nationally-recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee, are in excess of the amount thereof which would then be required
to be deposited to effect an equivalent Defeasance.
Section 9.05. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.02 hereof by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Issuers' and each Guarantor's obligations under this
Indenture, the Notes and the Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to this Article 9 until such time as
the Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Section 9.04 hereof; provided,
however, that if the Issuers or the Guarantors have made any payment of
principal of, premium, if any, or accrued interest on any Notes because of the
reinstatement of their obligations, the Issuers or the Guarantors, as the case
may
<PAGE> 85
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be, shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
Section 9.06. Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture, all
moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon written demand of the Issuers, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.02 hereof, to the
Issuers upon an Issuer Request (or, if such moneys had been deposited by the
Guarantors, to such Guarantors), and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
Section 9.07. Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent or then held by
the Issuers or the Guarantors in trust for the payment of the principal of, or
premium, if any, or interest on any Note that are not applied but remain
unclaimed by the Holder of such Note for two years after the date upon which
the principal of, or premium, if any, or interest on such Note shall have
respectively become due and payable shall be repaid to the Issuers (or, if
appropriate, the Guarantors) upon an Issuer Request such moneys shall be
released from such trust; and the Holder of such Note entitled to receive such
payment shall thereafter, as an unsecured general creditor, look only to the
Issuers and the Guarantors for the payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money shall thereupon
cease; provided, however, that the Trustee or any such Paying Agent, before
being required to make any such repayment, may, at the expense of the Issuers
and the Guarantors, either mail to each Noteholder affected, at the address
shown in the register of the Notes maintained by the Registrar pursuant to
Section 2.04 hereof, or cause to be published once a week for two successive
weeks, in a newspaper published in the English language, customarily published
each Business Day and of general circulation in the City of New York, New York,
a notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such mailing or
publication, any unclaimed balance of such moneys then remaining will be repaid
to the Issuers. After payment to the Issuers or the Guarantors or the release
of any money held in trust by the Issuers or any Guarantors, as the case may
be, Noteholders entitled to the money must look only to the Issuers and the
Guarantors
<PAGE> 86
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for payment as general creditors unless applicable abandoned property law
designates another person.
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee.
Subject to the provisions of this Article 10, each Guarantor, by execution
of the Guarantee, will jointly and severally unconditionally guarantee to each
Holder and to the Trustee, (i) the due and punctual payment of the principal
of, and premium, if any, and interest on each Note, when and as the same shall
become due and payable, whether at maturity, by acceleration or otherwise, the
due and punctual payment of interest (including Additional Interest) on the
overdue principal of, and premium, if any, and interest on the Notes, to the
extent lawful, and the due and punctual performance of all other Obligations of
the Issuers to the Holders or the Trustee (including without limitation amounts
due the Trustee under Section 7.07) all in accordance with the terms of such
Note and this Indenture, and (ii) in the case of any extension of time of
payment or renewal of any Notes or any of such other Obligations, that the same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, at stated maturity, by acceleration or
otherwise. Each Guarantor, by execution of the Guarantee, will further agree
that its obligations hereunder shall be absolute and unconditional,
irrespective of, and shall be unaffected by, any invalidity, irregularity or
unenforceability of any such Note or this Indenture, any failure to enforce the
provisions of any such Note or this Indenture, any waiver, modification or
indulgence granted to the Issuers with respect thereto by the Holder of such
Note or the Trustee, or any other circumstances which may otherwise constitute
a legal or equitable discharge of a surety or such Guarantor.
Each Guarantor, by execution of the Guarantee, will waive diligence,
presentment, demand for payment, filing of claims with a court in the event of
merger or bankruptcy of the Issuers, any right to require a proceeding first
against the Issuers, protest or notice with respect to any such Note or the
Indebtedness evidenced thereby and all demands whatsoever, and covenants that
this Guarantee will not be discharged as to any such Note except by payment in
full of the principal thereof, premium if any, and interest thereon and as
provided in Section 9.01 hereof. Each
<PAGE> 87
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Guarantor, by execution of the Guarantee, will further agree that, as between
such Guarantor, on the one hand, and the Holders and the Trustee, on the other
hand, (i) the maturity of the Obligations guaranteed hereby may be accelerated
as provided in Article 6 hereof for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (ii) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6 hereof, such Obligations (whether or not due and payable) shall
forthwith become due and payable by each Guarantor for the purpose of this
Guarantee. In addition, without limiting the foregoing provisions, upon the
effectiveness of an acceleration under Article 6 hereof, the Trustee shall
promptly make a demand for payment on the Notes under the Guarantee provided for
in this Article 10 and not discharged.
The Guarantee set forth in this Section 10.01 shall not be valid or become
obligatory for any purpose with respect to a Note until the certificate of
authentication on such Note shall have been signed by or on behalf of the
Trustee by its manual signature.
Section 10.02.. Execution and Delivery of Guarantees.
A Guarantee shall be executed on behalf of each Guarantor by the manual or
facsimile signature of an Officer of each Guarantor.
If an Officer of a Guarantor whose signature is on the Guarantee no longer
holds that office, such Guarantee shall be valid nevertheless.
Section 10.03.. Limitation of Guarantee.
The obligations of each Guarantor will be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees of Indebtedness
incurred under the New Bank Credit Facility) and after giving effect to any
collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under this Indenture, result in the
obligations of such Guarantor under the Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law. Each Guarantor
that makes a payment or distribution under a Guarantee shall be entitled to a
contribution from each other Guarantor in a pro rata amount based on the
Adjusted Net Assets of each Guarantor.
<PAGE> 88
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Section 10.04. Release of Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if:
(i) the Guarantor has sold all or substantially all of its assets or
the Company and its Subsidiaries have sold all of the Capital Stock of
the Guarantor owned by them, in each case in a transaction in compliance
with Sections 4.10 and 5.01 hereof; or
(ii) the Guarantor merges with or into or consolidates with, or
transfers all or substantially all of its assets in a transaction in
compliance with Section 5.01 hereof;
and in each such case, such Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transaction has been complied
with.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
Section 11.02. Notices.
Except for notice or communications to Holders any notice or
communication shall be given in writing and delivered in person, sent by
facsimile, delivered by commercial courier service or mailed by first-class
mail, postage prepaid, addressed as follows:
<PAGE> 89
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If to the Issuers or any Guarantor:
James Cable Partners, L.P.
710 North Woodward Avenue
Suite 180
Bloomfield Hills, Michigan 48304
Attention: Executive Vice President-Chief
Financial Officer
Fax Number: (248) 647-1321
Copy to:
Miller, Canfield, Paddock and Stone, P.L.C.
1400 North Woodward Avenue
Suite 100
Bloomfield Hills, Michigan 48304
Attention: Kevin Trimmer
Fax Number: (248) 258-3036
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
Fax Number: (212) 852-1626
Copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Marilyn Feuer
Fax Number: (212) 715-8000
Such notices or communications shall be effective when received
and shall be sufficiently given if so given within the time prescribed in this
Indenture.
<PAGE> 90
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The Issuers, the Guarantors or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Noteholder shall be mailed
to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication to a Noteholder is mailed in the
manner provided above, it shall be deemed duly given, whether or not the
addressee receives it.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
Section 11.03. Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or the
Notes. The Issuers, the Guarantors, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuers or any Guarantor to
the Trustee to take any action under this Indenture, the Issuers or such
Guarantor shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 11.05 below) stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 11.05 below) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
<PAGE> 91
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Section 11.05. Statements Required in Certificate and Opinion.
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he has
made such examination or investigation as is necessary to enable it or
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
Section 11.06. When Treasury Notes Disregarded.
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Issuers, any Guarantor or any other obligor on the Notes or
by any Affiliate of any of them shall be disregarded, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes as to which a Responsible Officer
of the Trustee has received an Officers' Certificate stating that such
securities are so owned shall be so disregarded. Notes so owned which have been
pledged in good faith shall not be disregarded if the pledgee establishes to
the satisfaction of the Trustee the pledgee's right so to act with respect to
the Notes and that the pledgee is not an Issuer, a Guarantor or any other
obligor upon the Notes or any Affiliate of any of them.
Section 11.07. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or meetings of
Noteholders. The Registrar and Paying Agent may make reasonable rules for
their functions.
<PAGE> 92
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Section 11.08. Business Days; Legal Holidays.
A "Business Day" is a day that is not a Legal Holiday. A "Legal Holiday"
is a Saturday, a Sunday, a federally-recognized holiday or a day on which
banking institutions are not required to be open in the State of New York. If
a payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 11.09. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 11.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Issuers or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 11.11. Personal Liability of Certain Persons.
No director, officer, employee, partner, interest holder or shareholder,
as such, of either Issuer or of the General Partner, will have any liability
for any obligations of either of the Issuers under the Notes or this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the Notes by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy. Absent such waiver and
release, under the Delaware Revised Uniform Limited Partnership Act, as
amended, the Holders of the Notes would have been able to proceed against the
General Partner in the event of nonpayment thereof, and such Holders would have
been able to proceed against the limited partners of the Company only if the
limited partners received distributions from the Company and, at the time of
such distributions, they knew that the Company's total liabilities exceeded the
fair value of the Company's assets.
<PAGE> 93
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Section 11.12. Successors.
All agreements of the Issuers and the Guarantors in this Indenture and the
Notes shall bind their respective successors. All agreements of the Trustee,
any additional trustee and any Paying Agents in this Indenture shall bind its
successor.
Section 11.13. Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture. Each signed
counterpart shall be deemed an original, but all of them together represent one
and the same agreement.
Section 11.14. Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
Section 11.15. Separability.
Each provision of this Indenture shall be considered separable and if for
any reason any provision which is not essential to the effectuation of the
basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE> 94
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed all as of the date and year first written above.
JAMES CABLE PARTNERS, L.P.
By: James Communications Partners,
a Michigan co-partnership,
its General Partner
By: Jamesco Inc., a Michigan
corporation, its Partner
By: William R. James
------------------------------
Name: William R. James
Title: President
JAMES CABLE FINANCE CORP.
By: William R. James
-------------------------------
Name: William R. James
Title: President
<PAGE> 95
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By: Gerard F. Ganey
---------------------------------
Name: GERARD F. GANEY
Title: SENIOR VICE PRESIDENT
<PAGE> 96
EXHIBIT A
[FORM OF FACE OF NOTE]
CUSIP
JAMES CABLE PARTNERS, L.P.
JAMES CABLE FINANCE CORP.
No. $
10 3/4% SENIOR NOTE DUE 2004
JAMES CABLE PARTNERS, L.P., a Delaware limited partnership (the
"Company"), and JAMES CABLE FINANCE CORP., a Michigan corporation ("Finance
Corp." and, together with the Company, the "Issuers"), for value received,
promise to pay to or registered assigns the principal sum
of $ dollars on August 15, 2004.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.
A-1
<PAGE> 97
IN WITNESS WHEREOF, the Issuers have caused this Note to be signed
manually or by facsimile by their duly authorized officers.
JAMES CABLE PARTNERS, L.P.
By: James Communications
Partners, a Michigan
co-partnership, its
General Partner
By: Jamesco Inc., a Michigan
corporation, its
Partner
By: ___________________________
Name: William R. James
Title: President
By: DKS Holdings, Inc.,
a Michigan corporation
its partner
By: ____________________________
Name: Daniel K. Shoemaker
Title: President
JAMES CABLE FINANCE CORP.
By: _____________________________
Name: William R. James
Title: President
By: _____________________________
Name: Daniel K. Shoemaker
Title: Treasurer
Dated:
A-2
<PAGE> 98
Certificate of Authentication
This is one of the 10 3/4% Senior Notes due 2004 referred to in the
within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: _________________________________
Authorized Signatory
A-3
<PAGE> 99
[FORM OF REVERSE OF NOTE]
JAMES CABLE PARTNERS, L.P.
JAMES CABLE FINANCE CORP.
10 3/4% SENIOR NOTE DUE 2004
1. Interest. James Cable Partners, L.P., a Delaware limited partnership
(the "Company"), and James Cable Finance Corp., a Michigan corporation
("Finance Corp." and, together with the Company, the "Issuers"), promise to
pay, until the principal hereof is paid or made available for payment, interest
on the principal amount set forth on the face hereof at a rate of 10 3/4% per
annum. Interest hereon will accrue from and including the most recent date to
which interest has been paid or, if no interest has been paid, from and
including , 1997 to but excluding the date on which interest is paid.
Interest shall be payable in arrears on each February 15 and August 15,
commencing February 15, 1998. Interest will be computed on the basis of a
360-day year of twelve 30-day months. The Issuers shall pay interest on
overdue principal and on overdue interest (to the full extent permitted by law)
at a rate of 10 3/4% per annum.
2. Method of Payment. The Issuers will pay interest hereon (except
defaulted interest) to the Persons who are registered Holders at the close of
business on February 1 or August 1 next preceding the interest payment date
(whether or not a Business Day). Holders must surrender Notes to a Paying
Agent to collect principal payments. The Issuers will pay principal and
interest in money of the United States of America that at the time of payment
is legal tender for payment of public and private debts. Interest may be paid
by check mailed to the Holder entitled thereto at the address indicated on the
register maintained by the Registrar for the Notes.
3. Paying Agent and Registrar. Initially, United States Trust Company of
New York (the "Trustee") will act as a Paying Agent and Registrar. The Issuers
may change any Paying Agent or Registrar without notice. Neither the Issuers
nor any of their Affiliates may act as Paying Agent or Registrar.
4. Indenture. The Company issued the Notes under an Indenture dated as of
August 15, 1997 (the "Indenture") among the Issuers and the Trustee. This is
one of an issue of Notes of the Issuers issued, or to be issued, under the
Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code Section Section 77aaa-77bbbb), as amended from time to
time. The Notes are subject to all
A-4
<PAGE> 100
such terms, and Holders are referred to the Indenture and such Act for a
statement of them. Capitalized and certain other terms used herein and not
otherwise defined have the meanings set forth in the Indenture. The Notes are
obligations of the Issuers limited in aggregate principal amount to $100.0
million.
5. Optional Redemption. The Issuers, at their option, may redeem the
Notes, in whole or in part, at any time on or after August 15, 2001 upon not
less than 30 nor more than 60 days' notice, at the redemption prices (expressed
as percentages of principal amount), set forth below, together, in each case,
with accrued and unpaid interest to the Redemption Date, if redeemed during the
twelve month period beginning on August 15 of each year listed below:
Year Redemption Price
---- ----------------
2001 105.375%
2002 102.687%
2003 and thereafter 100.000%
Notwithstanding the foregoing, the Issuers may redeem in the aggregate up
to 35% of the original principal amount of Notes at any time and from time to
time on or prior to August 15, 2000 at a redemption price equal to 110.750% of
the aggregate principal amount thereof, plus accrued and unpaid interest
thereon to the Redemption Date with the net proceeds of one or more Public
Equity Offerings; provided, that at least $65.0 million of the principal amount
of Notes originally issued remains outstanding immediately after the occurrence
of any such redemption and that any such redemption occurs within 60 days
following the closing of any such Public Equity Offering.
6. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at his registered address. On and after the Redemption
Date, unless the Issuers default in making the redemption payment, interest
ceases to accrue on Notes or portions thereof called for redemption.
7. Offers to Purchase. The Indenture provides that upon the occurrence of
a Change of Control or an Asset Sale and subject to further limitations
contained therein, the Issuers shall make an offer to purchase outstanding
Notes in accordance with the procedures set forth in the Indenture.
8. Registration Rights. Pursuant to a Registration Rights Agreement among
the Issuers and CIBC Wood Gundy Securities Corp. and First Chicago Capital
Markets, Inc., as Initial
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<PAGE> 101
Purchasers of the Notes, the Issuers will be obligated to consummate an exchange
offer pursuant to which the Holder of this Note shall have the right to exchange
this Note for Notes of a separate series issued under the Indenture (or a trust
indenture substantially identical to the Indenture in accordance with the terms
of the Registration Rights Agreement) which have been registered under the
Securities Act, in like principal amount and having substantially identical
terms as the Notes. The Holders shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. A
Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay to it any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer of or exchange any Notes or portion of a Note selected for
redemption, or register the transfer of or exchange any Notes for a period of
15 days before selection of Notes to be redeemed.
10. Persons Deemed Owners. The registered Holder of this Note may be
treated as the owner of this Note for all purposes.
11. Unclaimed Money. If money for the payment of principal, premium, if
any, or interest remains unclaimed for two years, the Trustee will pay the
money back to the Issuers at their written request. After that, Holders
entitled to the money must look to the Issuers or Guarantors for payment as
general creditors unless an "abandoned property" law designates another Person.
12. Amendment, Supplement, Waiver, Etc. The Issuers, the Guarantors, and
the Trustee may, without the consent of the Holders of any outstanding Notes,
amend, waive or supplement the Indenture or the Notes for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended, and making any change that does not
adversely affect the rights of any Holder. Other amendments and modifications
of the Indenture or the Notes may be made by the Issuers, the Guarantors and
the Trustee with the consent of the Holders of not less than a majority of the
aggregate principal amount of the outstanding Notes, subject to certain
exceptions requiring the consent of the Holders of the Notes to be affected.
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<PAGE> 102
13. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Issuers and their Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of their Capital Stock or
certain Indebtedness, make certain Investments, create or incur Liens, enter
into transactions with Affiliates, enter into agreements restricting the
ability of Subsidiaries to pay dividends and make distributions, issue
Preferred Stock of any Subsidiaries of the Issuers, enter into Sale and
Leaseback Transactions and on the ability of the Issuers and Guarantors to
merge or consolidate with any other Person or transfer all or substantially all
of the Issuers' or Guarantors' assets. Such limitations are subject to a
number of important qualifications and exceptions. Pursuant to Section 4.04 of
the Indenture, the Issuers must annually report to the Trustee on compliance
with such limitations.
14. Successor Corporation. When a successor corporation assumes all the
obligations of its predecessor under the Notes and the Indenture and the
transaction complies with the terms of Article 5 of the Indenture, the
predecessor corporation will, except as provided in Article 5, be released from
those obligations.
15. Defaults and Remedies. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.01(7) or (8) of
the Indenture with respect to the Issuers, the General Partner or any
Significant Subsidiary) occurs and is continuing, the Trustee or the Holders of
not less than 25% in aggregate principal amount of the outstanding Notes may,
by written notice to the Trustee and the Issuers, and the Trustee upon the
request of the Holders of not less than 25% in aggregate principal amount of
the outstanding Notes shall, declare all principal of and accrued interest on
all Notes to be immediately due and payable and such amounts shall become
immediately due and payable. If an Event of Default specified in Section
6.01(7) or (8) of the Indenture occurs with respect to the Issuers, the General
Partner or any Significant Subsidiary, the principal amount of and interest on,
all Notes shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder. Holders
may not enforce the Indenture or the Notes except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders notice
of any continuing default (except a default in payment of principal, premium,
if any, or interest) if it determines that withholding notice is in
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<PAGE> 103
their interests. The Issuers must furnish an annual compliance certificate to
the Trustee.
16. Trustee Dealings with Issuers. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Issuers, the General Partner or their Affiliates, and may otherwise
deal with the Issuers, the General Partner or their Affiliates, as if it were
not Trustee.
17. No Personal Liability of Certain Persons. No director, officer,
employee, partner (other than the General Partner), interest holder or
shareholder, as such, of either Issuer or of the General Partner, will have any
liability for any obligations of either of the Issuers under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy. Absent such waiver and
release, under the Delaware Revised Uniform Limited Partnership Act, as
amended, the Holders of the Notes would have been able to proceed against the
General Partner in the event of nonpayment thereof, and such Holders would have
been able to proceed against the limited partners of the Company only if the
limited partners received distributions from the Company and, at the time of
such distributions, they knew that the Company's total liabilities exceeded the
fair value of the Company's assets.
18. Discharge. The Issuers' obligations pursuant to the Indenture will be
discharged, except for obligations pursuant to certain sections thereof,
subject to the terms of the Indenture, upon the payment of all the Notes or
upon the irrevocable deposit with the Trustee of United States dollars or U.S.
Government Obligations sufficient to pay when due principal of and interest on
the Notes to maturity or redemption, as the case may be.
19. Guarantees by Future Subsidiaries. The Note will be entitled to the
benefits of certain Guarantees by future subsidiaries made for the benefit of
the Holders. Reference is hereby made to the Indenture for a statement of the
respective rights, limitations of rights, duties and obligations thereunder of
the Guarantors, the Trustee and the Holders.
20. Authentication. This Note shall not be valid until the Trustee
manually signs the certificate of authentication on the other side of this Note.
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<PAGE> 104
21. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN
THIS NOTE WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. The Trustee, the
Issuers and the Holders agree to submit to the jurisdiction of the courts of
the State of New York in any action or proceeding arising out of or relating to
the Indenture or the Notes.
22. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
The Issuers will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
JAMES CABLE PARTNERS, L.P..
710 North Woodward Avenue, Suite 180
Bloomfield Hills, Michigan 48304
Attention: Chief Financial Officer
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<PAGE> 105
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
___________________________________________________________________________
___________________________________________________________________________
Agent to transfer this Note on the books of the Issuers. The Agent may
substitute another to act for him.
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<PAGE> 106
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.16 of the Indenture, check the
appropriate box:
[ ] Section 4.10 [ ] Section 4.16
If you want to have only part of the Note purchased by the Issuers
pursuant to Section 4.10 or Section 4.16 of the Indenture, state the amount you
elect to have purchased:
$____________________
(multiple of $1,000)
Date: ___________________
Your Signature: ________________________________________________
(Sign exactly as your name appears on the face
of this Note)
_________________________
Signature Guaranteed
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<PAGE> 107
EXHIBIT B
[FORM OF LEGEND FOR 144A NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) UNDER REGULATION D OF THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2)
AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO AN ISSUER OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT, (C) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE ACT, (D) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED
ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), (E) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE ACT OR (F) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE) AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS NOTE WITHIN THREE YEARS AFTER ORIGINAL ISSUANCE OF THIS NOTE, IF THE
PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A
TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT.
B-1
<PAGE> 108
[FORM OF ASSIGNMENT FOR 144A NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
___________________________________________________________________________
___________________________________________________________________________
Agent to transfer this Note on the books of the Issuers. The Agent may
substitute another to act for him.
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 2.16 and 2.17 of the Indenture
shall have been satisfied.
Date: __________________ Your Signature: ___________________________________
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee: ____________________________________
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<PAGE> 109
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Issuers as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: __________________ ______________________________________
NOTICE: To be executed by
an executive officer
B-3
<PAGE> 110
EXHIBIT C
[FORM OF LEGEND FOR REGULATION S NOTE]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES
ACT OR EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
C-1
<PAGE> 111
[FORM OF ASSIGNMENT FOR REGULATION S NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
___________________________________________________________________________
___________________________________________________________________________
Agent to transfer this Note on the books of the Issuers. The Agent may
substitute another to act for him.
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 2.16 and 2.17 of the Indenture
shall have been satisfied.
Date: __________________ Your Signature: __________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ____________________________________
C-2
<PAGE> 112
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Issuers as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: __________________ _____________________________________
NOTICE: To be executed by
an executive officer
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<PAGE> 113
EXHIBIT D
[FORM OF LEGEND FOR GLOBAL NOTE]
Any Global Note authenticated and delivered hereunder shall bear a legend
(which would be in addition to any other legends required in the case of a
Restricted Note or Regulation S Note) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF
A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER
THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IT REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
D-1
<PAGE> 114
EXHIBIT E
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
___________, ____
Attention:
Re: James Cable Partners, L.P. (the "Company") and
James Cable Finance Corp. ("Finance Corp." and
together with the Company, the "Issuers")
10 3/4% Senior Notes due 2004 (the "Notes")
Dear Sirs:
In connection with our proposed purchase of Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated as of August , 1997 relating to the Notes and we agree to be
bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered, sold, pledged or
otherwise transferred except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Notes, we will
do so only (i) to an Issuer or any subsidiary thereof, (ii) pursuant to
an effective registration statement under the Securities Act, (iii) in
accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined in Rule 144A), (iv) to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has
E-1
<PAGE> 115
furnished on its behalf by a U.S. broker-dealer) to you a signed letter
containing certain representations and agreements relating to the
restrictions on transfer of the Notes, (v) outside the United States to
persons other than U.S. persons in offshore transactions meeting the
requirements of Rule 904 of Regulation S under the Securities Act, or (vi)
pursuant to any other exemption from registration under the Securities Act
(if available), and we further agree to provide to any person purchasing
any of the Notes from us a notice advising such purchaser that resales of
the Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Issuers such certifications, legal
opinions and other information as you and the Issuers may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting each are able to
bear the economic risk of our or their investment, as the case may be.
5. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: ___________________________
Authorized Signature
E-2
<PAGE> 116
EXHIBIT F
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
__________, ____
Attention:
Re: James Cable Partners, L.P.
(the "Company") and James Cable Finance Corp.
("Finance Corp." and, together with the Company, the
"Issuers") 10 3/4% Senior Notes due 2004 (the "Notes")
Dear Sirs:
In connection with our proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a U.S. person or to a
person in the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
F-1
<PAGE> 117
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: ________________________________
Authorized Signature
F-2
<PAGE> 118
EXHIBIT G
[FORM OF GUARANTEE]
The undersigned (the "Guarantor") hereby unconditionally guarantees, on a
senior basis, jointly and severally with all other guarantors under the
Indenture dated as of August , 1997 by and among James Cable Partners, L.P.,
a Delaware limited partnership (the "Company"), James Cable Finance Corp.
("Finance Corp." and, together with the Company, the "Issuers"), and United
States Trust Company of New York, as trustee (as amended, restated or
supplemented from time to time, the "Indenture"), to the extent set forth in
the Indenture and subject to the provisions of the Indenture, (a) the due and
punctual payment of the principal of and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on overdue principal and, to the extent permitted by law, interest,
and the due and punctual performance of all other obligations of the Company to
the Noteholders or the Trustee, all in accordance with the terms set forth in
Article 10 of the Indenture, and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise.
The obligations of the Guarantor to the Noteholders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms and limitations of this Guarantee.
Guarantor
By: _______________________________
Name:
Title:
G-1
<PAGE> 1
EXHIBIT 4.2
[FORM OF FACE OF EXCHANGE NOTE]
CUSIP
JAMES CABLE PARTNERS, L.P.
JAMES CABLE FINANCE CORP.
No. B- $
10 3/4% SERIES B SENIOR NOTE DUE 2004
JAMES CABLE PARTNERS, L.P., a Delaware limited partnership
(the "Company"), and JAMES CABLE FINANCE CORP., a Michigan corporation
("Finance Corp." and, together with the Company, the "Issuers"), for value
received, promise to pay to or registered assigns the
principal sum of $ dollars on August 15, 2004.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
<PAGE> 2
IN WITNESS WHEREOF, the Issuers have caused this Note to be
signed manually or by facsimile by their duly authorized officers.
JAMES CABLE PARTNERS, L.P.
By: James Communications
Partners, a Michigan
co-partnership, its
General Partner
By: Jamesco, Inc., a Michigan
corporation, its
Partner
By:
------------------------------
Name: William R. James
Title: President
By: DKS Holdings, Inc.,
a Michigan corporation
its partner
By:
------------------------------
Name: Daniel K. Shoemaker
Title: President
JAMES CABLE FINANCE CORP.
By:
------------------------------
Name: William R. James
Title: President
By:
------------------------------
Name: Daniel K. Shoemaker
Title: Treasurer
Dated:
-2-
<PAGE> 3
Certificate of Authentication
This is one of the Notes referred to in the within-mentioned
Indenture.
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By:
-------------------------------
Authorized Signatory
-3-
<PAGE> 4
[FORM OF REVERSE OF EXCHANGE NOTE]
JAMES CABLE PARTNERS, L.P.
JAMES CABLE FINANCE CORP.
10 3/4% SERIES B SENIOR NOTE DUE 2004
1. Interest. James Cable Partners, L.P., a Delaware
limited partnership (the "Company"), and James Cable Finance Corp., a Michigan
corporation ("Finance Corp." and, together with the Company, the "Issuers"),
promise to pay, until the principal hereof is paid or made available for
payment, interest on the principal amount set forth on the face hereof at a
rate of 10 3/4% per annum. Interest hereon will accrue from and including the
most recent date to which interest has been paid or, if no interest has been
paid, from and including August 15, 1997 to but excluding the date on which
interest is paid. Interest shall be payable in arrears on each February 15 and
August 15, commencing February 15, 1998. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. The Issuers shall pay
interest on overdue principal and on overdue interest (to the full extent
permitted by law) at a rate of 10 3/4% per annum.
2. Method of Payment. The Issuers will pay interest
hereon (except defaulted interest) to the Persons who are registered Holders at
the close of business on February 1 or August 1 next preceding the interest
payment date (whether or not a Business Day). Holders must surrender Notes to
a Paying Agent to collect principal payments. The Issuers will pay principal
and interest in money of the United States of America that at the time of
payment is legal tender for payment of public and private debts. Interest may
be paid by check mailed to the Holder entitled thereto at the address indicated
on the register maintained by the Registrar for the Notes.
3. Paying Agent and Registrar. Initially, United States
Trust Company of New York (the "Trustee") will act as a Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar without
notice. Neither the Issuers nor any of their Affiliates may act as Paying
Agent or Registrar.
4. Indenture. The Issuers issued the Notes under an
Indenture dated as of August 15, 1997 (the "Indenture") among the Issuers and
the Trustee. This is one of an issue of Notes of the Issuers issued, or to be
issued, under the Indenture. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code Section Section 77aaa-77bbbb), as amended
from time to time. The Notes are subject to all
-4-
<PAGE> 5
such terms, and Holders are referred to the Indenture and such Act for a
statement of them. Capitalized and certain other terms used herein and not
otherwise defined have the meanings set forth in the Indenture. The Notes are
obligations of the Issuers limited in aggregate principal amount to $100.0
million.
5. Optional Redemption. The Issuers, at their option,
may redeem the Notes, in whole or in part, at any time on or after August 15,
2001 upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount), set forth below,
together, in each case, with accrued and unpaid interest to the Redemption
Date, if redeemed during the twelve month period beginning on August 15 of each
year listed below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . 105.375%
2002 . . . . . . . . . . . . . . . . . . . . 102.687%
2003 and thereafter . . . . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, the Issuers may redeem in the
aggregate up to 35% of the original principal amount of Notes at any time and
from time to time on or prior to August 15, 2000 at a redemption price equal to
110.750% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon to the Redemption Date with the net proceeds of one or more
Public Equity Offerings; provided, that at least $65.0 million of the principal
amount of Notes originally issued remains outstanding immediately after the
occurrence of any such redemption and that any such redemption occurs within 60
days following the closing of any such Public Equity Offering.
6. Notice of Redemption. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the Redemption Date to
each Holder of Notes to be redeemed at his registered address. On and after
the Redemption Date, unless the Issuers default in making the redemption
payment, interest ceases to accrue on Notes or portions thereof called for
redemption.
7. Offers to Purchase. The Indenture provides that upon
the occurrence of a Change of Control or an Asset Sale and subject to further
limitations contained therein, the Issuers shall make an offer to purchase
outstanding Notes in accordance with the procedures set forth in the Indenture.
-5-
<PAGE> 6
8. Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. A Holder may transfer or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay to it any
taxes and fees required by law or permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Notes or portion of a Note
selected for redemption, or register the transfer of or exchange any Notes for
a period of 15 days before selection of Notes to be redeemed.
9. Persons Deemed Owners. The registered Holder of this
Note may be treated as the owner of this Note for all purposes.
10. Unclaimed Money. If money for the payment of
principal, premium, if any, or interest remains unclaimed for two years, the
Trustee will pay the money back to the Issuers at their written request. After
that, Holders entitled to the money must look to the Issuers or Guarantors for
payment as general creditors unless an "abandoned property" law designates
another Person.
11. Amendment, Supplement, Waiver, Etc. The Issuers, the
Guarantors, and the Trustee may, without the consent of the Holders of any
outstanding Notes, amend, waive or supplement the Indenture or the Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, maintaining the qualification of the Indenture
under the Trust Indenture Act of 1939, as amended, and making any change that
does not adversely affect the rights of any Holder. Other amendments and
modifications of the Indenture or the Notes may be made by the Issuers, the
Guarantors and the Trustee with the consent of the Holders of not less than a
majority of the aggregate principal amount of the outstanding Notes, subject to
certain exceptions requiring the consent of the Holders of the Notes to be
affected.
12. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Issuers and their Subsidiaries to, among
other things, incur additional Indebtedness, make payments in respect of their
Capital Stock or certain Indebtedness, make certain Investments, create or
incur Liens, enter into transactions with Affiliates, enter into agreements
restricting the ability of Subsidiaries to pay dividends and make
distributions, issue Preferred Stock of any Subsidiaries of the Issuers, enter
into Sale and Leaseback Transactions and on the ability of the Issuers and
Guarantors to merge or consolidate with any other Person or transfer all or
substantially all of the Issuers' or Guarantors' assets.
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<PAGE> 7
Such limitations are subject to a number of important qualifications and
exceptions. Pursuant to Section 4.04 of the Indenture, the Issuers must
annually report to the Trustee on compliance with such limitations.
13. Successor Corporation. When a successor corporation
assumes all the obligations of its predecessor under the Notes and the
Indenture and the transaction complies with the terms of Article 5 of the
Indenture, the predecessor corporation will, except as provided in Article 5,
be released from those obligations.
14. Defaults and Remedies. Events of Default are set
forth in the Indenture. Subject to certain limitations in the Indenture, if an
Event of Default (other than an Event of Default specified in Section 6.01(7)
or (8) of the Indenture with respect to the Issuers, the General Partner or any
Significant Subsidiary) occurs and is continuing, the Trustee or the Holders of
not less than 25% in aggregate principal amount of the outstanding Notes may,
by written notice to the Trustee and the Issuers, and the Trustee upon the
request of the Holders of not less than 25% in aggregate principal amount of
the outstanding Notes shall, declare all principal of and accrued interest on
all Notes to be immediately due and payable and such amounts shall become
immediately due and payable. If an Event of Default specified in Section
6.01(7) or (8) of the Indenture occurs with respect to the Issuers, the General
Partner or any Significant Subsidiary, the principal amount of and interest on,
all Notes shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder. Holders
may not enforce the Indenture or the Notes except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders notice
of any continuing default (except a default in payment of principal, premium,
if any, or interest) if it determines that withholding notice is in their
interests. The Issuers must furnish an annual compliance certificate to the
Trustee.
15. Trustee Dealings with Issuers. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Issuers, the General Partner or their Affiliates, and
may otherwise deal with the Issuers, the General Partner or their Affiliates,
as if it were not Trustee.
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<PAGE> 8
16. No Personal Liability of Certain Persons. No
director, officer, employee, partner, interest holder or shareholder,
as such, of either Issuer or of the General Partner, will have any liability
for any obligations of either of the Issuers under the Notes or the Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the Notes by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy. Absent such waiver and
release, under the Delaware Revised Uniform Limited Partnership Act, as
amended, the Holders of the Notes would have been able to proceed against the
General Partner in the event of nonpayment thereof, and such Holders would have
been able to proceed against the limited partners of the Company only if the
limited partners received distributions from the Company and, at the time of
such distributions, they knew that the Company's total liabilities exceeded the
fair value of the Company's assets.
17. Discharge. The Issuers' obligations pursuant to the
Indenture will be discharged, except for obligations pursuant to certain
sections thereof, subject to the terms of the Indenture, upon the payment of
all the Notes or upon the irrevocable deposit with the Trustee of United States
dollars or U.S. Government Obligations sufficient to pay when due principal of
and interest on the Notes to maturity or redemption, as the case may be.
18. Guarantees by Future Subsidiaries. The Notes will be
entitled to the benefits of certain Guarantees by future subsidiaries made for
the benefit of the Holders. Reference is hereby made to the Indenture for a
statement of the respective rights, limitations of rights, duties and
obligations thereunder of the Guarantors, the Trustee and the Holders.
19. Authentication. This Note shall not be valid until
the Trustee manually signs the certificate of authentication on the other side
of this Note.
20. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW
YORK SHALL GOVERN THIS NOTE WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
The Trustee, the Issuers and the Holders agree to submit to the jurisdiction of
the courts of the State of New York in any action or proceeding arising out of
or relating to the Indenture or the Notes.
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<PAGE> 9
21. Abbreviations. Customary abbreviations may be used
in the name of a Holder or an assignee, such as: TEN COM (= tenants in
common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
The Issuers will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to:
JAMES CABLE PARTNERS, L.P..
710 North Woodward Avenue, Suite 180
Bloomfield Hills, Michigan 48304
Attention: Chief Financial Officer
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<PAGE> 10
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Note on the books of the Issuers. The Agent may
substitute another to act for him.
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<PAGE> 11
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Issuers pursuant to Section 4.10 or Section 4.16 of the
Indenture, check the appropriate box:
[ ] Section 4.10 [ ] Section 4.16
If you want to have only part of the Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$____________________
(multiple of $1,000)
Date: ___________________
Your Signature: ___________________________________________________________
(Sign exactly as your name appears on the face of this Note)
_________________________
Signature Guaranteed
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<PAGE> 1
EXHIBIT 4.3
Execution Copy
================================================================================
CREDIT AGREEMENT
DATED AS OF AUGUST 15, 1997
AMONG
JAMES CABLE PARTNERS, L.P.,
AS BORROWER,
THE LENDERS LISTED HEREIN,
AS LENDERS,
AND
NBD BANK,
AS DOCUMENTATION AGENT
AND
CANADIAN IMPERIAL BANK OF COMMERCE,
AS ADMINISTRATION AGENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1 DEFINITIONS .................................................................................. 1
1.1 Certain Defined Terms ................................................................. 1
1.2 Accounting Terms: Utilization of GAAP
for Purposes of Calculations Under Agreement .......................................... 17
1.3 Other Definitional Provisions ......................................................... 18
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS ................................................... 18
2.1 Commitments: Making of Loans; Notes ................................................... 18
2.2 Interest on the Loans ................................................................. 20
2.3 Fees .................................................................................. 23
2.4 Repayments, Prepayments and Reductions
in Commitments: General Provisions Regarding Payments ................................
2.5 Use of Proceeds ....................................................................... 27
2.6 Special Provisions Governing Eurodollar Rate Loans .................................... 27
2.7 Increased Costs: Taxes: Capital Adequacy .............................................. 29
SECTION 3. CONDITIONS TO LOANS .......................................................................... 33
3.1 Conditions to Initial Loans ........................................................... 33
3.2 Conditions to All Loans ............................................................... 36
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES ..................................................... 38
4.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries ......... 38
4.2 Authorization of Borrowing, etc ....................................................... 39
4.3 Financial Condition ................................................................... 40
4.4 No Material Adverse Change: No Restricted Junior Payments ............................. 40
4.5 Title to Properties: Liens ............................................................ 40
4.6 Litigation; Adverse Facts ............................................................. 40
4.7 Payment of Taxes ...................................................................... 41
4.8 Performance of Agreements: Franchises ................................................. 41
4.9 Governmental Regulation ............................................................... 41
4.10 Securities Activities ................................................................. 42
4.11 Employee Benefit Plans ................................................................ 42
4.12 Certain Fees .......................................................................... 42
4.13 Environmental Protection .............................................................. 42
4.14 Employee Matters ...................................................................... 44
4.15 Solvency .............................................................................. 44
4.16 Disclosure ............................................................................ 44
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 5. COMPANY'S AFFIRMATIVE COVENANTS ............................................................. 44
5.1 Financial Statements and Other Reports ............................................... 44
5.2 Corporate Existence, etc ............................................................. 48
5.3 Payment of Taxes and Claims; Tax Consolidation ....................................... 48
5.4 Maintenance of Properties; Insurance ................................................. 48
5.5 Inspection: Lender Meeting ........................................................... 49
5.6 Compliance with Laws, etc ............................................................ 49
5.7 Environmental Disclosure and Inspection .............................................. 49
5.8 Company's Remedial Action Regarding Hazardous Materials .............................. 50
5.9 Further Assurances: New Subsidiaries ................................................. 51
5.10 Real Estate .......................................................................... 51
5.11 Franchise Consents ................................................................... 52
5.12 Other Terms .......................................................................... 52
SECTION 6. COMPANY'S NEGATIVE COVENANTS ................................................................ 52
6.1 Indebtedness ......................................................................... 52
6.2 Liens and Related Matters ............................................................ 53
6.3 Investments; Joint Ventures .......................................................... 54
6.4 Contingent Obligations ............................................................... 55
6.5 Restricted Junior Payments ........................................................... 55
6.6 Financial Covenants .................................................................. 56
6.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions:
New Subsidiaries ..................................................................... 57
6.8 Sales and Lease-Backs ................................................................ 57
6.9 Sale or Discount of Receivables ...................................................... 58
6.10 Transactions with Shareholders and Affiliates ........................................ 58
6.11 Conduct of Business .................................................................. 58
6.12 Amendments to the Indenture, Senior Unsecured Notes and Other
Material Agreements .................................................................. 58
6.13 Fiscal Year .......................................................................... 59
SECTION 7. EVENTS OF DEFAULT ........................................................................... 59
7.1 Failure to Make Payments When Due .................................................... 59
7.2 Default in Other Agreements .......................................................... 59
7.3 Breach of Certain Covenants .......................................................... 59
7.4 Breach of Warranty ................................................................... 59
7.5 Other Defaults Under Loan Documents .................................................. 60
7.6 Involuntary Bankruptcy, Appointment of Receiver, etc ................................. 60
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc ................................... 60
7.8 Judgments and Attachments ............................................................ 60
7.9 Dissolution .......................................................................... 61
7.10 Employee Benefit Plans ............................................................... 61
7.11 Change in Control .................................................................... 61
7.12 Invalidity of Guaranties ............................................................. 61
7.13 Failure of Security .................................................................. 62
7.14 Franchises ........................................................................... 62
</TABLE>
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<TABLE>
<S> <C> <C>
7.15 Default in Partnership Agreement ..................................................... 62
SECTION 8. AGENTS ...................................................................................... 63
8.1 Appointment .......................................................................... 63
8.2 Powers: General Immunity ............................................................. 63
8.3 Representations and Warranties-, No
Responsibility For Appraisal of Creditworthiness ..................................... 64
8.4 Right to Indemnity ................................................................... 64
8.5 Successor Agent ...................................................................... 65
8.6 Collateral Documents ................................................................. 65
SECTION 9. MISCELLANEOUS ............................................................................... 65
9.1 Assignments and Participations in Loans .............................................. 65
9.2 Expenses ............................................................................. 67
9.3 Indemnity ............................................................................ 68
9.4 Set-Off .............................................................................. 68
9.5 Ratable Sharing ...................................................................... 69
9.6 Amendments and Waivers ............................................................... 69
9.7 Independence of Covenants ............................................................ 70
9.8 Notices .............................................................................. 70
9.9 Survival of Representations, Warranties and Agreements ............................... 70
9.10 Failure or Indulgence Not Waiver: Remedies Cumulative ................................ 70
9.11 Marshalling: Payments Set Aside ...................................................... 71
9.12 Severability ......................................................................... 71
9.13 Obligations Several: Independent Nature of Lenders' Rights ........................... 71
9.14 Headings ............................................................................. 71
9.15 Applicable Law ....................................................................... 71
9.16 Successors and Assigns ............................................................... 72
9.17 Consent to Jurisdiction and Service of Process ....................................... 72
9.18 Waiver of Jury Trial ................................................................. 72
9.19 Confidential ......................................................................... 73
9.20 Counterparts: Effectiveness .......................................................... 73
9.21 Limitation on Recourse ............................................................... 75
9.22 Relationship of this Agreement to the Original Credit Agreement ...................... 76
</TABLE>
iii
<PAGE> 5
JAMES CABLE PARTNERS, L.P.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of August 15, 1997 and entered into by
and among JAMES CABLE PARTNERS, L.P., a Delaware limited partnership
("COMPANY"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF
(each individually referred to herein as a "LENDER" and collectively as
"LENDERS"), NBD BANK ("NBD"), as documentation agent for Lenders (in such
capacity, "DOCUMENTATION AGENT") and CANADIAN IMPERIAL BANK OF COMMERCE
("CIBC"), as administrative agent for Lenders (in such capacity,
"ADMINISTRATIVE AGENT").
WHEREAS, the parties hereto desire to amend and restate the Original
Credit Agreement (as defined below) in its entirety;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders and Agents agree
that the Original Credit Agreement shall be amended and restated as follows:
SECTION 1.
DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following
meanings:
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination
Date with respect to an Interest Period for a Eurodollar Rate Loan, the
rate per annum obtained by dividing (i) the arithmetic average (rounded
upward to the nearest 1/16 of one percent) of the offered quotation, if
any, to first class banks in the interbank Eurodollar market by each of the
Reference Lenders for U.S. dollar deposits of amounts in same day funds
comparable to the principal amount of the Eurodollar Rate Loan of that
Reference Lender for which the Adjusted Eurodollar Rate is then being
determined with maturities comparable to such Interest Period as of
approximately 10:00 A.M. (New York Time) on such Interest Rate
Determination Date by (ii) a percentage equal to 100% minus the stated
maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves)
applicable on such Interest Rate Determination Date to any member bank of
the Federal Reserve System in respect of "Eurocurrency liabilities" as
defined in Regulation D (or any successor category of liabilities under
Regulation D); provided that if any Reference Lender fails to provide
Administrative Agent with its aforementioned quotation then the
Adjusted Eurodollar Rate shall be determined based on the quotation(s)
provided to Administrative Agent by the other Reference Lender(s).
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 8.5.
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<PAGE> 6
"AFFECTED LENDER" has the meaning assigned to that term in
subsection 2.6C.
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by
contract or otherwise.
"AGENTS" means the Administrative Agent and the Documentation Agent.
"AGREEMENT" means this Credit Agreement dated as of August 15, 1997,
as it may be amended, supplemented or otherwise modified from time to time.
"ASSET SALE" means the sale (including any sale-leaseback transaction
any disposition of any rights under any Franchise Agreement) by Company or
any of its Subsidiaries to any Person other than Company or any of its
wholly-owned Subsidiaries of (i) any of the stock or partnership interests
of any of Company's Subsidiaries, (ii) substantially all of the assets of
any division or line of business of Company or any of its Subsidiaries, or
(iii) any other assets (whether tangible or intangible) of Company or any
of its Subsidiaries outside of the ordinary course of business; provided,
that for the purposes of subsections 2.4A(iii)(a) and 6.7, there shall be
excluded from the definition of Asset Sale (A) any such sale or related
series of sales of assets in the ordinary course of business to the extent
that the Net Cash Proceeds of such sale or related series of sales do not
exceed $500,000, provided that the aggregate amount of Net Cash Proceeds
from all such sales or related series of sales of assets excluded from
this definition of Asset Sale due to this clause (A) shall not exceed
$1,000,000 per year, and (B) any such sale of assets if the proceeds of
such sale are reinvested in assets of approximately equal or greater value
than the assets sold within 12 months after such sale, and Company agrees
to provide a certificate monthly to the Agents of any such asset sales
occurring during such month for which the proceeds are to be reinvested,
detailing the assets sold and when the proceeds are to be reinvested, and
if such proceeds are not reinvested within 12 months of such sale it
shall be considered an Asset Sale for purposes of subsections 2.4A(iii)(a)
and 6.7.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially
the form of Exhibit VIII annexed hereto.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASE RATE" means, at any time, the higher of (x) the Prime Rate or
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective
Rate.
"BASE RATE LOANS" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in
subsection 2.2A.
"BOND OFFERING COST" means up to $3,700,000 in actual costs and
expenses incurred by the Company in Fiscal Year 1997 in connection with
the Senior Unsecured Notes.
2
<PAGE> 7
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York or the
State of Michigan or is a day on which banking institutions located in
such states are authorized or required by law or other governmental
action to close.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally
guaranteed as to interest and principal by the United States Government or
(b) issued by any agency of the United States the obligations of which are
backed by the full faith and credit of the United States, in each case
maturing within six months after such date; (ii) marketable direct
obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality
thereof, in each case maturing within six months after such date and
having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Corporation ("SAP") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no
more than six months from the date of creation thereof and having, at the
time of the acquisition thereof, a rating of at least A-1 from SAP or at
least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within six months after such date and issued or
accepted by any Lender or by any commercial bank organized under the laws
of the United States of America or any state thereof or the District of
Columbia that (a) is at least "adequately capitalized" (as defined in the
regulations of its primary Federal banking regulator) and (b) has Tier 1
capital (as defined in such regulations) of not less than $100,000,000;
and (v) shares of any money market mutual fund that (a) has at least 95%
of its assets invested continuously in the types of investments referred
to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either
SAP or Moody's.
"CASH PROCEEDS" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.
"CERTIFICATE RE NON-BANK STATUS" means a certificate substantially
in the form of Exhibit IX annexed hereto delivered by a Lender to
Administrative Agent pursuant to subsection 2.7B(iii).
"CIBC" has the meaning assigned to that term in the introduction to
this Agreement.
"CLOSING DATE" means the date on or before August 15, 1997.
"COLLATERAL" means all of the properties and assets (including capital
stock) in which Liens are purported to be granted
by the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Company Security Agreement, any
Guarantor Security Agreement and any and all Mortgages.
3
<PAGE> 8
"COMMITMENT" means the commitment of a Lender to make Loans to Company
pursuant to subsection 2.IA(i), and "Commitments" means such commitments
of all Lenders in the aggregate.
"COMMITMENT TERMINATION DATE" means August 15, 2002.
"COMPANY" has the meaning assigned to that term in the introduction
to this Agreement.
"COMPANY SECURITY AGREEMENT" means that certain Company Security
Agreement by and between Company and Documentation Agent dated as of the
Closing Date and substantially in the form of Exhibit X annexed hereto, as
such Company Security Agreement may be amended, supplemented or
otherwise modified from time to time.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the
form of Exhibit IV annexed hereto delivered to Administrative Agent
and Lenders by Company pursuant to subsection 5.1(iv).
"CONSOLIDATED ADJUSTED EBITDA" means, for any period, Consolidated
System Cash Flow minus (i) Management Fees and Unallocated Corporate
Overhead to the extent actually paid in that period (provided that in
determining Consolidated Adjusted EBITDA, Bond Offering Costs incurred in
that period should not be considered in the calculation of Consolidated Net
Income) and (ii) to the extent included in Consolidated Net Income,
proceeds of the key-man life insurance policy on William R. James.
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period,
Consolidated Interest Expense, but excluding, however, amortization of
discount, deferred financing costs and interest expense not payable in
cash.
"CONSOLIDATED CURRENT ASSETS" means, as at any date of determination,
the total assets of Company and its Subsidiaries on a consolidated basis
which may properly be classified as current assets in conformity with GAAP,
excluding Cash and Cash Equivalents.
"CONSOLIDATED CURRENT LIABILITIES" means, as at any date of
determination, the total liabilities of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities
in conformity with GAAP, excluding the current portion of Indebtedness
under this Agreement.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total
interest expense (including that portion attributable to Capital Leases
in accordance with GAAP and capitalized interest) of Company and its
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of Company and its Subsidiaries, including, without
limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and
net costs under Interest Rate Agreements.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of Company and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded (i) the income (or loss) of
any Person (other than a Subsidiary of Company) in which any other Person
(other than Company or any of its Subsidiaries) has a joint interest,
except to the extent of the amount of
4
<PAGE> 9
dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss)
of any Person accrued prior to the date it becomes a Subsidiary of Company
or is merged into or consolidated with Company or any of its Subsidiaries
or that Person's assets are acquired by Company or any of its Subsidiaries,
(iii) the income of any Subsidiary of Company to the extent that the
declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary,
(iv) any after-tax gains or losses attributable to Asset Sales or returned
surplus assets of any Pension Plan, and (v) (to the extent not included in
clauses (i) through (iv) above) any net extraordinary gains or net noncash
extraordinary losses and guaranteed payments made to purchase limited
partner interests to the extent permitted by subsection 6.5(iii).
"CONSOLIDATED SENIOR DEBT" means, as at any date of determination,
all Indebtedness of Company and its Subsidiaries, other than Indebtedness
under the Senior Unsecured Notes, determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED SYSTEM CASH FLOW" means, for any period, the sum of
the amounts for such period of (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) income tax expense to the extent
actually paid in that period but excluding, to the extent otherwise
included therein, current income tax expense attributable to gains on
Asset Sales, (iv) total depreciation expense, (v) total amortization
expense, (vi) Management Fees and Unallocated Corporate Overhead to the
extent actually paid in that period, and (vii) other non-cash items
reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income, all of the foregoing as determined on a
consolidated basis for Company and its Subsidiaries in conformity with
GAAP. For purposes of calculating Consolidated System Cash Flow (and the
components thereof, including Consolidated Net Income) for any period,
any Asset Sale or acquisition by Company shall be deemed to have occurred
(i) for purposes of subsection 6.6, on the first day of such period and
(ii) for all other purposes, on the day on which such Asset Sale or
acquisition occurred and Consolidated System Cash Flow shall be adjusted
to give effect to such Asset Sale or acquisition in accordance with the
foregoing.
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination,
the aggregate stated balance sheet amount of all Indebtedness of Company
and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED WORKING CAPITAL" means, as at any date of
determination, the excess of Consolidated Current Assets over
Consolidated Current Liabilities.
"CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, for any Fiscal Year
on a consolidated basis, the amount (which may be a negative number) by
which the Consolidated Working Capital of Company and its Subsidiaries as
of the beginning of the period exceeds (or is less than) the Consolidated
Working Capital of Company and its Subsidiaries as of the end of such
period.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct
or indirect liability (including any guarantees), contingent or
otherwise, of that Person (i) with respect to any Indebtedness, lease,
dividend or other obligation of another if the primary purpose or intent
thereof by the Person incurring the Contingent Obligation is to provide
assurance to the obligee
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<PAGE> 10
of such obligation of another that such obligation of another will be paid
or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected (in whole
or in part) against loss in respect thereof, (ii) with respect to any
letter of credit issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings, or (iii) under
Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation
to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any
agreement (contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise)
or (Y) to maintain the solvency or any balance sheet item, level of income
or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary
purpose or intent thereof is as described in the preceding sentence. The
amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if less, the amount to
which such Contingent Obligation is specifically limited.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any of
its properties is bound or to which it or any of its properties is
subject.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designed to protect Company or any of its
Subsidiaries against fluctuations in currency values.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate
of deposit.
"DOCUMENTATION AGENT" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to Subsection 8.5.
"DOLLARS" and the sign "$" mean the lawful money of the United
States of America.
"DKSH" means DKS Holdings, Inc., a Michigan corporation.
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof having total assets in
excess of $3,000,000,000; (ii) a savings and loan association or savings
bank organized under the laws of the United States or any state thereof
having total assets in excess of $3,000,000,000; (iii) a commercial bank
organized under the laws of any other country or a political subdivision
thereof having total assets in excess of $3,000,000,000; provided that
(x) such bank is acting through a branch or agency located in the United
States or (y) such bank is organized under the laws of a country that is
a member of the
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<PAGE> 11
Organization for Economic Cooperation and Development or
a political subdivision of such country; and (iv) any other' entity which
is an "accredited investor" (as defined in Regulation D under the
Securities Act) having total assets in excess of $250,000,000 which
extends credit or buys loans as one of its businesses including, but not
limited to, insurance companies, mutual funds and lease financing
companies, in each case (under clauses (i) through (iv) above) that (i)
has executed and delivered an Assignment Agreement in accordance with
Section 9.1B, has delivered any forms, certificates or other evidence
required under subsections 2.7B(iii) and 9.1B and (ii) on the date of the
applicable Assignment Agreement, would not subject Company to payment of
any increased costs, taxes or gross-up payments under subsections 2.6,
2.7 or 9.3 that otherwise would not have been payable by Company to a
Lender had no assignment been made and (iii) is reasonably acceptable to
Agents; and (B) any Lender and any Affiliate of any Lender; provided that
no Affiliate or limited partner of Company shall be an Eligible Assignee.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is, or was at any time, maintained or
contributed to by Company or any of its ERISA Affiliates.
"ENVIRONMENTAL CLAIM" means any accusation, allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any governmental authority or any Person
for any damage, including, without limitation, personal injury (including
sickness, disease or death), tangible or intangible property damage,
contribution, indemnity, indirect or consequential damages, damage to the
environment, nuisance, pollution, contamination or other adverse effects
on the environment, or for fines, penalties or restrictions, in each case
relating to, resulting from or in connection with Hazardous Materials and
relating to Company, any of its Subsidiaries, any of their
respective Affiliates or any Facility.
"ENVIRONMENTAL LAWS" means all statutes, ordinances, orders, rules,
regulations, plans, policies or decrees and the like relating to (i)
environmental matters, including, without limitation, those relating to
fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the Release or threatened
Release of Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational
safety and health, industrial hygiene, land use or the protection of
human, plant or animal health or welfare, in any manner applicable to
Company or any of its Subsidiaries or any of their respective properties,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251
et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section 136 et
seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.) and the Emergency Planning and Community Right-to-Know Act (42
U.S.C. Section 11001 et seq.), each as amended or supplemented, and any
analogous future or present local, state and federal statutes and
regulations promulgated pursuant thereto, each as in effect as of the
date of determination.
"EQUITY PROCEEDS" means the cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated
therewith) from the issuance of any equity Securities of Company.
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<PAGE> 12
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute.
"ERISA AFFILIATE" means, as applied to any Person, (i) any
corporation which is, or was at any time, a member of a controlled group
of corporations within the meaning of Section 414(b) of the Internal
Revenue Code of which that Person is, or was at any time, a member; (ii)
any trade or business (whether or not incorporated) which is, or was at
any time, a member of a group of trades or businesses under common
control within the meaning of Section 414(c) of the Internal Revenue Code
of which that Person is, or was at any time, a member; and (iii) any
member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business
described in clause (ii) above is, or was at any time, a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect
to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation); (ii) the failure to
meet the minimum funding standard of Section 412 of the Internal Revenue
Code with respect to any Pension Plan (whether or not waived in
accordance with Section 412(d) of the Internal Revenue Code) or the
failure to make by its due date a required installment under Section
412(m) of the Internal Revenue Code with respect to any Pension Plan or
the failure to make any required contribution to a Multiemployer Plan;
(iii) the provision by the administrator of any Pension Plan pursuant to
Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan
in a distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by Company or any of its ERISA Affiliates from any Pension
Plan with two or more contributing sponsors or the termination of any
such Pension Plan resulting in liability pursuant to Sections 4063 or
4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition
which might constitute grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (vi) the
imposition of liability on Company or any of its ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the
application of Section 4212(c) of ERISA; (vii) the withdrawal by Company
or any of its ERISA Affiliates in a complete or partial withdrawal
(within the meaning of Sections 4203 and 4205 of ERISA) from any
Multiemployer Plan if there is any potential liability therefor, or the
receipt by Company or any of its ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of
an act or omission which could give rise to the imposition on Company or
any of its ERISA Affiliates of fines, penalties, taxes or related charges
under Chapter 43 of the Internal Revenue Code or under Section 409 or
502(c), (i) or (1) or 4071 of ERISA in respect of any Employee Benefit
Plan; (ix) the assertion of a material claim (other than routine claims
for benefits) against any Employee Benefit Plan other than a
Multiemployer Plan or the assets thereof, or against Company or any of
its ERISA Affiliates in connection with any such Employee Benefit Plan;
(x) receipt from the Internal Revenue Service of notice of the failure of
any Pension Plan (or any other Employee Benefit Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code) to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any
trust forming part of any Pension Plan to qualify for exemption from
taxation under Section 501(a) of the Internal Revenue Code; or (xi) the
imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or pursuant to ERISA with respect to any Pension
Plan.
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<PAGE> 13
"EURODOLLAR RATE LOANS" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"EVENT OF DEFAULT" means each of the events set forth in Section 7
unless remedied or waived in accordance with the terms of this Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"FACILITIES" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located
thereon) now, hereafter or heretofore owned, leased, operated or used by
Company or any of its Subsidiaries or any of their respective
predecessors or Affiliates.
"FCC" means the Federal Communications Commission and any successor
governmental agency performing functions similar to those performed by
the Federal Communications Commission on the date hereof.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
Administrative Agent from three Federal funds brokers of recognized
standing selected by Administrative Agent.
"FISCAL YEAR" means the fiscal year of Company and its Subsidiaries
ending on December 31 of each calendar year. For purposes of this
Agreement, any particular Fiscal Year shall be designated by reference to
the calendar year in which such Fiscal Year ends.
"FRANCHISE" means any franchise to operate a cable television system
granted by any federal, state or local governmental authority or agency.
"FUNDING AND PAYMENT OFFICE" means the office of the Administrative
Agent located at 425 Lexington Avenue, 8th Floor, York, New York 10017.
"FUNDING DATE" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a significant
segment of the accounting profession, in each case as the same are
applicable to the circumstances as of the date of determination as
adjusted to reflect the impact of tax basis accounting on depreciation,
amortization and the capitalization of expenses and other non-material
variations, all on a basis consistent with Company's historical financial
statements.
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<PAGE> 14
"GENERAL PARTNER" means James Communications Partners, a Michigan
general partnership or its successor in its capacity as general partner
of Company.
"GENERAL PARTNERSHIP AGREEMENT" means the Second Amended and
Restated Partnership Agreement of the General Partner dated as of July 1,
1997 by and among Jamesco, Trenary Corp. and DKSH, as amended,
supplemented or otherwise modified from time to time as permitted by the
terms thereof and hereof.
"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent order or consent decree of or
from any federal, state or local governmental authority, agency or court.
"GUARANTOR" means any Subsidiary of Company that executes and
delivers a Guaranty from time to time pursuant to subsection 5.10.
"GUARANTOR SECURITY AGREEMENT" means a Guarantor Security Agreement
by and among any Guarantor and Documentation Agent pursuant to subsection
5.10 in form and substance satisfactory to Documentation Agent and
Requisite Lenders, as such Guarantor Security Agreement may be amended,
supplemented or otherwise modified from time to time.
"GUARANTORS" means JCFC, any subsidiary of the Company that executes
and deliver a Guaranty from time to time pursuant to Subsection 5.10 or
any other Person that executes a Guaranty at any time.
"GUARANTY" means a Guaranty delivered by any Guarantor pursuant to
subsection 5.10 in form and substance satisfactory to Documentation Agent
and Requisite Lenders, as such Guaranty may be amended, supplemented or
otherwise modified from time to time.
"HAZARDOUS MATERIALS" means (i) any chemical, material or substance
at any time defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely
hazardous waste", "restricted hazardous waste", "infectious waste",
"toxic substances" or any other formulations intended to define, list or
classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of
similar import under any applicable Environmental Laws or publications
promulgated pursuant thereto; (ii) any oil, petroleum, petroleum fraction
or petroleum derived substance; (iii) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iv) any
flammable substances or explosives; (v) any radioactive materials; (vi)
asbestos in any form; (vii) urea formaldehyde foam insulation; (viii)
electrical equipment which contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of fifty parts
per million; (ix) pesticides; and (x) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority or which may or could pose a hazard to the health
and safety of the owners, occupants or any Persons in the vicinity of the
Facilities.
"INDEBTEDNESS" means, as applied to any Person, without duplication,
(i) all liabilities, contingent or otherwise, of such Person (a) for
borrowed money (whether or not the recourse of the lender is to the whole
of the assets of such Person or only to a portion thereof), (b) evidenced
by bonds (not including performance bonds incurred in the ordinary course
of business that
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<PAGE> 15
aggregate less than $1,500,000 at any one time outstanding), notes
debentures, drafts accepted or similar instruments or letters of credit
or representing the balance deferred and unpaid of the purchase price of
any property (other than any such balance that represents an account
payable or any other monetary obligation to a trade creditor created,
incurred, assumed or guaranteed by such Person in the ordinary course of
business of such Person in connection with obtaining goods, materials or
services, which account is not overdue by more than 90 days, according to
the original terms of sale, unless such account payable is being
contested or has been renegotiated in good faith) or (c) for the payment
to money relating to a Capital Lease; (ii) reimbursement obligations of
such Person with respect to letters of credit; (ii) obligations of such
Person with respect to Interest Rate Agreements and Currency Agreements;
(iv) all liabilities of others of the kind described in the
preceding clause (i), (ii) or (iii) that such person has guaranteed,
that have been incurred by a partnership in which it is a general partner
(to the extent such Person is liable, contingently or otherwise,
therefor) that is otherwise its legal liability (other than endorsements
for collection in the ordinary course of business); and (v) all
obligations of others secured by a Lien to which any of the properties or
assets (including, without limitation, leasehold interests and any other
tangible or intangible property rights) of such Person are subject,
whether or not the obligations secured thereby shall have been assumed by
such Person or shall otherwise be such Person's legal liability.
"INDEMNITEE" has the meaning assigned to that term in subsection 9.3.
"INDENTURE" means the Indenture dated August 15, 1997 among the
Company, JCFC and United States Trust Company of New York as Trustee, in
the form delivered to the Documentation Agent on the Closing Date
pursuant to Section 3.1, as such Indenture is modified from time to time
if permitted by this Agreement.
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate
Loan, each March 31, June 30, September 30 and December 31 of each year,
commencing on the first such date to occur after the Closing Date, and
(ii) with respect to any Eurodollar Rate Loan, the last day of each
Interest Period applicable to such Loan; provided that in the case of
each Interest Period of longer than three months "Interest Payment Date"
shall also include each date that is three months after the commencement
of such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in
subsection 2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect Company or any of
its Subsidiaries against fluctuations in interest rates.
"INTEREST RATE DETERMINATION DATE" means, with respect to any
Interest Period, the second Business Day prior to the first day of such
Interest Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person or (ii) any direct or
indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary
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<PAGE> 16
course of business) or capital contribution by Company or any of its
Subsidiaries to any other Person, including all indebtedness and accounts
receivable from that other Person that are not current assets or did not
arise from sales to that other Person in the ordinary course of business.
The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"JAMESCO" means Jamesco, Inc., a Michigan corporation.
"JCFC" means James Cable Finance Corp., a Michigan corporation.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form;
provided that in no event shall any corporate Subsidiary of any Person be
considered to be a Joint Venture to which such Person is a party.
"LENDER" and "LENDERS" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 9.1.
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof,
and any agreement to give any security interest) and any option, trust or
other preferential arrangement having the practical effect of any of the
foregoing.
"LIMITED PARTNER" means each of the Persons listed as such on
Schedule 4.1 annexed hereto and their successors or assigns.
"LOAN EXPOSURE" means, with respect to any Lender as of any date of
determination (i) prior to the termination of the Commitments, that
Lender's Commitment and (ii) after the termination of the Commitments,
the aggregate outstanding principal amount of the Loans of that Lender.
"LOANS" means the Loans made by Lenders to Company pursuant to
subsection 2.1A(ii).
"LOAN DOCUMENTS" means this Agreement, the Notes, any Guaranty, any
Interest Rate Agreements entered into between Company and any Lender and
the Collateral Documents.
"LOAN PARTIES" means Company and any Guarantors.
"MANAGEMENT FEES" means payments made to the General Partner
pursuant to Sections 5.5.1 and 5.6.1(a)(vii) of the Partnership
Agreement.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon
the business, operations, properties, assets, condition (financial or
otherwise) or prospects (it being understood
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<PAGE> 17
that materially negative changes in the regulatory environment in which
Company operates can be construed to affect such prospects) of Company
and its Subsidiaries taken as a whole or (ii) the material impairment of
the ability of any Loan Party to perform, or of Agents or Lenders to
enforce, the Obligations.
"MORTGAGE" means any mortgage, deed of trust or other similar
document granted by Company or any of its Subsidiaries in any interest in
real property to secure the Obligations.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in
Section 3(37) of ERISA, to which Company or any of its ERISA Affiliates
is contributing, or ever has contributed, or to which Company or any of
its ERISA Affiliates has, or ever has had, an obligation to contribute.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, Cash
Proceeds of such Asset Sale net of bona fide direct costs of sale
including (i) income taxes reasonably estimated to be actually payable as
a result of such Asset Sale within two years of the date of such Asset
Sale and (ii) payment of the outstanding principal amount of, premium or
penalty, if any, and interest on any Indebtedness (other than the Loans)
that is secured by a Lien on the stock or assets in question and that is
required to be repaid under the terms thereof as a result of such Asset
Sale.
"NOTES" means (i) the promissory notes of Company issued pursuant to
subsection 2.1D(ii) on the Closing Date and (ii) any promissory notes
issued by Company pursuant to the last sentence of subsection 9.1B(i) in
connection with assignments of the Commitments and Loans of any Lenders,
in each case substantially in the form of Exhibit III annexed hereto, as
they may be amended, supplemented or otherwise modified from time to
time.
"NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit I annexed hereto delivered by Company to Administrative Agent
pursuant to subsection 2.1.B with respect to a proposed borrowing.
"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in
the form of Exhibit II annexed hereto delivered by Company to
Administrative Agent pursuant to subsection 2.2E. with respect to a
proposed conversion or continuation of the applicable basis for
determining the interest rate with respect to the Loans specified
therein.
"OBLIGATIONS" means all obligations of every nature of each Loan
Party from time to time owed to Agents, Lenders or any of them under the
Loan Documents, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, (x) as applied to a partnership, a
certificate executed on behalf of such partnership by the chairman of the
board (if an officer) or the president or one of the vice presidents of
the managing or general partner of such partnership or by the chief
financial officer or the treasurer of the managing or general partner of
such partnership and (y) as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if
an officer) or its president or one of its vice presidents or by its
chief financial officer or its treasurer; provided that every Officers'
Certificate with respect to the compliance with a condition precedent to
the making of any Loans hereunder shall include (i) a statement that the
officer or officers making or giving such Officers' Certificate have read
such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a
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<PAGE> 18
statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to
enable them to express an informed opinion as to whether or not such
condition has been complied with, and (iii) a statement as to whether, in
the opinion of the signers, such condition has been complied with.
"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the
lessee at any time) of any property (whether real, personal or mixed)
that is not a Capital Lease other than any such lease under which that
Person is the lessor.
"ORIGINAL CREDIT AGREEMENT" means the Credit Agreement dated as of
June 30, 1995 among the Company, the lenders party thereto, Bankers Trust
Company, as agent, and CIBC, as co-agent, as amended.
"PARTNERSHIP AGREEMENT" means the Amended and Restated Agreement of
Limited Partnership of James Cable Partners, L.P. dated as of June 30,
1995 and as further amended, supplemented or otherwise modified from time
to time as permitted under the terms thereof and hereof.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto).
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal
Revenue Code or Section 302 of ERISA.
"PERMITTED ENCUMBRANCES" means the following types of Liens (other
than any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of
the Internal Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by
subsection 5.3;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen and other Liens imposed by
law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money);
(iv) any attachment or judgment Lien not constituting an
Event of Default under subsection 7.8;
(v) leases or subleases granted to others not interfering in
any material respect with the ordinary conduct of the business of
Company or any of its Subsidiaries;
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<PAGE> 19
(vi) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges
or encumbrances not interfering in any material respect with the
ordinary conduct of the business of Company or any of its
Subsidiaries;
(vii) any (a) interest or title of a lessor or sublessor
under any lease permitted hereunder, (b) restriction or
encumbrance that the interest or title of such lessor or sublessor
may be subject to, or (c) subordination of the interest of the
lessee or sublessee under such lease to any restriction or
encumbrance referred to in the preceding clause (b);
(viii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement; and
(ix) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint
Ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other organizations, whether or not legal
entities, and governments and agencies and political subdivisions
thereof.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"PRIME RATE" means the rate that CIBC announces from time to time as
its prime lending rate, as in effect from time to time. The Prime Rate
is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. CIBC or any other Lender may make
commercial loans or other loans at rates of interest at, above or below
the Prime Rate.
"PRO FORMA BASIS" means, with respect to compliance with any
covenant hereunder, compliance with such covenant after giving effect to
any proposed acquisition, asset sale, or any other action which requires
compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed
after good faith consultation with Agents using the consolidated
financial statements of Company and its Subsidiaries which shall be
reformulated as if any acquisition, asset sale, or any other action had
been consummated at the beginning of the period specified in the covenant
with respect to which Pro Forma Basis compliance is required.
"PRO RATA SHARE" means with respect to each Lender, the percentage
obtained by dividing (x) the Loan Exposure of that Lender by (y) the
aggregate Loan Exposures of all Lenders, as such percentage may be
adjusted by assignments permitted pursuant to subsection 9.1 The initial
Pro Rate Share of each Lender is set forth opposite the name of that
Lender in Schedule 2.1 annexed hereto.
"REFERENCE LENDERS" means CIBC and NBD Bank.
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<PAGE> 20
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or
outdoor environment (including, without limitation, the abandonment or
disposal of any barrels, containers or other closed receptacles
containing any Hazardous Materials), or into or out of any Facility,
including the movement of any Hazardous Material through the air, soil,
surface water, groundwater or property.
"REQUISITE LENDERS" means Lenders having or holding 50.1% or more of
the aggregate Loan Exposure of all Lenders.
"RESTRICTED JUNIOR PAYMENT" means, with respect to any Person, (i)
any dividend or other distribution, direct or indirect, on account of any
partnership interests, capital stock or other interests of such Person
now or hereafter outstanding, (ii) any redemption, retirement, sinking
fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any partnership interests, capital stock or other
interests of such Person now or hereafter outstanding, (iii) any payment
made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire partnership interests or other
interests of such Person now or hereafter outstanding, (iv) any payment
or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or
legal defeasance), sinking fund or similar payment with respect to, the
Senior Unsecured Notes and (v) any payment of Management Fees or other
payments to the General Partner or any of its Affiliates.
"SECURITIES" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes (other than the Notes), or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities"
or any certificates of interest, shares or participations in temporary or
interim certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"SENIOR UNSECURED DEBT DOCUMENTS" means the Senior Unsecured Notes,
the Indenture and all of their agreements, documents and instruments
executed or delivered in connection therewith.
"SENIOR UNSECURED NOTES" means the $100,000,000 aggregate principle
amount of the 10 3/4% Senior Notes due 2004 issued by the Company on the
Closing Date pursuant to the Indenture in the form delivered to the
Documentation Agent on the Closing Date pursuant to Section 3.1, as
amended or modified from time to time if permitted by the terms of this
Agreement.
"SIGNIFICANT SUBSIDIARY" means at any date of determination, any
Subsidiary of the Company that, together with its Subsidiaries, (i) for
the most recent fiscal quarter of the Company, accounted for more than 5%
of the consolidated revenues of the Company or (ii) as of
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<PAGE> 21
the end of such fiscal quarter, was the owner of more than 5% of the
consolidated assets of the Company, all as set forth on the most recently
available consolidated financial statements of the Company for such
fiscal quarter.
"SOLVENT" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property
of such Person is (y) greater than the total amount of liabilities
(including contingent liabilities) of such Person and (z) not less than
the amount that will be required to pay the probable liabilities on such
Person's then existing debts as they become absolute and matured
considering all financing alternatives and potential asset sales
reasonably available to such Person; (ii) such Person's capital is not
unreasonably small in relation to its business or any contemplated or
undertaken transaction; and (iii) such Person does not intend to incur,
or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such
Person is "solvent" within the meaning given that term and similar terms
under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability
at any time shall be computed as the amount that, in light of all of the
facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which
more than 50% of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar
functions) having the power to direct or cause the direction of the
management and policies thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"TAX" OR "TAXES" means any present or future tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed; provided that "TAX ON THE OVERALL NET
INCOME" of a Person shall be construed as a reference to a tax imposed by
the jurisdiction in which that Person's principal office (and/or, in the
case of a Lender, its lending office) is located 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).
"TRENARY CORP." means Trenary Corp. Ltd., a Michigan corporation.
"TOTAL DEBT TO EBITDA" has the meaning assigned to that term in
subsection 2.2A.
"UNALLOCATED CORPORATE OVERHEAD" means expenses incurred in the
ordinary course of business (including expenses related to the audit of
financial statements and the preparation of tax returns) that, consistent
with past practice, are not allocated among Company's cable television
systems.
1.2 ACCOUNTING TERMS: UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT.
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<PAGE> 22
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to
be delivered by Company to Lenders pursuant to clauses (i), (ii), (iii) and
(xiii) of subsection 5.1 shall be prepared in accordance with GAAP as in effect
at the time of such preparation (and delivered together with the reconciliation
statements provided for in subsection 5.1(v)). Calculations in connection with
the definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 4.3A.
1.3 OTHER DEFINITIONAL PROVISIONS.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS: MAKING OF LOANS; NOTES.
A. COMMITMENTS. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Company herein set
forth, each Lender hereby severally agrees to make the Loans described in this
subsection 2.1A.
(i) Loans. Each Lender severally agrees, subject to the limitations
set forth below with respect to the maximum amount of Loan permitted to
be outstanding from time to time, to lend to Company from time to time
during the period from the Closing Date to but excluding the Commitment
Termination Date an aggregate amount not exceeding its Pro Rata Share of
the aggregate amount of the Commitments to be used for the purposes
identified in subsection 2.5B. The original amount of each Lender's
Commitment is set forth opposite its name on Schedule 2.1 annexed hereto
and the aggregate original amount of the Commitments as of the Closing
Date is $30,000,000; provided that (a) the Commitments of Lenders shall
be adjusted to give effect to any assignments of the Commitments pursuant
to subsection 9.1B; (b) the amount of the Commitments shall be reduced
permanently from time to time by the amount of any reductions thereto made
pursuant to subsections 2.4A(ii) and 2.4A(iii) and (c) until such time as
the Partnership Agreement is amended in a manner satisfactory to the
Documentation Agent to permit the Company to borrow Loans in excess of
$20,000,000 and up to $30,00,000, the Company shall be prohibited from
borrowing Revolving Credit Loans in excess of $20,000,000 in aggregate
principal amount. Each Lender's Commitment shall expire on the Commitment
Termination Date and all Loans and all other amounts owed hereunder with
respect to the Loans and the Commitments shall be paid in full no later
than that date; provided that each Lender's Commitment shall expire
immediately and without further action on August 15, 1997 if the initial
Loans are not made on or before that date. Amounts borrowed under
this subsection 2. 1A(ii) may be repaid and reborrowed to but excluding
the Commitment Termination Date.
B. BORROWING MECHANICS. Loans made on any Funding Date shall be in an
aggregate minimum amount of $1,000,000 and integral multiples of $100,000 in
excess of that amount; provided that Loans made on any Funding Date as
Eurodollar Rate Loans with a particular Interest Period shall be
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<PAGE> 23
in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000
in excess of that amount. Whenever Company desires that Lenders make Loans it
shall deliver to Administrative Agent a Notice of Borrowing no later than 12:00
noon (New York City time) at least three Business Days in advance of the
proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one
Business Day in advance of the proposed Funding Date (in the case of a Base
Rate Loan). The Notice of Borrowing shall specify (i) the proposed Funding
Date (which shall be a Business Day), (ii) the amount and type of Loans
requested, (iii) in the case of any Loans made on the Closing Date, that such
Loans shall be Base Rate Loans, (iv) in the case of Loans not made on the
Closing Date, whether such Loans shall be Base Rate Loans or Eurodollar Rate
Loans, and (v) in the case of any Loans requested to be made as Eurodollar Rate
Loans, the initial Interest Period requested therefor. Loans may be continued
as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner
provided in subsection 2.2D. In lieu of delivering the above described Notice
of Borrowing, Company may give Administrative Agent telephonic notice by the
required time of any proposed borrowing under this subsection 2.1B; provided
that such notice shall be promptly confirmed in writing by delivery of a Notice
of Borrowing to Administrative Agent on or before the applicable Funding Date.
Neither of the Agents nor any Lender shall incur any liability to Company
in acting upon any telephonic notice referred to above that Administrative
Agent believes in good faith to have been given by a duly authorized officer or
other person authorized to borrow on behalf of Company or for otherwise acting
in good faith under this subsection 2.1B, and upon funding of Loans by Lenders
in accordance with this Agreement pursuant to any such telephonic notice
Company shall have effected Loans hereunder.
Company shall notify Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing is no longer true and correct as
of the applicable Funding Date, and the acceptance by Company of the proceeds
of any Loans shall constitute a re-certification by Company, as of the
applicable Funding Date, as to the matters to which Company is required to
certify in the applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof
shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in
accordance therewith.
C. DISBURSEMENT OF FUNDS. All Loans under this Agreement shall be made by
Lenders simultaneously and proportionately to their respective Pro Rata Shares,
it being understood that no Lender shall be responsible for any default by any
other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender to make the particular type of
Loan requested be increased or decreased as a result of a default by any other
Lender in that other Lender's obligation to make a Loan requested hereunder.
Promptly after receipt by Administrative Agent of a Notice of Borrowing
pursuant to subsection 2.1B (or telephonic notice in lieu thereof,
Administrative Agent shall notify each Lender of the proposed borrowing. Each
Lender shall make the amount of its Loan available to Administrative Agent, in
same day funds at the office of Administrative Agent, not later than 1:00 P.M.
(New York City time) on the applicable Funding Date at the Funding and Payment
Office. Upon satisfaction or waiver of the conditions precedent specified in
subsections 3.1 (in the case of Loans made on the Closing Date) and 3.2 (in the
case of all Loans), Administrative Agent shall make the proceeds of such Loans
available to Company on the applicable Funding Date by causing an amount of
same day funds in Dollars equal to the proceeds of all such Loans received by
Administrative Agent
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from Lenders to be credited to the account of Company at the Funding and
Payment Office by not later than 1:30 P.M. (New York City time).
Unless Administrative Agent shall have been notified by any Lender prior
to the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated
to, make available to Company a corresponding amount on such Funding Date. If
such corresponding amount is not in fact made available to Administrative Agent
by such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith
upon Administrative Agent's demand therefor, Administrative Agent shall
promptly notify Company and Company shall immediately pay such corresponding
amount to Administrative Agent together with interest thereon, for each day
from such Funding Date until the date such amount is paid to Administrative
Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing
in this subsection 2. 1C shall be deemed to relieve any Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
Company may have against any Lender as a result of any default by such Lender
hereunder.
D. NOTES. Company shall execute and deliver on the Closing Date to each
Lender (or to Documentation Agent for that Lender) on the Closing Date a Note
substantially in the form of Exhibit III annexed hereto to evidence that
Lender's Loans, in the principal amount of that Lender's Commitment and with
other appropriate insertions.
Agents may deem and treat the payee of any Note as the owner thereof for
all purposes hereof unless and until an Assignment Agreement effecting the
assignment or transfer thereof shall have been accepted by Agents as provided
in subsection 9.1B(ii). Any request, authority or consent of any person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, assignee or transferee of that Note or of any Note or
Notes issued in exchange therefor.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and
2.7, each Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to the Base Rate or the Adjusted Eurodollar Rate, as
the case may be. The applicable basis for determining the rate of interest
with respect to any Loan shall be selected by Company initially at the time a
Notice of Borrowing is given with respect to such Loan pursuant to subsection
2.1B. The basis for determining the interest rate with respect to any Loan may
be changed from time to time pursuant to subsection 2.2D. If on any day a Loan
is outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, the Loans shall
bear interest through maturity as follows:
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(i) if a Base Rate Loan, then at the sum of the Base Rate plus the
Applicable Margin per annum; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Margin per annum.
The "Applicable Margin" for each Base Rate Loan and Eurodollar Rate Loan
shall be the percentage set forth below for that type of Loan based upon the
ratio of (y) Consolidated Total Debt as of any day to (z) Consolidated Adjusted
EBITDA for the six consecutive month period ended as of such day multiplied by
2 (the "TOTAL DEBT TO ADJUSTED EBITDA RATIO"):
<TABLE>
<CAPTION>
================================================================================
APPLICABLE MARGIN
------------------------
TOTAL DEBT TO BASE EURODOLLAR
ADJUSTED EBITDA RATIO RATE LOAN RATE LOAN
================================================================================
<S> <C> <C> <C>
(A) Greater than or equal to 5.50:1.00 1.00% 2.25%
- --------------------------------------------------------------------------------
(B) Greater than or equal to 5.00:1.00
but less than 5.50:1.00 0.75% 2.00%
- --------------------------------------------------------------------------------
(C) Greater than or equal to 4.50:1.00
but less than 5.00:1.00 0.50% 1.75%
- --------------------------------------------------------------------------------
(D) Greater than or equal to 4.00:1.00
but less than 4.50:1.00 0.25% 1.50%
- --------------------------------------------------------------------------------
(E) Less than 4.00:1.00 0.00% 1.25%
- --------------------------------------------------------------------------------
</TABLE>
The Applicable Margin shall be adjusted, to the extent required, on the
date of delivery of each Compliance Certificate delivered pursuant to
subsection 5.1(iv), such adjustment to remain in effect until the next date of
delivery of a Compliance Certificate pursuant to subsection 5.1(iv); provided,
however, that, if Company fails to deliver a Compliance Certificate in
accordance with subsection 5.1(iv), the Total Debt to Adjusted EBITDA Ratio
shall be deemed to be 5.50: 1.00; and provided, further that the Applicable
Margin with respect to the period from the Closing Date until the date of
delivery of the first Compliance Certificate pursuant to subsection 5.1(iv)
shall be determined based upon the Compliance Certificate delivered as of the
Closing Date pursuant to subsection 3.1M.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, two, three or six month period; provided
that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a
Loan initially made as a Eurodollar Rate Loan, or on the date specified
in the applicable Notice of Conversion/Continuation, in the case of a
Loan converted to a Eurodollar Rate Loan;
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(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/ Continuation, each successive Interest Period shall
commence on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on the
last Business Day of a calendar month;
(v) there shall be no more than eight Interest Periods outstanding
at any time; and
(vi) in the event Company fails to specify an Interest Period for
any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice
of Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part
of its outstanding Loans equal to $1,000,000 and integral multiples of $100,000
in excess of that amount from Loans bearing interest at a rate determined by
reference to one basis to Loans bearing interest at a rate determined by
reference to an alternative basis or (ii) upon the expiration of any Interest
Period applicable to a Eurodollar Rate Loan, to continue all or any portion of
such Loan equal to $1,000,000 and integral multiples of $500,000 in excess of
that amount as a Eurodollar Rate Loan; provided, however that a Eurodollar Rate
Loan may only be converted into a Base Rate Loan on the expiration date of an
Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to Administrative
Agent no later than 10:00 A.M. (New York City time) at least one Business Day
in advance of the proposed conversion date (in the case of a conversion to a
Base Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). A Notice of Conversion/ Continuation shall
specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of,
a Eurodollar Rate Loan, that no Potential Event of Default or Event of Default
has occurred and is continuing. In lieu of delivering the above-described
Notice of Conversion/Continuation, Company may give Administrative Agent
telephonic notice by the required time of any proposed conversion/continuation
under this subsection 2.2D; provided that such notice shall
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<PAGE> 27
be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Administrative Agent on or before the proposed
conversion/ continuation date.
Neither any of the Agents nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or
for otherwise acting in good faith under this subsection 2.2D, and upon
conversion or continuation of the applicable basis for determining the interest
rate with respect to any Loans in accordance with this Agreement pursuant to
any such telephonic notice Company shall have effected a conversion or
continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to effect a conversion or continuation
in accordance therewith.
E. DEFAULT RATE. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base
Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective such Eurodollar Rate Loans shall thereupon become
Base Rate Loans and shall thereafter bear interest payable upon demand at a
rate which is 2% per annum in excess of the interest rate otherwise payable
under this Agreement for Base Rate Loans. Payment or acceptance of the
increased rates of interest provided for in this subsection 2.2E is not a
permitted alternative to timely payment and shall not constitute a waiver of
any Event of Default or otherwise prejudice or limit any rights or remedies of
Agents or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed (i)
in the case of Base Rate Loans, on the basis of a 365-day or 366-day year, as
the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of
a 360-day year, in each case for the actual number of days elapsed in the
period during which it accrues. In computing interest on any Loan, the date of
the making of such Loan or the first day of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted from a
Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to
such Base Rate Loan, as the case may be, shall be included, and the date of
payment of such Loan or the expiration date of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar
Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar
Rate Loan, as the case may be, shall be excluded; provided that if a Loan is
repaid on the same day on which it is made, one day's interest shall be paid
on that Loan.
2.3 FEES.
A. COMMITMENT FEES. Company agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and
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including the Closing Date to and excluding the Commitment Termination Date
equal to the daily excess of the Commitments (without reducing such Commitments
by any restriction on the ability of the Company to borrow hereunder caused by
the Partnership Agreement) over the aggregate principal amount of Loans
outstanding multiplied by 0.375% per annum, such commitment fees to be
calculated on the basis of a 360-day year and the actual number of days elapsed
and to be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing on the first such date to occur after the
Closing Date, and on the Commitment Termination Date.
B. OTHER FEES. Company agrees to pay to Agents such other fees in the
amounts and at the times separately agreed upon between Company and each Agent.
2.4 PREPAYMENTS AND REDUCTIONS IN COMMITMENTS: GENERAL PROVISIONS REGARDING
PAYMENTS.
A. PREPAYMENTS AND UNSCHEDULED REDUCTIONS IN COMMITMENTS.
(i) Voluntary Prepayments. Company may, upon not less than three
Business Days' prior written or telephonic notice given to Administrative
Agent by 10:00 A.M. (New York City time) on the date required and, if
given by telephone, promptly confirmed in writing to Administrative Agent
(which original written or telephonic notice Administrative Agent will
promptly transmit by telefacsimile or telephone to each Lender), at any
time and from time to time prepay any Loans on any Business Day in whole
or in part, without premium or penalty, in an aggregate minimum amount of
$500,000 and integral multiples of $100,000 in excess of that amount;
provided, however, that a Eurodollar Rate Loan may only be prepaid on the
expiration of the Interest Period applicable thereto. Notice of
prepayment having been given as aforesaid, the principal amount of the
Loans specified in such notice shall become due and payable on the
prepayment date specified therein. Any such voluntary prepayment shall
be applied as specified in subsection 2.4A(iv).
(ii) Voluntary Reductions of Commitments. Company may, upon not
less than three Business Days' prior written or telephonic notice
confirmed in writing to Administrative Agent (which original written or
telephonic notice Administrative Agent will promptly transmit by
telefacsimile or telephone to each Lender), at any time and from time to
time terminate in whole or permanently reduce in part, without premium or
penalty, the Commitments in an amount up to the amount by which the
Commitments exceed the aggregate outstanding principal amount of Loans at
the time of such proposed termination or reduction; provided that any
such partial reduction of the Commitments shall be in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess
of that amount. Company's notice to Administrative Agent shall
designate the date (which shall be a Business Day) of such termination or
reduction and the amount of any partial reduction, and such termination
or reduction of the Commitments shall be effective on the date specified
in Company's notice and shall reduce the Commitment of each Lender
proportionately to its Pro Rata Share. Any such voluntary reduction of
the Commitments shall be applied as specified in subsection 2.4A(iv).
(iii) Mandatory Prepayments and Mandatory Reductions of Commitments.
(a) Prepayments and Reductions from Asset Sales. No later
than the second Business Day following the date of receipt by
Company or any of its Subsidiaries of Cash Proceeds of any Asset
Sale which in the aggregate exceed $3,000,000 for all such
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Asset Sales since the Closing Date, Company shall prepay the
Loans an amount equal to the Net Cash Proceeds of such Asset Sale,
and the Commitments shall be permanently reduced in an amount
equal to such excess, provided that it is acknowledged that Cash
Proceeds from any sale of assets excluded from the definition of
Asset Sale as described in clause (B) of the definition of Asset
Sale shall not be required to prepay the Loans except to the
extent described in such clause (B). Concurrently with any
prepayment of the Loans and/or reduction of the Commitments
pursuant to this subsection 2.4A(iii)(a), Company shall deliver to
Administrative Agent an Officers' Certificate demonstrating the
derivation of the Net Cash Proceeds of the correlative Asset Sale
from the gross sales price thereof. In the event that Company
shall, at any time after receipt of Cash Proceeds of any Asset
Sale requiring a prepayment or a reduction of the Commitments
pursuant to this subsection 2.4A(iii)(a), determine that the
prepayments and/or reductions of the Commitments previously made
in respect of such Asset Sale were in an aggregate amount less
than that required by the terms of this subsection 2.4A(iii)(a),
Company shall promptly make an additional prepayment of the Loans
(and the Commitments shall be permanently reduced), in the manner
described above in an amount equal to the amount of any such
deficit, and Company shall concurrently therewith deliver to
Administrative Agent an Officers' Certificate demonstrating the
derivation of the additional Net Cash Proceeds resulting in
such deficit.
(b) Prepayments and Reductions Due to Issuance of Equity
Securities. On the date of receipt by Company or any of its
Subsidiaries of any Equity Proceeds Company shall prepay the Loans
in an amount equal to 100% of such Net Cash Proceeds.
(c) Prepayments and Reductions Due to Issuance or Incurrence
of Indebtedness. On the date of receipt by Company of the cash
proceeds (net of underwriting discounts and commissions and other
reasonable costs associated therewith) from the issuance or
incurrence of any Indebtedness (other than Indebtedness permitted
by Subsections 6.1(vi) and (vii)) of Company or any of its
Subsidiaries, Company shall prepay the Loans in an amount equal to
100% of such net cash proceeds and (2) the Commitments shall be
permanently reduced by the amount of such net cash proceeds.
(d) Prepayments and Reductions Due to Reversion of Surplus
Assets of Pension Plans. On the date of return to Company or any
of its Subsidiaries of any surplus assets of any pension plan of
Company or any of its Subsidiaries, Company shall prepay the Loans
in an amount (the "NET REVERSION AMOUNT") equal to 100% of such
returned surplus assets, net of transaction costs and expenses
incurred in obtaining such return, including incremental taxes
payable as a result thereof
(e) Prepayments and Reductions Due to Insurance and
Condemnation Proceeds. Other than the portion of Insurance
Proceeds (as defined below) or Condemnation Proceeds (as defined
below), as the case may be, that Company intends to reinvest in
assets of the general type used in the business of Company and its
Subsidiaries within twelve months from the date of receipt of such
proceeds, no later than the second Business Day following the date
of receipt by Company or any of its Subsidiaries of any cash
payments under any of the casualty insurance policies covering
damage to or loss of property maintained pursuant to subsection
5.4 resulting from
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damage to or loss of all or any portion of the Collateral or any
other tangible asset (net of actual and documented reasonable
costs incurred by Company in connection with adjustment and
settlement thereof, "INSURANCE PROCEEDS") or any proceeds
resulting from the taking of assets by the power of eminent
domain, condemnation or otherwise (net of actual and documented
reasonable costs incurred by Company in connection with adjustment
and settlement thereof, "CONDEMNATION PROCEEDS") Company shall
prepay the Loans in an amount equal to such proceeds and the
Commitments shall be permanently reduced in an amount equal to
such excess. Company shall, no later than twelve months after
receipt of any such Insurance Proceeds or Condemnation Proceeds
that have not theretofore been applied to the Obligations, make an
additional prepayment of the Loans, (and the Commitments shall be
permanently reduced), in the manner described above, in the full
amount of all such proceeds that have not then been reinvested in
similar assets; provided, however, that no prepayment from
Insurance Proceeds will be required pursuant to this subsection
2.4A(iii)(e) with respect to business interruption insurance; and
provided, further, that without prejudice to any other right or
remedy of Agents and Lenders under this Agreement and the other
Loan Documents, with respect to the key-man life insurance on
William R. James, the prepayment pursuant to this subsection
2.4A(iii) will be required only if a Change of Control described
in subsection 7. 11 shall have occurred. Any prepayment out of
such key-man life insurance proceeds shall be made on the later of
such Change of Control and 18 months after the receipt by Company
of such proceeds and shall be made in an amount of such proceeds
net of actual and documented reasonable costs incurred by Company
in connection with an executive search and/or compensation or
incentive arrangements for management assistance following the
event giving rise to the payment of such proceeds.
(f) Prepayments Due to Reductions or Restrictions of
Commitments. Company shall from time to time prepay the Loans to
the extent necessary so that the aggregate outstanding principal
amount of Loans shall not at any time exceed the Commitments then
in effect.
(iv) Application of Prepayments of Loans. Any prepayment of Loans
shall be applied first to Base Rate Loans to the full extent thereof
before application to Eurodollar Rate Loans, in each case in a manner
which minimizes the amount of any payments required to be made by Company
pursuant to subsection 2.6D.
B. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense, setoff
or counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 12:00 Noon (New York City time) (or,
in the case of payments being made from the proceeds of Loans, 1:30 P.M.
(New York City time)) on the date due at the Funding and Payment Office
for the account of Lenders; funds received by Administrative Agent after
that time on such due date shall be deemed to have been paid by Company
on the next succeeding Business Day. Company hereby authorizes
Administrative Agent to charge its accounts with Administrative Agent in
order to cause timely payment to be made to Administrative Agent of all
principal, interest, fees and expenses due hereunder (subject to
sufficient funds being available in its accounts for that purpose).
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(ii) Application of Payments to Principal and Interest. All
payments in respect of the principal amount of any Loan shall include
payment of accrued interest on the principal amount being repaid or
prepaid, and all such payments shall be applied to the payment of
interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
payments in respect of Loans shall be apportioned among all outstanding
Loans to which such payments relate, in each case proportionately to
Lenders' respective Pro Rata Shares. Administrative Agent shall promptly
distribute to each Lender, at its primary address set forth below its
name on the appropriate signature page hereof or at such other address as
such Lender may request, its Pro Rata Share of all such payments received
by Administrative Agent and the commitment fees of such Lender when
received by Administrative Agent pursuant to subsection 2.3.
Notwithstanding the foregoing provisions of this subsection 2.4C(iii),
if, pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of
any Eurodollar Rate Loans, Administrative Agent shall give effect thereto
in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may
be.
(v) Notation of Payment. Each Lender agrees that before disposing
of any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
that the failure to make (or any error in the -making of) a notation of
any Loan made under such Note shall not limit or otherwise affect the
obligations of Company hereunder or under such Note with respect to any
Loan or any payments of principal or interest on such Note.
2.5 USE OF PROCEEDS.
A. LOANS. The proceeds of funds available to Company on the Closing Date
shall be applied by Company to prepay the outstanding Loans and other
obligations pursuant to the Original Credit Agreement and other Indebtedness
described on Schedule 3.1B and for general partnership purposes. All Loans
shall be applied by Company for general partnership purposes, to consummate
acquisitions permitted by Section 6.7 and to purchase limited partner interests
in Company to the extent permitted under subsection 6.5(iii).
B. MARGIN REGULATIONS. No portion of the proceeds of any borrowing under
this Agreement shall be used by Company or any of its Subsidiaries in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation G, Regulation U, Regulation T or Regulation X of the Board
of Governors of the Federal Reserve System or any other regulation of such
Board or to violate the Exchange Act, in each case as in effect on the date or
dates of such borrowing and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
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Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 10:00 A.M. (New York City time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent
manifest error, be final, conclusive and binding upon all parties) the interest
rate that shall apply to the Eurodollar Rate Loans for which an interest rate
is then being determined for the applicable Interest Period and shall promptly
give notice thereof (in writing or by telephone confirmed in writing) to
Company and each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market adequate and fair means
do not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate,
Administrative Agent shall on such date give notice (by telefacsimile or by
telephone confirmed in writing) to Company and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to,
Eurodollar Rate Loans until such time as Administrative Agent notifies Company
and Lenders that the circumstances giving rise to such notice no longer exist
and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by
Company with respect to the Loans in respect of which such determination was
made shall be deemed to be rescinded by Company.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the event
that on any date any Lender shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with Company and Administrative Agent) that the making,
maintaining or continuation of its Eurodollar Rate Loans (i) has become
unlawful as a result of compliance by such Lender in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not
be unlawful) or (ii) has become impracticable, or would cause such Lender
material hardship in the case of clauses (i) and (ii), as a result of
contingencies occurring after the date of this Agreement (or, with respect to
an Eligible Assignee, the date such Eligible Assignee became a Lender
hereunder) which materially and adversely affect the interbank Eurodollar
market or the position of such Lender in that market (other than as a result of
a deterioration in the creditworthiness of such Lender), then, and in any such
event, such Lender shall be an "Affected Lender" and it shall on that day give
notice (by telefacsimile or by telephone confirmed in writing) to Company and
Agents of such determination (which notice Administrative Agent shall promptly
transmit to each other Lender). Thereafter (a) the obligation of the Affected
Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be
suspended until such notice shall be withdrawn by the Affected Lender, (b) to
the extent such determination by the Affected Lender relates to a Eurodollar
Rate Loan then being requested by Company pursuant to a Notice of Borrowing or
a Notice of Conversion/Continuation, the Affected Lender shall make such Loan
as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the
Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans
(the "Affected Loans") shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into Base Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company
pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation,
Company shall have the option, subject to the provisions of subsection 2.6D, to
rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all
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Lenders by giving notice (by telefacsimile or by telephone confirmed in
writing) to Administrative Agent of such rescission on the date on which the
Affected Lender gives notice of its determination as described above (which
notice of rescission Administrative Agent shall promptly transmit to each other
Lender). Except as provided in the immediately preceding sentence, nothing in
this subsection 2.6C shall affect the obligation of any Lender other than an
Affected Lender to make or maintain Loans as, or to convert Loans to,
Eurodollar Rate Loans in accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Company shall compensate each Lender, upon written request by that Lender
(which request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or
carry its Eurodollar Rate Loans and any loss, expense or liability sustained by
that Lender in connection with the liquidation or reemployment of such funds)
which that Lender may sustain: (i) if for any reason (other than a default by
that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does
not occur on a date specified therefor in a Notice of Conversion/Continuation
or a telephonic request for conversion or continuation, (ii) if any
prepayment or other principal payment or any conversion of any of its
Eurodollar Rate Loans occurs on a date prior to the last day of an Interest
Period applicable to that Loan, (iii) if any prepayment of any of its
Eurodollar Rate Loans is not made on any date specified in a notice of
prepayment given by Company, or (iv) as a consequence of any other default by
Company in the repayment of its Eurodollar Rate Loans when required by the
terms of this Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Subject to subsection 2.8, any
Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the
account of any of its branch offices or the office of an Affiliate of that
Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however. that each Lender may fund each of its Eurodollar Rate Loans
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Company may not elect to have a Loan be made or maintained as, or converted
to, a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/ Continuation given by Company with
respect to a requested borrowing or conversion/ continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 INCREASED COSTS: TAXES: CAPITAL ADEQUACY.
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A. Compensation for Increased Costs and Taxes. Subject to the provisions
of subsection 2.7B, in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations
hereunder or any payments to such Lender (or its applicable lending
office) of principal, interest, fees or any other amount payable
hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or
similar requirement against assets held by, or deposits or other
liabilities in or for the account of, or advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office of
such Lender (other than any such reserve or other requirements with
respect to Eurodollar Rate Loans that are reflected in the definition of
Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender
of agreeing to make, making or maintaining Loans hereunder or to reduce any
amount received or receivable by such Lender (or its applicable lending office)
with respect thereto; then, in any such case, Company shall promptly pay to
such Lender, upon receipt of the statement referred to in the next sentence,
such additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Company (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Lender under this subsection
2.7A, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Company
under this Agreement and the other 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) imposed, levied, collected, withheld or assessed by
or within the United States of America or any political subdivision in or
of the United States of America or any other jurisdiction from or to
which a payment is made by or on behalf of Company or by any federation
or organization of which the United States of America or any such
jurisdiction is a member at the time of payment.
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(ii) Grossing-up of Payments. If Company 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 Company to any Agent or Lender
under any of the Loan Documents:
(a) Company shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as
Company becomes aware of it;
(b) Company 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 Company) for its own account or (if
that liability is imposed on such Agent or such Lender, as the
case may be) on behalf of and in the name of such Agent or such
Lender;
(c) the sum payable by Company 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, such Agent or such
Lender, as the case may be, receives on the due date a net sum
equal to what it would have received had no such deduction,
withholding or payment been required or made; and
(d) 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, Company shall deliver to
Administrative Agent evidence satisfactory to the other affected
parties of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority;
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Administrative
Agent for transmission to Company, on or prior to the Closing Date
(in the case of each Lender listed on the signature pages hereof)
or on the date of the Assignment 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 Company or
Administrative Agent (each in the reasonable exercise of its
discretion), (1) two original copies of Internal Revenue Service
Form 1001 or 4224 (or any successor forms), properly completed and
duty executed by such Lender, together with any other certificate
or statement of exemption required under the Internal Revenue Code
or the regulations issued thereunder to establish that such Lender
is not subject to deduction or withholding of United States
federal income tax with respect to any payments to such Lender of
principal, interest, fees or other amounts payable under any of
the Loan Documents or (2) if such Lender is not a "bank" or other
Person described in Section 881(c)(3) of the Internal Revenue Code
and cannot deliver either Internal Revenue Service Form 1001 or
4224 pursuant to clause (1) above, a Certificate re Non-Bank
Status together with two original copies of Internal Revenue
Service Form W-8 (or any successor form), properly completed and
duly executed by such Lender, together with any other certificate
or
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statement of exemption required under the Internal Revenue Code
or the regulations issued thereunder to establish that such Lender
is not subject to deduction or withholding of United States
federal income tax with respect to any payments to such Lender of
interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates
or other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby
agrees, from time to time after the initial delivery by such
Lender of such forms, certificates or other evidence, whenever a
lapse in time or change in circumstances renders such forms,
certificates or other evidence obsolete or inaccurate in any
material respect, such Lender shall (1) deliver to Administrative
Agent for transmission to Company two new original copies of
Internal Revenue Service Form 1001 or 4224, or a Certificate re
Non-Bank Status and two original copies of Internal Revenue
Service Form W-8, as the case may be, properly completed and duly
executed by such Lender, together with any other certificate or
statement of exemption required in order to confirm or establish
that such Lender is not subject to deduction or withholding of
United States federal income tax with respect to payments to such
Lender under the Loan Documents or (2) immediately notify
Administrative Agent and Company of its inability to deliver any
such forms, certificates or other evidence
(c) Company shall not be required to pay any additional
amount to any Non-US Lender under clause (c) of subsection
2.7B(ii) if such Lender shall have failed to satisfy the
requirements of subsection 2.7B(iii)(a); provided that if such
Lender shall have satisfied such requirements on the Closing Date
(in the case of each Lender listed on the signature pages hereof)
or on the date of the Assignment Agreement pursuant to which it
became a Lender (in the case of each other Lender), nothing in
this subsection 2.7B(iii)(c) shall relieve Company of its
obligation to pay any additional amounts pursuant to clause (c) of
subsection 2.7B(ii) in the event that, as a result of any change
in any applicable law, treaty or governmental rule, regulation or
order, or any change in the interpretation, administration or
application thereof, such Lender is no longer properly entitled to
deliver forms, certificates or other evidence at a subsequent date
establishing the fact that such Lender is not subject to
withholding as described in subsection 2.7B(iii)(a).
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law)
of any such governmental authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of, or with
reference to, such Lender's Loans or Commitments or other obligations hereunder
with respect to the Loans to a level below that which such Lender or such
controlling corporation could have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such Lender or such controlling corporation with
regard to capital adequacy), then from time to time, within five Business Days
after receipt by Company from such Lender of the statement referred to in the
next sentence, Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such
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controlling corporation on an after-tax basis for such reduction. Such Lender
shall deliver to Company (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis of the calculation of
such additional amounts, which statement shall be conclusive and binding upon
all parties hereto absent manifest error.
D. SUBSTITUTE LENDERS. In the event Company is required under the
provisions of this subsection 2.7 to make payments in a material amount to any
Lender, Company may, so long as no Event of Default or Potential Event of
Default shall have occurred and be continuing, elect to terminate such Lender
as a party to this Agreement; provided that, concurrently with such
termination, (i) Company shall pay that Lender all principal, interest and fees
and other amounts (including without limitation, amounts, if any, owed under
this subsection 2.7) owed to such Lender through such date of termination, (ii)
another financial institution satisfactory to Company and Agents (or if either
Agent is also the Lender to be terminated, the successor Agent to such Agent)
shall agree, as of such date, to become a Lender for all purposes under this
Agreement (whether by assignment or amendment) and to assume all obligations of
the Lender to be terminated as of such date, and (iii) all documents and
supporting materials necessary, in the judgment of Agents (or if either Agent
is also the Lender to be terminated, the successor Agent to such Agent) to
evidence the substitution of such Lender shall have been received and approved
by Agents as of such date.
2.8 OBLIGATION OF LENDERS TO MITIGATE.
Each Lender agrees that, as promptly as practicable after any one or more
of the officers of such Lender responsible for administering the Loans of such
Lender becomes aware of the occurrence of an event or the existence of a
condition that would cause such Lender to become an Affected Lender or that
would entitle such Lender to receive payments under subsection 2.7, it will, to
the extent not inconsistent with the internal policies of such Lender and any
applicable legal or regulatory restrictions, use reasonable efforts (i) to
make, fund or maintain the Commitments of such Lender or the affected Loans of
such Lender through another lending office of such Lender, or (ii) take such
other measures as such Lender may deem reasonable, if as a result thereof the
circumstances which would cause such Lender to be an Affected Lender would
cease to exist or the additional amounts which would otherwise be required to
be paid to such Lender pursuant to subsection 2.7 would be materially reduced
and if, as determined by such Lender in its sole discretion, the making,
funding or maintaining of such Commitments or Loans through such other lending
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or the
interests of such Lender; provided that such Lender will not be obligated to
utilize such other lending office pursuant to this subsection 2.8 unless
Company agrees to pay all incremental expenses incurred by such Lender as a
result of utilizing such other lending office as described in clause (i) above.
A certificate as to the amount of any such expenses payable by Company
pursuant to this subsection 2.8 (setting forth in reasonable detail the basis
for requesting such amount) submitted by such Lender to Company (with a copy to
Administrative Agent) shall be conclusive absent manifest error.
SECTION 3.
CONDITIONS TO LOANS
The obligations of Lenders to make Loans hereunder are subject to the
satisfaction of the following conditions.
3.1 CONDITIONS TO INITIAL LOANS.
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The obligations of Lenders to make any Loans are, in addition to the
conditions precedent specified in subsection 3.2, subject to prior or
concurrent satisfaction of the following conditions:
A. COMPANY DOCUMENTS. On or before the Closing Date, Company shall
deliver or cause to be delivered to Lenders (or to Documentation Agent for
Lenders with sufficient originally executed copies, where appropriate, for each
Lender) the following, each, unless otherwise noted, dated the Closing Date:
(i) Certified copies of its Partnership Agreement, together with a
good standing certificate from the Secretary of State of the State of
Delaware, Oklahoma, Texas, Georgia, Louisiana, Colorado, Wyoming,
Tennessee, Alabama, Florida and Michigan and each other state in which it
is qualified as a foreign partnership to do business and, to the extent
generally available, a certificate or other evidence of good standing as
to payment of any applicable franchise or similar taxes from the
appropriate taxing authority of each of such states, each dated a recent
date prior to the Closing Date;
(ii) A certified copy of the General Partnership Agreement;
(iii) A certified copy of the articles of incorporation and by-laws
of Jamesco, DKSH and Trenary Corp.;
(iv) Resolutions of the Board of Directors of Jamesco in its
capacity as general partner of the General Partner and resolutions of the
partners of the General Partner and each Guarantor, in each case
approving and authorizing the execution, delivery and performance of this
Agreement and the other Loan Documents, certified as of the Closing Date
by the corporate secretary or an assistant secretary of Jamesco and each
Guarantor as being in full force and effect without modification or
amendment;
(v) Evidence in writing satisfactory to Documentation Agent that the
Advisory Board of Company has approved this Agreement and the Notes;
(vi) Signature and incumbency certificates of the officers executing
this Agreement and the other Loan Documents;
(vii) Executed originals of this Agreement, the Notes (duly executed
in accordance with subsection 2.1D, drawn to the order of each Lender and
with appropriate insertions) and the other Loan Documents; and
(viii) Such other documents as Documentation Agent may reasonably
request and that are reasonably available to Company.
B. CAPITALIZATION AND ISSUANCE OF SENIOR UNSECURED NOTES. (i)
Documentation Agent shall be satisfied with the capital, organization,
ownership and management structure of Company and its Subsidiaries and with the
form and substance of the Partnership Agreement, including without limitation,
amendments thereto consented to by the limited partners of Company, (ii)
Company shall have issued and sold the Senior Unsecured Notes and Documentation
Agent shall have received complete and correct copies of the Indenture in form
and substance satisfactory to Documentation Agent, (iii) Company shall have
received net proceeds from the issuance and sale of the Senior Unsecured Notes,
in an aggregate
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amount equal to at least $96,000,000 and (iv) Documentation Agent
shall have received evidence satisfactory to it that all Indebtedness and other
obligations described on Schedule 3.1B are being paid in full on the Closing
Date and received satisfactory pay off letters and assignments from any lenders
party to the Original Credit Agreement that are not party to this Agreement.
C. PERFECTION OF SECURITY INTERESTS. Company shall have taken or caused
to be taken such actions in such a manner so that Documentation Agent has a
valid and perfected first priority security interest in the entire Collateral
with respect to which a security interest can be perfected by the filing of
Uniform Commercial Code financing statements (other than real estate and motor
vehicles) (subject to Liens consented to in writing by Agents with respect to
such Collateral and other Liens permitted by subsection 6.2) granted by the
Collateral Documents. Such actions shall include, without limitation: (i) the
delivery to Documentation Agent of Uniform Commercial Code financing
statements, executed by the applicable Loan Parties as to the Collateral
granted by such Loan Parties for all jurisdictions as may be necessary or
desirable to perfect Documentation Agent's security interest in such
Collateral; and (ii) evidence reasonably satisfactory to Documentation Agent
that all other filings (including, without limitation, Uniform Commercial Code
termination statements), recordings and other actions Documentation Agent deems
necessary or advisable to establish, preserve and perfect the first priority
Liens (subject to Liens permitted by subsection 6.2 with respect to such
Collateral) granted to Documentation Agent in personal and mixed property shall
have been made.
D. FINANCIAL CONDITION CERTIFICATE. Company shall have delivered to
Documentation Agent a Financial Condition Certificate dated the Closing Date,
substantially in the form annexed hereto as Exhibit XI, with appropriate
attachments demonstrating that, after giving effect to the consummation of the
financing transactions contemplated hereby, Company and its Subsidiaries, taken
as a whole, are Solvent.
E. OPINIONS OF COMPANY'S COUNSEL. Lenders and their respective counsel
shall have received (i) originally executed copies of one or more favorable
written opinions of Miller, Canfield, Paddock and Stone, P.L.C., counsel for
Company, in form and substance reasonably satisfactory to Documentation Agent
and its counsel, dated as of the Closing Date and setting forth substantially
the matters in the opinions designated in Exhibit V and Exhibit VI annexed
hereto and as to such other matters as Documentation Agent acting on behalf of
Lenders may reasonably request and (ii) evidence satisfactory to Documentation
Agent that Company has requested such counsel to deliver such opinions to
Lenders.
F. OPINIONS OF AGENT'S COUNSEL. Lenders shall have received originally
executed copies of one or more favorable written opinions of Dickinson, Wright,
Moon, VanDusen & Freeman, counsel to Documentation Agent, dated as of the
Closing Date, substantially in the form of Exhibit VII annexed hereto and as to
such other matters as Documentation Agent acting on behalf of Lenders may
reasonably request.
G. FEES. Company shall have paid to Administrative Agent, for
distribution (as appropriate) to Agents and Lenders, the fees payable on the
Closing Date referred to in subsection 2.3.
H. PRO FORMA BALANCE SHEETS; FINANCIAL STATEMENTS. On or before the
Closing Date, Documentation Agent shall have received from Company (i)
unaudited pro forma consolidated and consolidating balance sheets of Company
and its Subsidiaries as at the Closing Date, prepared in accordance with GAAP,
(including an estimated pro forma opening balance sheet) reflecting the
forecasted financial condition, income and expenses of Company (including tax
assumptions) after
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giving effect to the transactions contemplated hereby and by the other Loan
Documents, which pro forma financial statements shall be in form and substance
satisfactory to Documentation Agent and (ii) the unaudited annual and quarterly
balance sheets of the Company as at March 31, 1997 and the related consolidated
and consolidating statements of operations, partners' equity and cash flows of
Company for the three month and twelve month periods ending on such date, all
in reasonable detail and certified by the chief financial officer of Company
that they fairly present the financial condition of Company as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal year-end
adjustments, which financial statements demonstrate to Documentation Agent's
satisfaction that no material adverse change in the condition (financial or
otherwise), results of operations, assets, liabilities or prospects of the
Business has occurred relative to the information previously disclosed to
Documentation Agent.
I. EVIDENCE OF INSURANCE. Company shall have delivered to Documentation
Agent certificates of insurance naming Documentation Agent on behalf of
Documentation Agent and Lenders as loss payee under the casualty insurance
policies and as additional insured under the liability and business
interruption policies, all as required pursuant to subsection 5.4 hereof or
pursuant to the Collateral Documents. All such certificates of insurance shall
contain such endorsements as are reasonably required by Documentation Agent.
J. NO MATERIAL ADVERSE EFFECT. Since December 31, 1996, no Material
Adverse Effect (in the sole opinion of Agents) shall have occurred through the
Closing Date.
K. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company
shall have delivered to Documentation Agent an Officers' Certificate, in form
and substance satisfactory to Documentation Agent, to the effect that the
representations and warranties in Section 4 hereof are true, correct and
complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date and that Company shall have
performed in all material respects agreements and satisfied all conditions
which this Agreement provides shall be performed or satisfied by it on or
before the Closing Date except as otherwise disclosed to and agreed to in
writing by Agents and Requisite Lenders.
L. DELIVERY OF COMPLIANCE CERTIFICATE. Company shall have delivered to
Documentation Agent a Compliance Certificate substantially in the form of
Exhibit IV annexed hereto, dated as of the Closing Date, and calculated to give
effect to the initial funding under this Agreement, demonstrating compliance
with the covenants set forth in this Agreement.
M. FRANCHISES. Documentation Agent shall have had an opportunity to review
all of the Franchises which shall be in full force and effect and shall be
reasonably satisfactory to Documentation Agent.
N. COMPLETION OF PROCEEDINGS. All corporate, partnership and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Documentation Agent, acting on behalf of Lenders, and its counsel
shall be satisfactory in form and substance to Documentation Agent and such
counsel, and Documentation Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as Documentation
Agent may reasonably request.
3.2 CONDITIONS TO ALL LOANS.
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The obligations of Lenders to make Loans on each Funding Date are subject
to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding Date, in
accordance with the provisions of subsection 2.1B, an originally executed
Notice of Borrowing, in each case signed by the chief executive officer, the
chief financial officer or the treasurer of Company or by any executive officer
of Company designated by any of the above-described officers on behalf of
Company in a writing delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained in Section 4 and in
the other Loan Documents shall be true, correct and complete in all
material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in
which case such representations and warranties shall have been true,
correct and complete in all material respects on and as of such earlier
date;
(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event
of Default;
(iii) Company shall have performed in all material respects all
agreements and satisfied all conditions which this Agreement provides
shall be performed or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender
from making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall not
violate any law including, without limitation, Regulation G, Regulation
T, Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System; and
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or
any property of Company or any of its Subsidiaries that has not been
disclosed by Company in writing pursuant to subsection 4.6 or 5.1(x)
prior to the making of the last preceding Loans (or, in the case of the
initial Loans, prior to the execution of this Agreement), and there shall
have occurred no development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so disclosed, that,
in either event, in the opinion of either Agent or of Requisite Lenders,
would be expected to have a Material Adverse Effect; and no injunction or
other restraining order shall have been issued -and no hearing to
cause an injunction or other restraining order to be issued shall be
pending or noticed with respect to any action, suit or proceeding seeking
to enjoin or otherwise prevent the consummation of, or to recover any
damages or obtain relief as a result of, the transactions contemplated by
this Agreement or the making of Loans hereunder.
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SECTION 4.
COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans hereunder Company represents and warrants to each Lender, on the date of
this Agreement and on each Funding Date that the following statements are true,
correct and complete:
4.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Company is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Company has all requisite partnership power and authority to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Loan Documents and to carry out the
transactions contemplated thereby.
B. QUALIFICATION AND GOOD STANDING. Company is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 6.11.
D. SUBSIDIARIES. All of the Subsidiaries of Company as of the Closing
Date are identified in Schedule 4.1 annexed hereto. The capital stock or
partnership interests of each of the Subsidiaries of Company identified in
Schedule 4.1 annexed hereto is duly authorized and validly issued and none of
such capital stock or partnership interests constitutes Margin Stock. Each of
the Subsidiaries of Company identified in Schedule 4.1 annexed hereto is a
corporation or partnership duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation set
forth therein, has all requisite corporate or partnership, as the case may be,
power and authority to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted, and is qualified to
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in
each case except where failure to be so qualified or in good standing or a lack
of such corporate or partnership power and authority has not had and will not
have a Material Adverse Effect. Schedule 4.1 annexed hereto correctly sets
forth the ownership interest of Company and each of its Subsidiaries in each of
the Subsidiaries of Company identified therein.
E. COLLATERAL DOCUMENTS. The security interests created in favor of
Documentation Agent under the Collateral Documents will at all times from and
after the Closing Date constitute, as security for the obligations purported to
be secured thereby, a legal, valid and enforceable security interest in and
Lien on all of the Collateral referred to therein in favor of Documentation
Agent for the benefit of the Lenders, perfected (by the filing of Uniform
Commercial Code financing statements or as otherwise required by the Collateral
Documents) and prior to the rights of all third persons in accordance with the
requirements of all applicable Collateral Documents, subject only to Liens
permitted by subsection 6.2. Each Loan Party has good and marketable title to
its respective Collateral, and all such Collateral is free and clear of all
Liens except for Liens permitted by subsection 6.2. No consents, filings or
recordings are required in order to perfect or maintain the perfection or
priority of (by the filing of Uniform Commercial Code financing statements or
as otherwise required by the Collateral Documents) the
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security interests purported to be created by any of the Collateral Documents,
other than such as have been obtained and which remain in full force and effect
and uniform commercial code financing statements to be filed, or delivered to
Documentation Agent for filing, on the Closing Date and periodic uniform
commercial code continuation filings or as is specifically otherwise permitted
by the terms of any applicable Collateral Document.
F. PARTNERS. Set forth on Schedule 4.1 annexed hereto is a true, correct
and complete list of each person holding any partnership interest or any right
to obtain a partnership or other equity interest in Company as of the Closing
Date and a description of such interest.
4.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance of
the Loan Documents have been duly authorized by all necessary corporate or
partnership, as the case may be, action on the part of each Loan Party.
B. NO CONFLICT. The execution, delivery and performance by the Loan
Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not (i) violate any
provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries, the Partnership Agreement, the General
Partnership Agreement, the Certificate or Articles of Incorporation or Bylaws
of any Subsidiary of Company or any order, judgment or decree of any court or
other agency of government binding on Company or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contractual Obligation of Company or any of
its Subsidiaries, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of Company or any of its Subsidiaries
(other than any Liens created under any of the Loan Documents in favor of
Documentation Agent on behalf of Lenders), or (iv) require any approval of
stockholders or partners or any approval or consent of any Person under any
Contractual Obligation of Company or any of its Subsidiaries, except for such
approvals or consents which will be obtained on or before the Closing Date and
disclosed in writing to Lenders.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by the
Loan Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body, other than
the filing of UCC financing statements which are being filed on or about the
Closing Date.
D. BINDING OBLIGATION. Each of the Loan Documents has been duly executed
and delivered by each of the Loan Parties party thereto and is the legally
valid and binding obligation of each such Loan Party, enforceable against such
Loan Party in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
E. VALID ISSUANCE OF SENIOR UNSECURED NOTES. Company has the partnership
power and authority to issue the Senior Unsecured Notes. The Senior Unsecured
Notes, when issued and paid for, will be the legally valid and binding
obligations of Company, enforceable against Company in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability. The
Senior Unsecured Notes, when issued and sold in
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accordance with the terms of the Indenture will either (a) have been registered
or qualified under applicable federal and state securities laws or (b) be
exempt therefrom.
4.3 FINANCIAL CONDITION:.
FINANCIAL STATEMENTS. Company has heretofore delivered to Lenders, at
Lenders' request, the following financial statements and information: (i) the
audited consolidated balance sheet of Company and its Subsidiaries as at
December 31, 1996 and the related consolidated statements of income, partners'
equity and cash flows of Company and its Subsidiaries for the Fiscal Year then
ended and (ii) the unaudited consolidated balance sheet of Company and its
Subsidiaries as at March 31, 1997 and the related unaudited consolidated
statements of income, partners' equity and cash flows of Company and its
Subsidiaries for the three months then ended. All such statements were
prepared in conformity with GAAP and fairly present the financial position (on
a consolidated basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows
(on a consolidated basis) of the entities described therein for each of the
periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments.
Company does not (and will not following the funding of the initial Loans) have
any Contingent Obligation, contingent liability or liability for taxes,
long-term lease or unusual forward or long-term commitment that is not
reflected in the foregoing financial statements or the notes thereto and which
in any such case is material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Company
and any of its Subsidiaries taken as a whole.
4.4 NO MATERIAL ADVERSE CHANGE: NO RESTRICTED JUNIOR PAYMENTS
Since December 31, 1996, no event or change has occurred that has caused
or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Neither Company nor any of its Subsidiaries has directly or indirectly
declared, ordered, paid or made, or set apart any sum or property for, any
Restricted Junior Payment or agreed to do so except as permitted by subsection
6.5.
4.5 TITLE TO PROPERTIES: LIENS.
Company and its Subsidiaries have (i) good, sufficient and legal title to
(in the case of fee interests in real property), (ii) valid leasehold interests
in (in the case of leasehold interests in real or personal property), or (iii)
good title to (in the case of all other personal property), all of
the material properties and assets reflected in the financial statements
referred to in subsection 4.3 or in the most recent financial statements
delivered pursuant to subsection 5.1, in each case except for assets disposed
of since the date of such financial statements in the ordinary course of
business or as otherwise permitted under subsection 6.7. Except as permitted by
subsection 6.2, all such properties and assets are free and clear of Liens.
Schedule 4.5 annexed hereto correctly sets forth (i) each of the parcels of
real property owned by the Company and the Company's estimate of the value of
each such parcel and (ii) each lease to which the Company is a party and the
payments required under such lease.
4.6 LITIGATION; ADVERSE FACTS.
Except as set forth in Schedule 4.6 annexed hereto, there are no actions,
suits, proceedings, arbitrations or governmental investigations (whether or not
purportedly on behalf of Company or any of its Subsidiaries) at law or in
equity or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, pending or, to the knowledge of Company, threatened against or
affecting Company or any of its Subsidiaries or any
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property of Company or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Except as set forth in Schedule 4.6 annexed hereto, neither Company nor any of
its Subsidiaries is (i) in violation of any applicable laws that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect or (ii) subject to or in default with respect to any final
judgments, writs, injunctions, decrees, rules or regulations of any court or
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
4.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 5.3, all tax returns and
reports of Company and its Subsidiaries required to be filed by any of them
have been timely filed, and all taxes, assessments, fees and other governmental
charges upon Company and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Company does not know of any proposed tax
assessment against Company or any of its Subsidiaries which is not being
actively contested by Company or such Subsidiary in good faith and by
appropriate proceedings; provided that such reserves or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have
been made or provided therefor.
4.8 PERFORMANCE OF AGREEMENTS: FRANCHISES.
A. Neither Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect,
of such default or defaults, if any, would not have a Material Adverse Effect.
B. Schedule 4.8 annexed hereto accurately and completely lists all
material authorizations, licenses, permits and Franchises granted or assigned
to Company by the FCC or any other public or governmental agency or regulatory
body, including all material authorizations, licenses, permits and Franchises
for the construction, installation or operation of cable television systems. A
correct copy of each such Franchise has been delivered to Documentation Agent
or its counsel. The same constitute the only material licenses, permits or
Franchises or other authorizations of any public or governmental agency or
regulatory body required or advisable in connection with the business of
Company as conducted or proposed to be conducted. All existing Franchises are
in full force and effect, are duly issued in the name of, or validly assigned
to, Company and Company has full power and authority to operate thereunder.
Except as set forth in Schedule 4.8 annexed hereto, no cable television
Franchise issued has a term which will expire prior to August 15, 2002. Except
as set forth in Schedule 4.8 annexed hereto, each of the Franchises listed on
Schedule 4.8 annexed hereto are assignable to Documentation Agent and Lenders
as collateral security for the Obligations. Schedule 4.8 also accurately and
completely lists all material agreements, if any, which are presently in effect
for the use of public utility facilities in connection with the cable systems
operated by Company.
4.9 GOVERNMENTAL REGULATION.
Neither Company nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment
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Company Act of 1940 or under any other federal or state statute or regulation
which may limit its ability to incur Indebtedness or which may otherwise render
all or any portion of the Obligations unenforceable.
4.10 SECURITIES ACTIVITIES.
A. Neither Company 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.
B. Following application of the proceeds of each Loan, not more than 25%
of the value of the assets (either of Company only or of Company and its
Subsidiaries on a consolidated basis) subject to the provisions of subsection
6.2 or 6.7 or subject to any restriction contained in any agreement or
instrument, between any Loan Party, on the one had, and any Lender or any
Affiliate of any Lender, on the other hand, relating to Indebtedness and within
the scope of subsection 7.2, will be Margin Stock.
4.11 EMPLOYEE BENEFIT PLANS.
A. Company and each of its ERISA Affiliates are in compliance with all
applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit
Plan, and have performed all their obligations under each Employee Benefit
Plan.
B. No ERISA Event has occurred or is reasonably expected to occur.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code, no Employee Benefit Plan provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees of Company or any of its ERISA Affiliates.
D. As of the most recent valuation date for any Pension Plan, there are no
unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA) for
any Pension Plan (excluding for purposes of such computation any Pension Plans
with respect to which assets exceed benefit liabilities).
4.12 CERTAIN FEES.
No broker's or finder's fee or commission will be payable with respect to
this Agreement or any of the transactions contemplated hereby, and Company
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
4.13 ENVIRONMENTAL PROTECTION.
Except as set forth in Schedule 4.13 annexed hereto:
(i) the operations of Company and each of its Subsidiaries
(including, without limitation, all operations and conditions at or in
the Facilities) comply in all material respects with all Environmental
Laws;
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(ii) Company and each of its Subsidiaries have obtained all
Governmental Authorizations under Environmental Laws necessary to their
respective operations, and all such Governmental Authorizations are in
good standing, and Company and each of its Subsidiaries are in compliance
with all material terms and conditions of such Governmental
Authorizations;
(iii) neither Company nor any of its Subsidiaries has received (a)
any notice or claim to the effect that it is or may be liable to any
Person as a result of or in connection with any Hazardous Materials or
(b) any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. Section 9604) or comparable state laws, and, to the best of
Company's knowledge, none of the operations of Company or any of its
Subsidiaries is the subject of any federal or state investigation
relating to or in connection with any Hazardous Materials at any Facility
or at any other location;
(iv) none of the operations of Company or any of its Subsidiaries is
subject to any judicial or administrative proceeding alleging the
violation of or liability under any Environmental Laws which if adversely
determined could reasonably be expected to have a Material Adverse
Effect;
(v) neither Company nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding
written order or agreement with any governmental authority or private
party relating to (a) any Environmental Laws or (b) any Environmental
Claims;
(vi) neither Company nor any of its Subsidiaries has any contingent
liability in connection with any Release of any Hazardous Materials by
Company or any of its Subsidiaries;
(vii) neither Company nor any of its Subsidiaries nor, to the best
knowledge of Company, any predecessor of Company or any of its
Subsidiaries has filed any notice under any Environmental Law indicating
past or present treatment or Release of Hazardous Materials at any
Facility, and none of Company's or any of its Subsidiaries' operations
involves the generation, transportation, treatment, storage or disposal
of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state
equivalent;
(viii) no Hazardous Materials exist on, under or about any Facility
in a manner that has a reasonable possibility of giving rise to an
Environmental Claim having a Material Adverse Effect, and neither Company
nor any of its Subsidiaries has filed any notice or report of a Release
of any Hazardous Materials that has a reasonable possibility of giving
rise to an Environmental Claim having a Material Adverse Effect;
(ix) neither Company nor any of its Subsidiaries nor, to the best
knowledge of Company, any of their respective predecessors has disposed
of any Hazardous Materials in a manner that has a reasonable possibility
of giving rise to an Environmental Claim having a Material Adverse Effect;
(x) no underground storage tanks or surface impoundments are on or
at any Facility; and
(xi) no Lien in favor of any Person relating to or in connection
with any Environmental Claim has been filed or has been attached to any
Facility.
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4.14 EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or threatened involving
Company or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
4.15 SOLVENCY.
Company and each of its Subsidiaries is and, upon the incurrence of any
Obligations by Company on any date on which this representation is made, will
be, Solvent.
4.16 DISCLOSURE.
To the best of the Company's knowledge after the exercise of reasonable
due diligence, no representation or warranty of Company or any Loan Party
contained in any Loan Document or in any other document, certificate or written
statement furnished to Lenders by or on behalf of Company or any Loan Party for
use in connection with the transactions contemplated by this Agreement contains
any untrue statement of a material fact or omits to state a material fact
(known to Company, in the case of any document not furnished by them) necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances in which the same were made. Any projections and
pro forma financial information contained in such materials are based upon good
faith estimates and assumptions believed by Company to be reasonable at the
time made, it being recognized by Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results. There are no facts known (or which should upon the reasonable
exercise of diligence be known) to Company (other than matters of a general
economic nature) that, individually or in the aggregate, could reasonably be
expected in Company's reasonable judgment to result in a Material Adverse
Effect and that have not been disclosed herein or in such other documents,
certificates and statements furnished to Lenders for use in connection with the
transactions contemplated hereby.
SECTION 5.
COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments hereunder
shall remain in effect and until payment in full of all of the Loans and other
Obligations, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Agents and Lenders:
(i) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each fiscal quarter of each Fiscal Year,
(a) the consolidated balance sheet of Company as at the end of such fiscal
quarter and the related consolidated statements of income, partners' equity
and cash flows of Company and statements of income for each of its cable
television systems for such fiscal quarter and for the period from the
beginning of the then current Fiscal Year to the end of such fiscal
quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the previous Fiscal Year and the
corresponding figures from the consolidated plan and financial forecast for
the current Fiscal Year delivered pursuant to subsection 5.1(xii), all in
reasonable detail and certified by the chief financial officer of Company
that they fairly present the financial condition of Company and each of its
cable television
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systems as at the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes resulting
from audit and normal year-end adjustments, and (b) a narrative report
describing the operations of Company and any material variances from the
consolidated plan and financial forecast for the current Fiscal Year for
Company and each of its cable television systems in the form prepared for
presentation to senior management for such fiscal quarter and for the
period from the beginning of the then current Fiscal Year to the end of
such fiscal quarter;
(ii) Year-End Financials: as soon as available and in any event
within 90 days after the end of each Fiscal Year, (a) the consolidated
balance sheet of Company as at the end of such Fiscal Year and the
related consolidated statements of income, partners' equity and cash
flows of Company and statements of income for each of its cable
television systems for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous Fiscal Year
and the corresponding figures from the consolidated plan and financial
forecast delivered pursuant to subsection 5.1(xii) for the Fiscal Year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer of Company that they fairly
present the financial condition of Company and each of its cable
television systems as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, (b) a
narrative report describing the operations of Company and each of its
cable television systems in the form prepared for presentation to senior
management for such Fiscal Year, and (c) in the case of such consolidated
financial statements, a report thereon of Deloitte & Touche or other
independent certified public accountants of recognized national standing
selected by Company and satisfactory to Agent, which report shall be
unqualified, shall express no doubts about the ability of Company and
each of its cable television systems to continue as a going concern, and
shall state that such consolidated financial statements fairly present
the consolidated financial position of Company and each of its cable
television systems as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards;
(iii) Officers' and Compliance Certificates: together with each
delivery of financial statements of Company and its Subsidiaries pursuant
to subdivisions (i) and (ii) above, (a) an Officers' Certificate of
Company stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition of Company
and its Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do
not have knowledge of the existence as at the date of such Officers'
Certificate, of any condition or event that constitutes an Event of
Default or Potential Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof
and what action Company has taken, is taking and proposes to take with
respect thereto; and (b) a Compliance Certificate
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demonstrating in reasonable detail compliance during and at the end of
the applicable accounting periods with the restrictions contained in
Section 6;
(iv) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 4.3, the
consolidated financial statements of Company and its Subsidiaries
delivered pursuant to subdivisions (i), (ii), or (xii) of this subsection
5.1 will differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such subdivisions
had no such change in accounting principles and policies been made, then
(a) together with the first delivery of financial statements pursuant to
subdivision (i), (ii) or (xii) of this subsection 5.1 following such
change, consolidated financial statements of Company and its Subsidiaries
for (y) the current Fiscal Year to the effective date of such change and
(z) the two full Fiscal Years immediately preceding the Fiscal Year in
which such change is made, in each case prepared on a pro forma basis as
if such change had been in effect during such periods, and (b) together
with each delivery of financial statements pursuant to subdivision (i),
(ii) or (xii) of this subsection 5.1 following such change, a written
statement of the chief accounting officer or chief financial officer of
Company setting forth the differences which would have resulted if such
financial statements had been prepared without giving effect to such
change;
(v) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Company and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(vi) SEC Filings and Press Releases: promptly upon their becoming
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its
security holders, partners or Affiliates or by any Subsidiary of Company
to its security holders, partners or Affiliates, (b) all regular and
periodic reports and all registration statements (other than on Form S-
8 or a similar form) and prospectuses, if any, filed by Company or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority,
and (c) all press releases and other statements made available generally
by Company or any of its Subsidiaries to the public concerning material
developments in the business of Company or any of its Subsidiaries;
(vii) Events of Default, etc..: promptly upon any officer of Company
obtaining knowledge (a) of any condition or event that constitutes an
Event of Default or Potential Event of Default, or becoming aware that
any Lender has given any notice (other than to Agent) or taken any other
action with respect to a claimed Event of Default or Potential Event of
Default, (b) that any Person has given any notice to Company or any of
its Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in subsection 7.2,
(c) of any condition or event that would be required to be disclosed in a
current report filed by Company with the Securities and Exchange
Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect
on the date hereof) if Company were required to file such reports under
the Exchange Act, or (d) of the occurrence of any event or change that
has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature
and period of existence of such condition, event or change, or specifying
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the notice given or action taken by any such Person and the nature of
such claimed Event of Default, Potential Event of Default, default, event
or condition, and what action Company has taken, is taking and proposes
to take with respect thereto;
(viii) Litigation or Other Proceedings: (a) promptly upon any
officer of Company obtaining knowledge of (X) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or
any property of Company or any of its Subsidiaries (collectively,
"PROCEEDINGS") not previously disclosed in writing by Company to Lenders
or (Y) any material development in any Proceeding that, in any case:
(1) if reasonably expected to be adversely determined, has a
reasonable possibility of giving rise to a Material Adverse
Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within twenty days after the end of each
fiscal quarter of Company, a schedule of all Proceedings involving an
alleged liability of, or claims against or affecting, Company or any of
its Subsidiaries equal to or greater than $ 1,000,000, and promptly after
request by either Agent such other information as may be reasonably
requested by such Agent to enable such Agent and its counsel to evaluate
any of such Proceedings;
(ix) ERISA Events: promptly upon becoming aware of the occurrence of
or forthcoming occurrence of any ERISA Event, a written notice specifying
the nature thereof, what action Company or any of its ERISA Affiliates
has taken, is taking or proposes to take with respect thereto and, when
known, any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto;
(x) ERISA Notices: with reasonable promptness, copies of (a) each
Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by Company or any of its ERISA Affiliates with the Internal
Revenue Service with respect to each Pension Plan; (b) all notices
received by Company or any of its ERISA Affiliates from a Multiemployer
Plan sponsor concerning an ERISA Event; and (c) such other documents or
governmental reports or filings relating to any Employee Benefit Plan as
either Agent shall reasonably request;
(xi) Financial Plans: as soon as practicable and in any event no
later than January 31 of each Fiscal Year, a consolidated plan and
financial forecast for such Fiscal Year and the next four succeeding
Fiscal Years, including without limitation (a) a forecasted consolidated
balance sheet of Company and forecasted consolidated statements of income
of Company and each of its cable television systems for each such Fiscal
Year, together with pro forma Compliance Certificate for each such Fiscal
Year and an explanation of the assumptions on which such forecasts are
based, (b) forecasted consolidated statements of income of Company and
each of its cable television systems for each month of the first such
Fiscal Year, together with an explanation of the assumptions on which
such forecasts are based, (c) the amount of forecasted unallocated
overhead for each such Fiscal Year, and (d) such other information and
projections as any Lender may reasonably request and that is reasonably
available to Company;
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(xii) Insurance: as soon as practicable and in any event by the last
day of each Fiscal Year, a report in form and substance satisfactory to
Administrative Agent outlining all material insurance coverage maintained
as of the date of such report by Company and its Subsidiaries and all
material insurance coverage planned to be maintained by Company and its
Subsidiaries in the immediately succeeding Fiscal Year;
(xiii) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and
reports, whether prepared by personnel of Company or any of its
Subsidiaries or by independent consultants, with respect to significant
environmental matters at any Facility or which relate to an Environmental
Claim which could result in a Material Adverse Effect;
(xiv) Other Information: with reasonable promptness, such other
information and data with respect to Company or any of its Subsidiaries
as from time to time may be reasonably requested by any Lender and that
is reasonably available to Company.
5.2 CORPORATE EXISTENCE, ETC.
Each of Company will, and will cause each of its respective Subsidiaries
to, at all times preserve and keep in full force and effect its corporate or
partnership, as the case may be, existence and all rights and franchises
material to its business, except (i) any of the foregoing to the extent they
are permitted under subsection 6.7, (ii) the failure to keep any Franchises in
full force and effect to the extent that an Event of Default or a Potential
Event of Default would not be caused under Section 7.14 if such Franchises were
terminated and compliance with the financial covenants contained in Section 6.6
were calculated as if such termination had occurred as of the first day of the
period for which such financial covenants were calculated, as described in
Section 7.14, (iii) any of the foregoing with respect to any Subsidiary of the
Company which is not a Significant Subsidiary and (iv) any event provided for
in the Partnership Agreement which would require Company to be dissolved, wound
up or terminated if the term of the Company is subsequently extended by a vote
of the partners within 90 days of such event.
5.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
A. Company will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for
sums that have become due and payable and that by law have or may become a Lien
upon any of its properties or assets, prior to the time when any penalty or
fine shall be incurred with respect thereto; provided that no such charge or
claim need be paid if being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor.
B. Company will not, and will not permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than Company or any Subsidiary of Company).
5.4 MAINTENANCE OF PROPERTIES; INSURANCE.
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Company will, and will cause each of its Subsidiaries to, maintain or
cause to be maintained in good repair, working order and condition, ordinary
wear and tear excepted, all material properties used or useful in the business
of Company and its Subsidiaries and from time to time will make or cause to be
made all appropriate repairs, renewals and replacements thereof. Company will
maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage
(including, without limitation, flood insurance, if necessary or advisable) of
the kinds and in amounts customarily carried or maintained under similar
circumstances by corporations and partnerships of established reputation
engaged in similar businesses in similar geographic locations. Each such
policy of insurance shall name Documentation Agent for the benefit of Lenders
as the loss payee thereunder for all losses subject to application of proceeds
as required by subsection 2.4A(iii)(e) and shall provide for at least 30 days
prior written notice to Documentation Agent of any modification or cancellation
of such policy.
5.5 INSPECTION: LENDER MEETING.
Company will, and will cause each of its Subsidiaries to, permit any
authorized representatives designated by any Lender to visit and inspect any of
the properties of Company or any of its Subsidiaries, including its and their
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that Company
may, if it so chooses, be present at or participate in any such discussion),
all upon reasonable notice and at such reasonable times during normal business
hours and as often as may be reasonably requested. Without in any way limiting
the foregoing, Company will, upon the request of either Agent or Requisite
Lenders, participate in a meeting of Agents and Lenders once during each Fiscal
Year to be held at Company's corporate offices (or such other location as may
be agreed to by Company and Agents at such time as may be agreed to by Company
and Agents).
5.6 COMPLIANCE WITH LAWS, ETC.
Company will, and will cause each of its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which could reasonably be expected
to cause a Material Adverse Effect.
5.7 ENVIRONMENTAL DISCLOSURE AND INSPECTION.
A. Company will, and will cause each of its Subsidiaries to, exercise all
due diligence in order to comply and cause (i) all tenants under any leases or
occupancy agreements affecting any portion of the Facilities and (ii) all other
Persons on or occupying such property, to comply with all Environmental Laws.
B. Company agrees that Agents may, from time to time and in its reasonable
discretion taking into account the potential risk to Company, Agents and the
Lenders, retain, at Company's expense, an independent professional consultant
to review any report relating to Hazardous Materials prepared by or for Company
and to conduct its own investigation of any Facility currently owned, leased,
operated or used by Company or any of its Subsidiaries, and Company agrees to
use its best efforts to obtain permission for Agents' professional consultant
to conduct its own investigation of any Facility previously owned, leased,
operated or used by Company or any of its Subsidiaries. Company hereby grants
to Agents and their respective agents, employees, consultants and contractors
the right to enter into or on to the Facilities currently owned, leased,
operated or used by Company or any of its Subsidiaries to perform such tests on
such property as are reasonably necessary to conduct such a review
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and/or investigation. Any such investigation of any Facility shall be
conducted, unless otherwise agreed to by Company and Agents, during normal
business hours and, to the extent reasonably practicable, shall be conducted so
as not to interfere with the ongoing operations at any such Facility or to
cause any damage or loss to any property at such Facility. Company and Agents
hereby acknowledge and agree that any report of any investigation conducted at
the request of Agents pursuant to this subsection 5.7B will be obtained and
shall be used by Agents and Lenders for the purposes of Lenders' internal
credit decisions, to monitor and police the Loans and to protect Lenders'
security interests, if any, created by the Loan Documents. Agents agree to
deliver a copy of any such report to Company with the understanding that
Company acknowledges and agrees that (i) it will indemnify and hold harmless
each Agent and each Lender from any costs, losses or liabilities relating to
Company's use of or reliance on such report, (ii) neither any Agent nor any
Lender makes any representation or warranty with respect to such report, and
(iii) by delivering such report to Company, neither any Agent nor any Lender is
requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
C. Company will promptly advise Lenders in writing and in reasonable
detail of (i) any Release of any Hazardous Materials required to be reported to
any federal, state or local governmental or regulatory agency under any
applicable Environmental Laws, (ii) any and all written communications with
respect to any Environmental Claims that have a reasonable possibility of
giving rise to a Material Adverse Effect or with respect to any Release of
Hazardous Materials required to be reported to any federal, state or local
governmental or regulatory agency, (iii) any remedial action taken by Company
or any other Person in response to (x) any Hazardous Materials on, under or
about any Facility, the existence of which has a reasonable possibility of
resulting in an Environmental Claim having a Material Adverse Effect, or (y)
any Environmental Claim that could have a Material Adverse Effect, (iv)
Company's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of any Facility that could cause such Facility or
any part thereof to be subject to any restrictions on the ownership, occupancy,
transferability or use thereof under any Environmental Laws, and (v) any
request for information from any governmental agency that suggests such agency
is investigating whether Company or any of its Subsidiaries may be potentially
responsible for a Release of Hazardous Materials.
D. Company will promptly notify Lenders of (i) any proposed acquisition of
stock, partnership interests, assets, or property by Company or any of its
Subsidiaries that could reasonably be expected to expose Company or any of its
Subsidiaries to, or result in, Environmental Claims that could have a Material
Adverse Effect or that could reasonably be expected to have a material adverse
effect on any Governmental Authorization then held by Company or any of its
Subsidiaries and (ii) any proposed action to be taken by Company or any of its
Subsidiaries to commence manufacturing, industrial or other operations that
could reasonably be expected to subject Company or any of its Subsidiaries to
additional laws, rules or regulations, including, without limitation, laws,
rules and regulations requiring additional environmental permits or licenses.
E. Company will, at its own expense, provide copies of such documents or
information as either Agent may reasonably request and that are reasonably
available to Company in relation to any matters disclosed pursuant to this
subsection 5.7.
5.8 COMPANY'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.
Company will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any Facility in order to comply with all
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applicable Environmental Laws and Governmental Authorizations. In the event
Company or any of its Subsidiaries undertakes any remedial action with respect
to any Hazardous Materials on, under or about any Facility, Company or such
Subsidiary will conduct and complete such remedial action in compliance with
all applicable Environmental Laws, and in accordance with the policies, orders
and directives of all federal, state and local governmental authorities except
when, and only to the extent that, Company's or such Subsidiary's liability for
such presence, storage, use, disposal, transportation or discharge of any
Hazardous Materials is being contested in good faith by Company or such
Subsidiary.
5.9 FURTHER ASSURANCES: NEW SUBSIDIARIES.
At any time or from time to time upon the request of the Agents, Company
will, at its expense, promptly execute, acknowledge and deliver such further
documents and do such other acts and things as Agents may reasonably request in
order to effect fully the purposes of the Loan Documents and to provide for
payment of the Obligations in accordance with the terms of this Agreement, the
Notes and the other Loan Documents. In furtherance and not in limitation of
the foregoing, each of Company will take, and cause each of its respective
Subsidiaries to take, such actions as either Agent may reasonably request from
time to time (including, without limitation, the execution and delivery of
guaranties, security agreements, pledge agreements, mortgages, deeds of trust,
stock powers, financing statements and other documents, the filing or recording
of any of the foregoing, title insurance with respect to any of the foregoing
that relates to an interest in real property, and the delivery of stock
certificates and other collateral with respect to which perfection is obtained
by possession) to ensure that the Obligations are guarantied by any material
Subsidiaries of Company created after the Closing Date and are secured by
substantially all of the assets of Company and its Subsidiaries. In the event
that any new Subsidiary of Company is created, whether or not in compliance
with the requirements of subsection 6.7(iii), all of the capital stock or
partnership interests of such new Subsidiary shall be duly and validly pledged
to Documentation Agent for the benefit of Lenders pursuant to the Collateral
Documents, subject to no other Liens, and if such Subsidiary is in the judgment
of Agents and Requisite Lenders material to the operation of the business of
Company or the performance of the Obligations, such Subsidiary shall execute
and deliver to Documentation Agent for the benefit of the Lenders its Guaranty
and its Guarantor Security Agreement.
5.10 REAL ESTATE.
Without limiting subsection 5.10, Agents may from time to time designate
real property of Company of any of its Subsidiaries now owned or hereafter
acquired as "Mortgaged Property," in which case Company shall, and shall cause
its Subsidiaries to, execute and deliver all Mortgages and take all other
action Agents may request to grant Documentation Agent, on behalf of Lenders,
as security for the Obligations, a first priority security interest subject
only to Permitted Encumbrances on all such real property interests on terms and
conditions reasonably satisfactory to Documentation Agent. Concurrently with
the execution and delivery of any Mortgage, Company shall cause to be delivered
to Documentation Agent: (i) a title report with respect to the Mortgaged
Property, in form and substance satisfactory to Documentation Agent, (ii) an
opinion of local counsel admitted to practice in the state in which any
Mortgaged Property is located, addressed to Agents and Lenders, in form and
substance satisfactory to Documentation Agent, (iii) ALTA tender's extended
coverage title insurance policies (with endorsements for any matter
Documentation Agent may reasonably request) issued by a nationally recognized
title insurance company acceptable to Documentation Agent in its reasonable
discretion, in amounts satisfactory to Documentation Agent, ensuring that as of
the date of recording thereof the Mortgages will be valid and enforceable first
priority mortgage Lien on the property encumbered thereby, free and clear of
all Liens, except as Documentation Agent may approve, and the Liens
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permitted under subsection 6.2, in form and substance satisfactory to
Documentation Agent, and (iv) such certificates and affidavits as the title
insurer may reasonably require in connection with the issuance of the title
insurance policy described in clause (iii) hereof.
5.11 FRANCHISE CONSENTS.
Upon request of the Agents Company shall use its reasonable best efforts,
to obtain consents of the other parties to the Franchises set forth on Schedule
5.12 annexed hereto to the assignment and pledge of such Franchises to
Documentation Agent for the benefit of the Lenders pursuant to the Collateral
Documents; provided that Company shall not be required to seek the
consent of the other parties to a Franchise if in Company's reasonable judgment
such action would impair Company's ability to conduct business with such other
party or Company's relationship with such other party.
5.12 OTHER TERMS.
If at any time after the date hereof Company shall enter into any
instrument or agreement with respect to any Indebtedness which in the
aggregate, together with any related Indebtedness, exceeds $500,000, relating
to or amending any terms or conditions applicable to any of such Indebtedness
which includes covenants, terms, conditions or defaults not substantially
provided for in this Agreement or more favorable to the lender or lenders
thereunder than those provided for in this Agreement, then the Company shall
promptly so advise the Agents and the Lenders. Thereupon, if the Agents shall
request, upon notice to the Company, the Agents and the Lenders shall enter
into an amendment to this Agreement or an additional agreement (as the Agents
may request), providing for substantially the same covenants, terms, conditions
and defaults as those provided for in such instrument or agreement to the
extent required and as may be selected by the Agents. In addition to the
foregoing, any covenants or defaults or similar provisions (which include
without limitation any provisions requiring any mandatory prepayments or
defeasance under the Senior Unsecured Notes, Indenture or any other Senior
Unsecured Debt Document) in any Senior Unsecured Debt Document at any time not
substantially provided for in this Agreement or more favorable to the holders
of the Indebtedness under the Senior Unsecured Notes issued in connection
therewith are hereby incorporated by reference into this Agreement to the same
extent as if set forth fully herein, and no subsequent amendment, waiver,
termination or modification thereof shall affect any such covenants or defaults
or other provisions as incorporated herein.
SECTION 6.
COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations, unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform, and shall cause each of its respective
Subsidiaries to perform, all covenants in this Section 6.
6.1 INDEBTEDNESS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
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(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 6.4 and, upon
any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished;
(iii) Company may become and remain liable with respect to
Indebtedness in respect of Capital Leases and/or purchase money
Indebtedness in an aggregate amount not to exceed $2,500,000;
(iv) Company may remain liable with respect to Indebtedness
described in Schedule 6.1 annexed hereto, including any refinancing or
extension thereof provided that the amount thereof is not increased;
(v) Company may become and remain liable with respect to
Indebtedness evidenced by the Senior Unsecured Notes in aggregate
principal amount not to exceed $100,000,000; and
(vi) Company may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed $2,500,000 at
any time outstanding.
(vii) Without duplication, Contingent Obligations to the extent
permitted by Section 6.4.
6.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens described in Schedule 6.2 annexed hereto, and any
renewal or extension of any such Lien provided that the aggregate amount
of the Indebtedness secured thereby is not increased;
(iv) Purchase-money Liens, including liens in connection with
Capital Leases, securing Indebtedness permitted under subsection
6.1(iii); provided that such Liens encumber only the asset so purchased;
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(v) Liens existing on such property, asset, income or profits at the
time of its acquisition, provided that such Lien was not incurred in
contemplation of such acquisition and such acquisition was permitted by
Section 6.7(iii); and
(vi) Other Liens securing Indebtedness in an aggregate amount not to
exceed $2,500,000 at any time outstanding.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 6.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 6.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an Asset Sale and except for the
Indenture, neither Company nor any of its Subsidiaries shall enter into any
agreement prohibiting the creation or assumption of any Lien upon any of its
properties or assets, whether now owned or hereafter acquired.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Except as provided herein, Company will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock, partnership interests
or other interests owned by Company or any other Subsidiary of Company, (ii)
repay or prepay any Indebtedness owed by such Subsidiary to Company or any
other Subsidiary of Company, (iii) make loans or advances to Company or any
other Subsidiary of Company, or (iv) transfer any of its property or assets to
Company or any other Subsidiary of Company.
6.3 INVESTMENTS; JOINT VENTURES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in
Cash Equivalents;
(ii) Company and its Subsidiaries may make intercompany loans to the
extent permitted under subsection 6.1(iv);
(iii) The Company may make Investments in Joint Ventures to the
extent the aggregate amount of the outstanding Investments in all Joint
Ventures does not exceed $2,500,000;
(iv) Company and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 6.3 annexed hereto;
and
(v) Company may make acquisitions permitted under subsection
6.7(iii).
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6.4 CONTINGENT OBLIGATIONS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Any Guarantor may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the Obligations;
(ii) Company may become and remain liable with respect to Interest
Rate Agreements to the extent such Interest Rate Agreements are entered
into to protect the Company against fluctuations in interest rates and
not for the purpose of financial speculation;
(iii) Company may remain liable with respect to Contingent
Obligations described in Schedule 6.4 annexed hereto, including any
refinancing or extension thereof, provided that the amount thereof is not
increased;
(iv) Company may become and remain liable with respect to Contingent
Obligations under performance bonds incurred in the ordinary course of
business in an aggregate amount not to exceed $1,500,000 at any time
outstanding (which allowance under this clause (iv) is not in addition to
the exclusion contained in the definition of Indebtedness); and
(v) Company may become and remain liable with respect to other
Contingent Obligations in an aggregate principal amount not to exceed
$1,000,000 at any time outstanding.
6.5 RESTRICTED JUNIOR PAYMENTS.
Company shall not, and it shall not permit any of its respective
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Junior Payment; provided that:
(i) So long as no Event of Default or Potential Event of Default
has occurred and is continuing or would result therefrom, Company may make
scheduled interest and principal payments which are required to be paid in
cash from time to time pursuant to the terms of the Senior Unsecured Notes
without giving effect to any amendment or modification thereof;
(ii) Company may make payments of Management Fees which are not in
excess of the amount allowed under the Partnership Agreement;
(iii) So long as no Event of Default or Potential Event of Default
has occurred and is continuing or would result therefrom, Company may
purchase limited partner interests in Company from limited partners of
Company that are not Affiliates of Company, the General Partner or
Jamesco and pay dividends on partnership interests of the Company;
provided that (x) all such purchases and dividends together do not exceed
$5,000,000 in the aggregate since the Closing Date and (y) prior to any
such purchase or dividend Company delivers an Officers' Certificate to
Agents and Lenders in form and substance reasonably satisfactory to
Agents, confirming that no Event of Default or Potential Event of Default
is continuing and it will be in compliance, on a Pro Forma Basis after
giving effect to such purchase, with all covenants set
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forth in subsection 6.6 hereof and setting forth the percentage limited
partnership interest to be purchased and the aggregate amount to be
paid in connection with such purchase;
(iv) So long as no Event of Default or Potential Event of Default
has occurred and is continuing or would result therefrom, payments
permitted under Section 6.10(iii); and
(v) So long as no Event of Default or Potential Event of Default has
occurred and is continuing or would result therefrom, the payment of any
dividend or distribution on any general or limited partnership interest
of the Company or any Subsidiary of the Company to the extent necessary
to permit the direct or indirect beneficial owners of such partnership
interests to pay federal and state income tax liabilities arising from
income of the Company or such Subsidiary and attributable to them solely
as a result of the Company or such Subsidiary (and any intermediate
entity through which such holder owns such partnership interests) being a
partnership or similar pass-through entity for federal income tax
purposes.
6.6 FINANCIAL COVENANTS.
A. TOTAL DEBT COVERAGE. Company will not permit the ratio of (y)
Consolidated Total Debt as of any day during the periods set forth below to (z)
Consolidated Adjusted EBITDA for the most recently ended six consecutive month
period ended as of such day multiplied by 2 to be greater than the correlative
ratio indicated:
<TABLE>
<S> <C>
CONSOLIDATED
TOTAL DEBT
TO
CONSOLIDATED
PERIOD ADJUSTED EBITDA
December 31, 1995 through September 30, 1999 7.00:1.00
December 31, 1999 and thereafter 6.75:1.00
</TABLE>
B. SENIOR DEBT COVERAGE. Company will not permit the ratio of (y)
Consolidated Senior Debt as of any day during the period set forth below to (z)
Consolidated Adjusted EBITDA for the six (6) consecutive month period ended as
of such day multiplied by 2 to be greater than the correlative ratio
indicated.:
<TABLE>
<S> <C>
CONSOLIDATED
SENIOR DEBT
TO
CONSOLIDATED
PERIOD ADJUSTED EBITDA
December 31, 1995 through September 30, 1999 2.50:1.00
December 31, 1999 and thereafter 2.25:1.00
</TABLE>
C. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit, as of the
last day of any fiscal quarter, the ratio of (i) Consolidated Adjusted EBITDA
for the six (6) consecutive month period then ending to (ii) Consolidated Cash
Interest Expense for the six (6) consecutive month period then ending than to be
less than 1.1 to 1.0.
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6.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS: NEW
SUBSIDIARIES.
Company shall not, and shall not permit any of its Subsidiaries to, alter
the corporate, partnership, capital or legal structure of Company or any of its
Subsidiaries, create any new Subsidiaries or enter into any transaction of
merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution), or convey, sell, lease, sub-lease, transfer or
otherwise dispose of (other than in the ordinary course of business), in one
transaction or a series of transactions, all or any part of its business,
property or fixed assets, whether now owned or hereafter acquired, or acquire
by purchase or otherwise the business, property or fixed assets of, or stock or
other evidence of beneficial ownership of, any Person or any division or line
of business of any Person (other than in the ordinary course of business),
except:
(i) so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing or would result therefrom and
Company delivers an Officers' Certificate to Agents and Lenders, in form
and substance reasonably satisfactory to Agent, confirming that it will
be in compliance, on a Pro Forma Basis after giving effect to such Asset
Sale, with all covenants set forth in subsection 6.6 hereof, Company and
its Subsidiaries may make Asset Sales of assets with an aggregate book
value for all such assets of less than $3,000,000; provided that (x) the
consideration received for such assets shall be in an amount at least
equal to the fair market value thereof; (y) the sole consideration
received shall be cash, except that the Company shall be allowed to trade
assets of like kind with other cable companies; and (z) the proceeds of
such Asset Sales shall be applied as required by subsection 2.4A(iii)(a);
(ii) subject to the requirements of subsection 5.9, Company may
create new Subsidiaries with the prior written consent of the Agents; and
(iii) so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing or would result therefrom and
Company delivers an Officers' Certificate to Agents and Lenders, in form
and substance reasonably satisfactory to Agent, confirming that it will
be in compliance, on a Pro Forma Basis after giving effect to such
acquisition, with all covenants set forth in subsection 6.6 hereof,
Company may from time to time make acquisitions of cable systems and
related communications systems that are in close proximity to Company's
existing cable systems by way of asset purchase, stock or partnership
interest purchase, merger, consolidation or otherwise not to exceed
$2,000,000 in the aggregate, provided that it is acknowledged that any
acquisitions from the reinvestment of the proceeds of any sale of assets
as permitted under clause (B) contained in the definition of Asset Sale
or the purchase of replacement assets with Insurance Proceeds or
Condemnation Proceeds in accordance with Section 2.4(A)(iii)(e) shall not
count against such $2,000,000 basket.
6.8 SALES AND LEASE-BACKS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company
or any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Company or any of its Subsidiaries
to any Person (other than Company or any of its Subsidiaries) in connection
with such lease.
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6.9 SALE OR DISCOUNT OF RECEIVABLES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, discount, or otherwise sell for
less than the face value thereof any of its notes or accounts receivable.
6.10 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of Company or with any Affiliate of Company or of
any such holder, on terms that are less favorable to Company or that
Subsidiary, as the case may be, than those that might be obtained at the time
from Persons who are not such a holder or Affiliate; provided that the
foregoing restriction shall not apply to (i) any transaction between Company
and any of its wholly-owned Subsidiaries or between any of its wholly-owned
Subsidiaries, (ii) payment of Management Fees in accordance with subsection
6.5, and in any event not to exceed in any fiscal year 4% of the Company's
annual revenues plus $5.00 per subscriber, or (iii) payments in an aggregate
amount not to exceed $2,000,000 in connection with the Incentive Compensation
Agreement adopted by the Company as of December 31, 1994.
6.11 CONDUCT OF BUSINESS.
From and after the Closing Date, Company shall not, and shall not permit
any of its Subsidiaries to, engage in any business other than (i) the
businesses engaged in by Company and its Subsidiaries on the Closing Date and
similar or related businesses or as the Company's business has thereafter
evolved in the fields of cable television systems, enhanced video services,
advanced telecommunications services, such as broadband high speed Internet
access and inter- and intra- network data services and telephony, and (ii)
such other lines of business as may be consented to by Requisite Lenders.
6.12 AMENDMENTS TO THE INDENTURE, SENIOR UNSECURED NOTES AND OTHER MATERIAL
AGREEMENTS.
Company shall not, and shall not permit any of its Subsidiaries or the
Guarantor to, amend or otherwise change the terms of any Senior Unsecured Debt
Document, or make any payment consistent with an amendment thereof or change
thereto, if the effect of such amendment or change is to increase the interest
rate on the Senior Unsecured Notes, change (to earlier dates) any dates upon
which payments of principal or interest are due thereon, change any event of
default or condition to an event of default with respect thereto (other than to
eliminate any such event of default), change any affirmative or negative
covenant in any significant respect, change the redemption, prepayment or
defeasance provisions thereof, or if the effect of such amendment or change,
together with all other amendments or changes made, is to increase materially
the obligations of the obligor thereunder or to confer any additional rights on
the holders of the Senior Unsecured Notes (or a trustee or other representative
on their behalf) which would be adverse to any Loan Party or Lenders. Company
shall not permit the Partnership Agreement, the General Partnership Agreement,
or the certificate or articles of incorporation or by laws or partnership
agreement of any Subsidiary to be amended or otherwise modified in any respect
without the prior written consent of Requisite Lenders (other than non-material
amendments or modifications, which individually or taken together with all other
amendments or modifications, could not reasonably be expected to be adverse to
any Lender and which do not increase the Management Fees).
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6.13 FISCAL YEAR
Company shall not change its Fiscal Year-end from December 31.
SECTION 7.
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; failure by Company to pay any
interest on any Loan when due and such failure shall not have been remedied or
waived within two Business Days after the earlier of (i) an officer of the
Company becoming aware of such failure or (ii) receipt by the Company of notice
from either Agent or any Lender of such default; or failure by Company to pay
any fee or any other amount due under this Agreement when due and such failure
shall not have been remedied or waived within five days after the earlier of
(a) an officer of the Company becoming aware of such failure or (b) receipt by
the Company of notice from either Agent or any Lender of such default; or
7.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries to pay when due, beyond
the end of any grace period provided therefor, any amount on any Indebtedness
(other than Indebtedness referred to in subsection 7.1) or Contingent
Liabilities which individually or together with other such Indebtedness and
Contingent Liabilities as to which any such failure exists has an aggregate
outstanding amount in excess of $2,500,000 or (ii) breach or default by Company
or any of its Subsidiaries with respect to any other material term of (a) any
evidence of any Indebtedness or Contingent Liabilities which individually or
together with other such Indebtedness and Contingent Liabilities as to which
any such failure exists has an aggregate outstanding amount in excess of
$2,500,000 or (b) any loan agreement, mortgage, indenture or other agreement
relating to such Indebtedness or Contingent Obligation(s), if the effect of
such breach or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder
or holders) to cause after the expiration of any applicable grace
period, that Indebtedness or Contingent Obligation(s) to become or be declared
due and payable prior to its stated maturity or the stated maturity of any
underlying obligation, as the case may be (upon the giving or receiving of
notice, lapse of time, both, or otherwise); or
7.3 BREACH OF CERTAIN COVENANTS.
Failure of Company or Company to perform or comply with any term or
condition contained in subsection 2.5 or Section 6 of this Agreement; or
7.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made by any
Loan Party in any Loan Document or in any statement or certificate at any time
given by any Loan Party in writing
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pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
7.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
Any Loan Party shall default in the performance of or compliance with any
term contained in this Agreement or any of the other Loan Documents, other than
any such term referred to in any other subsection of this Section 7, and such
default shall not have been remedied or waived within 30 days after the earlier
of (i) an officer of Company becoming aware of such default or (ii) receipt by
Company of notice from either Agent or any Lender of such default; or
7.6 INVOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Company or any of its Subsidiaries or the
General Partner in an involuntary case under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief shall
be granted under any applicable federal or state law; or (ii) an involuntary
case shall be commenced against Company or any of its Subsidiaries or the
General Partner under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a decree
or order of a court having jurisdiction in the premises for the appointment of
a receiver, liquidator, sequestrator, trustee, custodian or other officer
having similar powers over Company or any of its Subsidiaries or the General
Partner, or over all or a substantial part of its property, shall have been
entered; or there shall have occurred the involuntary appointment of an interim
receiver, trustee or other custodian of Company or any of its Subsidiaries or
the General Partner for all or a substantial part of its property; or a
warrant-of attachment, execution or similar process shall have been issued
against any substantial part of the property of Company or any of its
Subsidiaries, and any such event described in this clause (ii) shall continue
for 60 days unless dismissed, bonded or discharged; or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) Company or any of its Subsidiaries or the General Partner shall have
an order for relief entered with respect to it or commence a voluntary case
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or Company or any of its
Subsidiaries or the General Partner shall make any assignment for the benefit of
creditors; or (ii) Company or any of its Subsidiaries or the General Partner
shall be unable, or shall fail generally, or shall admit in writing its
inability, to pay its debts as such debts become due; or the Board of Directors
of Company or any of its Subsidiaries or the General Partner (or any committee
thereof) shall adopt any resolution or otherwise authorize any action to approve
any of the actions referred to in clause (i) above or this clause (ii); or
7.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar process,
together with all such other money judgments, writs or warrants of attachment
or similar processes, involving in the aggregate at any time an amount in
excess of $2,500,000 (and not adequately covered by insurance as to which a
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solvent and unaffiliated insurance company has acknowledged coverage) shall be
entered or filed against Company or any of its Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of 60 days (or in any event later than five days prior to
the date of any proposed sale thereunder); or
7.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Company or any of
its Significant Subsidiaries or the General Partner decreeing the dissolution
or split up of Company or that Significant Subsidiary or the General Partner
and such order shall remain undischarged or unstayed for a period in excess of
30 days; or
7.10 EMPLOYEE BENEFIT PLANS.
There shall occur one or more ERISA Events which individually or in the
aggregate results in or might reasonably be expected to result in liability of
Company or any of its ERISA Affiliates in excess of $1,000,000 during the term
of this Agreement; or there shall exist an amount of unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in
the aggregate for all Pension Plans (excluding for purposes of such computation
any Pension Plans with respect to which assets exceed benefit liabilities),
which exceeds $1,000,000; or
7.11 CHANGE IN CONTROL.
Any of the following shall occur: (i) the General Partner shall, for any
reason, cease to be the sole general partner of Company or shall cease to have
the sole power to take all actions the General Partner is entitled or required
to take under the Partnership Agreement as in effect on the Closing Date, (ii)
William R. James shall cease to own at least 51% of the aggregate direct and
indirect beneficial ownership interest in the General Partner and Jamesco or
William R. James shall no longer have the sole power to direct or cause the
direction of the management or policies of the General Partner, unless in the
event of any Incapacity (as defined in the Partnership Agreement) of William R.
James, C. Timothy Trenary or Daniel Shoemaker, directly or indirectly, shall
have the power to direct or cause the direction of the management and policies
of the General Partner and shall be actively engaged in the operation and
management of the affairs of Company performing substantially the same type of
management duties with respect to business of Company as performed as of the
Closing Date, (iii) any "Change of Control" as defined in the Senior Unsecured
Debt Documents or (iv) any event provided for in the Partnership Agreement
which would require Company to be dissolved, wound up or terminated (unless the
term of Company is subsequently extended by a vote of the partners within 90
days of such event), including, without limitation, (a) expiration of the term
of Company or (b) the General Partner shall be removed, whether or not such
event creates a dissolution, winding up or termination.
7.12 INVALIDITY OF GUARANTIES.
Upon execution and delivery thereof, any guaranty of the Obligations of
Company for any reason, other than the satisfaction in full of all Obligations,
ceases to be in full force and effect other than in accordance with its terms)
or is declared to be null and void, or any Loan Party denies in writing that it
has any further liability, including without limitation with respect to future
advances by Lenders, under any Loan Document to which it is a party; or
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7.13 FAILURE OF SECURITY.
Upon execution and delivery thereof, any Collateral Document shall, at any
time, cease to be in full force and effect as to any material Collateral (other
than by reason of a release of Collateral thereunder in accordance with the
terms hereof or thereof, the satisfaction in full of the Obligations or any
other termination of such Collateral Document in accordance with the terms
hereof or thereof) or shall be declared null and void, or the validity or
enforceability thereof shall be contested in writing by any Loan Party, or
Documentation Agent shall not have or shall cease to have a valid security
interest in any material Collateral (other than inventory or equipment in
transit in the ordinary course of business) purported to be covered thereby,
perfected and with the priority required by the relevant Collateral Document,
for any reason other than the failure of either Agent or any Lender to take any
action within its control, subject only to Liens permitted under the applicable
Collateral Documents; or
7.14 FRANCHISES.
(i) Company shall lose, fail to keep in force, suffer the termination,
suspension or revocation of or terminate, forfeit or suffer a material adverse
amendment to any Franchise or group of Franchises at any time held by it, or
(ii) any governmental regulatory authority shall schedule or conduct a hearing
on the renewal of any Franchise or group of Franchises held by Company, and the
Requisite Lenders shall reasonably believe that the result thereof shall be the
termination, revocation, suspension, or material adverse amendment of such
Franchise or group of Franchises; and if, after giving pro forma effect to all
such events described in the foregoing clauses (i) and (ii) on a pro forma
basis reasonably acceptable to the Agents, including without limitation those
events which the Requisite Lenders reasonably believe will occur, as if they
had all occurred as of the first day of the period for which each of the
financial covenants contained in Section 6.6 were calculated, the Company would
be in breach of any of the financial covenants contained in Section 6.6; or
7.15 DEFAULT IN PARTNERSHIP AGREEMENT.
Any party to the Partnership Agreement shall default in the performance of
or compliance with any material term contained in such Partnership Agreement,
and, as a result, the ability of Company and the other Loan Parties, taken as a
whole, to perform, or Agents or Lenders to enforce, the Obligations of Company
shall be materially and adversely affected:
THEN (i) upon the occurrence of any Event of Default described in
subsection 7.6 or 7.7, each of (a) the unpaid principal amount of and accrued
interest on the Loans and (b) all other Obligations shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by Company,
and the obligation of each Lender to make any Loan, shall thereupon terminate,
and (ii) upon the occurrence and during the continuation of any other Event of
Default, Documentation Agent shall, upon the written request or with the
written consent of Requisite Lenders, by written notice to Company, declare all
or any portion of the amounts described in clauses (a) and (b) above to be, and
the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan.
Notwithstanding anything contained in the preceding paragraph, if at any
time within 60 days after an acceleration of the Loans pursuant to such
paragraph Company shall pay all arrears of interest and all payments on account
of principal which shall have become due otherwise than as a result of such
acceleration (with interest on principal and, to the extent permitted by law,
on overdue interest, at the rates specified in this Agreement) and all Events
of Default and Potential Events of Default (other than
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non-payment of the principal of and accrued interest on the Loans, in each case
which is due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to subsection 9.6, then Requisite Lenders, by written notice to
Company, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and are not intended to
benefit Company and do not grant Company the right to require Lenders to
rescind or annul any acceleration hereunder, even if the conditions set forth
herein are met.
SECTION 8.
AGENTS
8.1 APPOINTMENT.
NBD is hereby appointed Documentation Agent hereunder and under the other
Loan Documents and each Lender authorizes Documentation Agent to act as its
agent in accordance with the terms of this Agreement and the other Loan
Documents. CIBC is hereby appointed Administrative Agent hereunder and under
the other Loan Documents and each Lender hereby authorizes Administrative Agent
to act as its agent in accordance with the terms of this Agreement and the
other Loan Documents. Each Agent agrees to act upon the express conditions
contained in this Agreement and the other Loan Documents, as applicable. The
provisions of this Section 8 are solely for the benefit of Agents and Lenders,
and Company shall have no rights as a third party beneficiary of any of the
provisions thereof. In performing its functions and duties under this
Agreement, each Agent shall act solely as an agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Company or any of its Subsidiaries.
8.2 POWERS: GENERAL IMMUNITY.
A. DUTIES SPECIFIED. Each Lender irrevocably authorizes each Agent to
take such action on such Lender's behalf and to exercise such powers hereunder
and under the other Loan Documents as are specifically delegated to such Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. Each Agent shall have only those duties and
responsibilities that are expressly specified in this Agreement and the other
Loan Documents and it may perform such duties by or through its agents or
employees. Neither Agent shall have, by reason of this Agreement or any of the
other Loan Documents, a fiduciary relationship in respect of any Lender; and
nothing in this Agreement or any of the other Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon either Agent
any obligations in respect of this Agreement or any of the other Loan Documents
except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Neither Agent shall be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or
any other Loan Document and neither Agent nor any Lender shall be responsible
to any other Lender for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any
other documents furnished or made by either Agent or such Lender to Lenders or
by or on behalf of Company to either Agent or any Lender in connection with the
Loan Documents and the transactions contemplated thereby or for the financial
condition or business affairs of Company or any other Person liable for the
payment of any Obligations. Neither Agent shall be required to ascertain or
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inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or
as to the use of the proceeds of the Loans or as to the existence or possible
existence of any Event of Default or Potential Event of Default. Anything
contained in this Agreement to the contrary notwithstanding, neither Agent
shall have any liability arising from confirmations of the amount of
outstanding Loans.
C. EXCULPATORY PROVISIONS. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to Lenders for any action taken
or omitted by such Agent under or in connection with any of the Loan Documents
except to the extent caused by such Agent's gross negligence or willful
misconduct. If either Agent shall request instructions from Lenders with
respect to any act or action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents, such Agent
shall be entitled to refrain from such act or taking such action unless and
until such Agent shall have received instructions from Requisite Lenders.
Without prejudice to the generality of the foregoing, (i) each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Company and its Subsidiaries), accountants,
experts and other professional advisors selected by it; and (ii) no Lender
shall have any right of action whatsoever against either Agent as a result of
such Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders. Each Agent shall be entitled to refrain
from exercising any power, discretion or authority vested in it under this
Agreement or any of the other Loan Documents unless and until it has obtained
the instructions of Requisite Lenders.
D. AGENTS ENTITLED TO ACT AS LENDER. The agency hereby created shall in
no way impair or affect any of the rights and powers of, or impose any duties
or obligations upon, each Agent in its individual capacity as a Lender
hereunder. With respect to its participation in the Loans, each Agent shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as though it were not performing the duties and functions delegated to
it hereunder, and the term "Lender" or "Lenders" or any similar term shall,
unless the context clearly otherwise indicates, include each Agent in its
individual capacity. Each Agent and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of banking, trust, financial
advisory or other business with Company or any of its Affiliates as if it were
not performing the duties specified herein, and may accept fees and other
consideration from Company for services in connection with this Agreement and
otherwise without having to account for the same to Lenders.
8.3 REPRESENTATIONS AND WARRANTIES, NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Loans hereunder and that it
has made and shall continue to make its own appraisal of the creditworthiness
of Company and its Subsidiaries. Neither Agent shall have any duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or to provide any
Lender with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or at any time or
times thereafter, and neither Agent shall have any responsibility with respect
to the accuracy of or the completeness of any information provided to Lenders.
8.4 RIGHT TO INDEMNITY.
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Each Lender, in proportion to its Pro Rata Share in effect on the date
indemnification is sought, severally agrees to indemnify each Agent, to the
extent that such Agent shall not have been reimbursed by Company, for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including, without limitation,
counsel fees and disbursements) or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against either
Agent in performing its duties hereunder or under the other Loan Documents or
otherwise in its capacity as an Agent in any way relating to or arising out of
this Agreement or the other Loan Documents; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Agent's gross negligence or willful misconduct. If any
indemnity furnished to either Agent for any purpose shall, in the opinion of
such Agent, be insufficient or become impaired, such Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished.
8.5 SUCCESSOR AGENT.
Each Agent may resign at any time by giving 30 days' prior written notice
thereof to Lenders and Company, and each Agent may be removed at any time with
cause by an instrument or concurrent instruments in writing delivered to
Company and such Agent and signed by Requisite Lenders. Upon any such notice
of resignation or any such removal, Requisite Lenders shall have the right,
upon five Business Days' notice to Company, to appoint a successor Agent for
such Agent. Upon the acceptance of any appointment as an Agent hereunder by a
successor Agent, that successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Agent and the retiring or removed Agent shall be discharged from its
duties and obligations under this Agreement. After any retiring or removed
Agent's resignation or removal hereunder as an Agent, the provisions of this
Section 8 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was an Agent under this Agreement.
8.6 COLLATERAL DOCUMENTS.
Each Lender hereby further authorizes Documentation Agent to enter into
each Collateral Document as secured party on behalf of and for the benefit of
Lenders and agrees to be bound by the terms of each Collateral Document;
provided that Documentation Agent shall not enter into or consent to any
amendment, modification, termination or waiver of any provision contained in
any Collateral Document without the prior consent of Requisite Lenders.
Anything contained in any of the Loan Documents to the contrary
notwithstanding, each Lender agrees that no Lender shall have any right
individually to realize upon any of the Collateral under any Collateral
Document, it being understood and agreed that all rights and remedies under the
Collateral Documents may be exercised solely by Documentation Agent for the
benefit of Lenders in accordance with the terms thereof.
SECTION 9.
MISCELLANEOUS
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS.
A. GENERAL. Each Lender shall have the right at any time to (i) sell,
assign or transfer to any Eligible Assignee, or (ii) sell participations to any
Person in, all or any part of its Commitments or any Loan or Loans made by it
or any other interest herein or in any other Obligations owed to it;
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provided that no such sale, assignment, transfer or participation shall,
without the consent of Company, require Company to file a registration
statement with the Securities and Exchange Commission or apply to qualify such
sale, assignment, transfer or participation under the securities laws of any
state; provided, further, that no such sale, assignment or transfer described
in clause (i) above shall be effective unless and until an Assignment Agreement
effecting such sale, assignment or transfer shall have been accepted by each
Agent as provided in subsection 9.lB(ii). Except as otherwise provided in this
subsection 9.1, no Lender shall, as between Company and such Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment or transfer of, or any granting of participations in, all or any
part of its Commitments or the Loans or the other Obligations owed to such
Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Commitment Loan or other
Obligation may (a) be assigned in any amount to another Lender, or to an
Affiliate of the assigning Lender or another Lender, with the giving of
notice to Company and Agents or (b) be assigned in an aggregate amount of
not less than $5,000,000 (or such lesser amount as shall constitute the
aggregate amount of the Commitments, Loans, and other Obligations of the
assigning Lender) to any other Eligible Assignee with the consent of the
Company (which consent shall not be unreasonably withheld and may not be
withheld during the continuance of any Event of Default) and of each
Agent. To the extent of any such assignment in accordance with either
clause (a) or (b) above, the assigning Lender shall be relieved of its
obligations with respect to its Commitments, Loans, or other Obligations
or the portion thereof so assigned. The parties to each such assignment
shall execute and deliver to Agent, for its acceptance, an Assignment
Agreement, together with a processing fee of $3,500.00 (or $1,000.00 in
the case of an assignment to a Lender) and such forms, certificates or
other evidence, if any, with respect to United States federal income tax
withholding matters as the assignee under such Assignment Agreement may
be required to deliver to Administrative Agent pursuant to subsection
2.7B(iii)(a). Upon such execution, delivery and acceptance, from and
after the effective date specified in such Assignment Agreement, (y) the
assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to
such Assignment Agreement, shall have the rights and obligations of a
Lender hereunder and (z) the assigning Lender thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment Agreement, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of
an Assignment Agreement covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto). The Commitments hereunder
shall be modified to reflect the Commitment of such assignee and any
remaining Commitment of such assigning Lender and, if any such assignment
occurs after' the issuance of the Notes hereunder, the assigning Lender
shall, upon the effectiveness of such assignment or as promptly
thereafter as practicable, surrender its applicable Notes to
Administrative Agent for cancellation, and thereupon new Notes shall be
issued to the assignee and to the assigning Lender, substantially in the
form of Exhibit III annexed hereto with appropriate insertions, to
reflect the new Commitments of the assignee and the assigning Lender.
(ii) Acceptance by Agents. Upon its receipt of an Assignment
Agreement executed by an assigning Lender and an assignee representing
that it is an Eligible Assignee, together with the processing fee
referred to in subsection 8.1B(i) and any forms, certificates or other
evidence with respect to United States federal income tax withholding
matters that such assignee may be required to deliver to Agents pursuant
to subsection 2.7B(iii), each Agent shall, if such
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Assignment Agreement has been completed and is in substantially the form
of Exhibit VIII hereto and if each Agent has consented to the assignment
evidenced thereby to the extent such consent is required pursuant to
subsection 9. 1B(i)), (a) accept such Assignment Agreement by executing a
counterpart thereof as provided therein (which acceptance shall evidence
any required consent of Agents to such assignment) and (b) give prompt
notice thereof to Company. The Administrative Agent shall maintain a
copy of each Assignment Agreement delivered to and accepted by it as
provided in this subsection 9.lB(ii).
C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of
any Loan allocated to such participation, (ii) a reduction of the principal
amount of or the rate of interest payable on any Loan allocated to such
participation or (iii) the release of all or substantially all Collateral, and
all amounts payable by Company hereunder (including without limitation amounts
payable to such Lender pursuant to subsections 2.6D and 2.7) shall be
determined as if such Lender had not sold such participation. Company and each
Lender hereby acknowledge and agree that, solely for purposes of subsections
9.4 and 9.5, (a) any participation will give rise to a direct obligation of
Company to the participant and (b) the participant shall be considered to be a
"Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
9.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and its Notes to any Federal Reserve
Bank as collateral security pursuant to Regulation A of the Board of Governors
of the Federal Reserve System and any operating circular issued by such Federal
Reserve Bank; provided that (i) no Lender shall, as between Company and such
Lender, be relieved of any of its obligations hereunder as a result of any such
assignment and pledge and (ii) in no event shall such Federal Reserve Bank be
considered to be a "Lender" or be entitled to require the assigning Lender to
take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 9.19.
9.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be consummated,
Company agrees to pay promptly (i) all the actual and reasonable costs and
expenses of preparation of the Loan Documents; (ii) all the costs of furnishing
all opinions by counsel for Company (including without limitation any opinions
requested by Lenders as to any legal matters arising hereunder) and of
Company's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents including, without limitation, with respect to confirming
compliance with environmental and insurance requirements; (iii) the reasonable
fees, expenses and disbursements of counsel to either Agent (including
allocated costs of internal counsel) in connection with the negotiation,
preparation, execution and administration of the Loan Documents and the Loans
and any consents, amendments, waivers or other modifications hereto or thereto
and any other documents or matters requested by Company; (iv) all the costs and
expenses of creating and perfecting the Liens in favor of the Documentation
Agent for the benefit of Lenders pursuant to the Loan Documents, including
filing and recording fees and expenses, title insurance, fees and expenses of
counsel for providing such opinions as Lenders may reasonably request and fees
and expenses of legal
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counsel to either Agent (including local counsel); (v) all other actual and
reasonable costs and expenses incurred by either Agent in connection with the
syndication of the Commitments and the negotiation, preparation and execution
of the Loan Documents and the transactions contemplated hereby and thereby; and
(vi) after the occurrence of an Event of Default, all costs and expenses,
including reasonable attorneys' fees (including allocated costs of internal
counsel) and costs of settlement, incurred by Agents and Lenders in enforcing
any Obligations of or in collecting any payments due from Company hereunder or
under the other Loan Documents by reason of such Event of Default or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or pursuant to any
insolvency or bankruptcy proceedings.
9.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection 9.2, whether
or not the transactions contemplated hereby shall be consummated, Company
agrees to defend, indemnify, pay and hold harmless Agents and Lenders, and the
officers, directors, employees, agents and affiliates of Agents and Lenders
(collectively called the "INDEMNITEES") from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including without limitation the reasonable fees and disbursements
of counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened by any Person,
whether or not any such Indemnitee shall be designated as a party or a
potential party thereto), whether direct, indirect or consequential and whether
based on any federal, state or foreign laws, statutes, rules or regulations
(including without limitation securities and commercial laws, statutes, rules
or regulations and Environmental Laws), on common law or equitable cause or on
contract or otherwise, that may be imposed on, incurred by, or asserted against
any such Indemnitee, in any manner relating to or arising out of this Agreement
or the other Loan Documents or the transactions contemplated hereby or thereby
(including without limitation Lenders' agreement to make the Loans hereunder or
the use or intended use of the proceeds of any of the Loans) or the statements
contained in the commitment letter delivered by any Lender to Company with
respect thereto (collectively called the "INDEMNIFIED LIABILITIES"); provided
that Company shall not have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise solely from the gross negligence or willful misconduct of
that Indemnitee as determined by a final judgment of a court of competent
jurisdiction. To the extent that the undertaking to defend, indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Company shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
9.4 SET-OFF.
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by Company at any time or
from time to time, without notice to Company or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to
apply any and all deposits (general or special, including, but not limited to,
Indebtedness evidenced by certificates of deposit, whether matured or
unmatured, but not including trust accounts) and any other Indebtedness at any
time held or owing by that Lender to or for the credit or the account of
Company against and on account of the obligations and liabilities of Company to
that Lender under this Agreement, the Notes, and the other Loan Documents,
including, but not limited to, all claims of any nature or description arising
out of or connected with this Agreement, the Notes, or any other Loan Document,
irrespective of
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whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any other amounts due hereunder
shall have become due and payable pursuant to Section 7.
9.5 RATABLE SHARING.
Lenders hereby agree among themselves that if any of them shall, whether
by voluntary payment, by realization upon security, through the exercise of any
right of set-off or banker's lien, by counterclaim or cross action or by the
enforcement of any right under the Loan Documents or otherwise, or as adequate
protection of a deposit treated as cash collateral under the Bankruptcy Code,
receive payment or reduction of a proportion of the aggregate amount of
principal, interest, fees and other amounts then due and owing to that Lender
hereunder or under the other Loan Documents (collectively, the "AGGREGATE
AMOUNTS DUE" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the
Aggregate Amounts Due to the other Lenders so that all such recoveries of
Aggregate Amounts Due shall be shared by all Lenders in proportion to the
Aggregate Amounts Due to them; provided that if all or part of such
proportionately greater payment received by such purchasing Lender is
thereafter recovered from such Lender upon the bankruptcy or reorganization of
Company or otherwise, those purchases shall be rescinded and the purchase
prices paid for such participations shall be returned to such purchasing Lender
ratably to the extent of such recovery, but without interest. Company
expressly consents to the foregoing arrangement and agrees that any holder of a
participation so purchased may exercise any and all rights of banker's lien,
set-off or counterclaim with respect to any and all monies owing by Company to
that holder with respect thereto as fully as if that holder were owed the
amount of the participation held by that holder.
9.6 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision of this
Agreement or of the Notes, or consent to any departure by Company therefrom,
shall in any event be effective without the written concurrence of Requisite
Lenders; provided that any such amendment, modification, termination, waiver or
consent which: increases the amount of any of the Commitments or reduces the
principal amount of any of the Loans; changes any Lender's Pro Rata Share;
changes in any manner the definition of "Requisite Lenders"; changes in any
manner any provision of this Agreement which, by its terms, expressly requires
the approval or concurrence of all Lenders; postpones the scheduled final
maturity date (but not the date of any scheduled installment of principal) of
any of the Loans; postpones the date on which any interest or any fees are
payable; decreases the interest rate borne by any of the Loans or the amount of
any fees payable hereunder; increases the maximum duration of Interest Periods
permitted hereunder; releases all or substantially all of the Collateral;
releases any Guarantor from its obligations under its Guaranty; or changes in
any manner the provisions contained in subsection 7.1 or this subsection 9.6
shall be effective only if evidenced by a writing signed by or on behalf of all
Lenders to whom are owed Obligations being directly affected by such amendment,
modification, termination, waiver or consent. In addition, (i) any amendment,
modification, termination or waiver of any of the provisions contained in
Section 3 shall be effective only if evidenced by a writing signed by or on
behalf of Agents and Requisite Lenders, (ii) no amendment, modification,
termination or waiver of any provision of any Note shall be effective without
the written concurrence of the Lender which is the holder of that Note, (iii)
no increase in the Commitments of any Lender over the amount thereof then in
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effect shall be effective without the written concurrence of that Lender, it
being understood and agreed that in no event shall waivers or modifications of
conditions precedent, covenants, Events of Default, Potential Events of Default
or of a mandatory prepayment or a reduction of any or all of the Commitments be
deemed to constitute an increase of the Commitment of any Lender and that an
increase in the available portion of any Commitment of any Lender shall not be
deemed to constitute an increase in the Commitment of such Lender, and (iv) no
amendment, modification, termination or waiver of any provision of Section 8 or
of any other provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of Agents shall be effective without the
written concurrence of Agents. Either Agent may, but shall have no obligation
to, with the concurrence of any Lender, execute amendments, modifications,
waivers or consents on behalf of that Lender. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on Company in any case shall entitle
Company to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 9.6 shall be binding upon each
Lender at the time outstanding, each future Lender and, if signed by Company,
on Company.
9.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be
within the limitations of, another covenant shall not avoid the occurrence of
an Event of Default or Potential Event of Default if such action is taken or
condition exists.
9.8 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered
in person or by courier service, upon receipt of telefacsimile or telex, or
three Business Days after depositing it in the United States mail with postage
prepaid and property addressed; provided that notices to either Agent shall not
be effective until received. For the purposes hereof, the address of each
party hereto shall be as set forth under such party's name on the signature
pages hereof or (i) as to Company and Agent, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Agent.
9.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 9.2,
9.3 and 9.4 and the agreements of Lenders set forth in subsections 8.2C, 8.4
and 9.5 shall survive the payment of the Loans, and the termination of this
Agreement.
9.10 FAILURE OR INDULGENCE NOT WAIVER: REMEDIES CUMULATIVE.
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No failure or delay on the part of either Agent or any Lender in the exercise
of any power, right or privilege hereunder or under any other Loan Document
shall impair such power, right or privilege or be construed to be a waiver of
any default or acquiescence therein, nor shall any single or partial exercise
of any such power, right or privilege preclude other or further exercise
thereof or of any other power, right or privilege. All rights and remedies
existing under this Agreement and the other Loan Documents are cumulative to,
and not exclusive of, any rights or remedies otherwise available.
9.11 MARSHALLING: PAYMENTS SET ASIDE.
Neither Agent nor any Lender shall be under any obligation to marshal any
assets in favor of Company or any other party or against or in payment of any
or all of the Obligations. To the extent that Company makes a payment or
payments to Agents or Lenders (or to either Agent for the benefit of Lenders),
or Agents or Lenders enforce any security interests or exercise their rights of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, any other state
or federal law, common law or any equitable cause, then, to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor or related thereto, shall be
revived and continued in full force and effect as if such payment or payments
had not been made or such enforcement or setoff had not occurred.
9.12 SEVERABILITY.
In case any provision in or obligation under this Agreement or the Notes or any
other Loan Document shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any' other
jurisdiction, shall not in any way be affected or impaired thereby.
9.13 OBLIGATIONS SEVERAL: INDEPENDENT NATURE OF LENDERS' RIGHTS.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any
other Lender to be joined as an additional party in any proceeding for such
purpose.
9.14 HEADINGS.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
9.15 APPLICABLE LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
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9.16 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 9.1). Neither Company's
rights or obligations hereunder nor any interest therein may be assigned or
delegated by Company without the prior written consent of all Lenders.
9.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
MICHIGAN AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR
SUCH OBLIGATION. Company hereby agrees that service of all process in any such
proceeding in any such court may be made by registered or certified mail,
return receipt requested, to Company at its address provided in subsection 9.8,
such service being hereby acknowledged by Company to be sufficient for personal
jurisdiction in any action against Company in any such court and to be
otherwise effective and binding service in every respect. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of any Lender to bring proceedings against Company in the
courts of any other jurisdiction.
9.18 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION
OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of
this waiver is intended to be all encompassing of any and all disputes that may
be filed in any court and that relate to the subject matter of this
transaction, including without limitation contract claims, tort claims, breach
of duty claims and all other common law and statutory claims. Each party
hereto acknowledges that this waiver is a material inducement to enter into a
business relationship, that each has already relied on this waiver in entering
into this Agreement, and that each will continue to rely on this waiver in
their related future dealings. Each party hereto further warrants and
represents that it has reviewed this waiver with its legal counsel and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING
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TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be
filed as a written consent to a trial by the court.
9.19 CONFIDENTIAL.
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, it being understood and agreed by Company that in any event
a Lender may make disclosures reasonably required by any bona fide assignee,
transferee or participant in connection with the contemplated assignment or
transfer by such Lender of any Loans or any participation therein or as
required or requested by any governmental agency or representative thereof or
pursuant to legal process; provided that, unless specifically prohibited by
applicable law or court order, each Lender shall notify Company of any request
by any governmental agency or representative thereof (other than any such
request in connection with any examination of the financial condition of such
Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information; and provided, further that
in no event shall any Lender be obligated or required to return any materials
furnished by Company or any of its Subsidiaries.
9.20 COUNTERPARTS: EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Documentation Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
9.21 LIMITATION ON RECOURSE.
No recourse for the payment of the principal of or premium, if any, or
interest on any Note, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
Company in this Agreement or in any Note or because of the creation of any
Indebtedness represented thereby, shall be had against any past, present or
future partner of Company, or any officer, director or employee, past, present
or future, of Company or any past, present or future general or limited partner
of the Company or of any successor corporation or partnership or against the
property or assets of any such general or limited partner, officer, employee or
director, either directly or through Company or any partner of Company or any
successor corporation or general or limited partnership, whether by virtue of
any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise.
9.22 RELATIONSHIP OF THIS AGREEMENT TO THE ORIGINAL CREDIT AGREEMENT.
This Agreement shall become effective on the Closing Date. On the Closing
Date, the Loans under the Original Credit Agreement which are not paid in full
shall be considered a part of the Loans under this Agreement for all purposes,
as if made in accordance with an pursuant to the terms of this Agreement. On
and after the Effective Date, the rights and obligations of the parties hereto
shall be
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governed solely by this Agreement and the other Loan Documents, except in
respect of any rights or obligations arising prior to the Closing Date and
which shall survive the Closing Date. All of the Loans and other Obligations
of the Loan Parties are a continuation of, or replace and refund, as the case
may be, the "Loans" and other "Obligations" of the Loan Parties under and as
defined in the Original Credit Agreement, and all Loans and other Obligations
of each Loan Party shall be entitled to, and are secured by, the same
Collateral with the same priority, as the "Loans" and other "Obligations" under
and as defined in the Original Credit Agreement. This Agreement amends and
restates in full the terms and provisions of the Original Credit Agreement and
is not intended to constitute a novation or satisfaction of or a renunciation
or cancellation or other discharge of the indebtedness and other liabilities
and obligations created under and evidenced by the Original Credit Agreement,
and Company agrees that all liens and security interests, including without
limitation all security agreements and financing statements, created, executed
or filed in connection with the Original Credit Agreement shall continue in
full force and effect and secure all Loans and other Obligations under this
Agreement and the other Loan Documents.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
JAMES CABLE PARTNERS, L.P.
By: James Communication Partners,
a General Partner
By: Jamesco, Inc.,
a General Partner
By: William R. James
----------------------------
Name: William R. James
---------------------------
Title: President
--------------------------
Notice Address:
James Cable Partners, L.P.
710 North Woodward Avenue, Suite 180
Bloomfield Hills, Michigan 48304
Attention: William R. James
Telephone: (810) 647-1080
Telecopy: (810) 647-1321
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CANADIAN IMPERIAL BANK
OF COMMERCE, as a Lender and
as Administrative Agent
By: Lorain C. Granberg
--------------------------------
Name: Lorain C. Granberg
----------------------------
Title: DIRECTOR, CIBC WOOD GUNDY
---------------------------
SECURITIES CORP., AS AGENT
Notice Address:
Canadian Imperial Bank of Commerce
425 Lexington Avenue 8th Floor
New York, New York 10017
Attention: Lorain Granberg
Telephone: (212) 856-3630
Telecopy: (212) 856-3558
NBD BANK, as a Lender and
as Documentation Agent
By: W.H. Canney
----------------------------
Name: William H. Canney
-----------------------
Title: Vice President
----------------------
Notice Address:
NBD Bank
611 Woodward
Detroit, Michigan 48226
Attn:William Canney
Telephone: (313) 225-3489
Telecopy: (313) 225-2290
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EXHIBIT 4.4
COMPANY SECURITY AGREEMENT
This SECURITY AGREEMENT (this "AGREEMENT") is dated as of August 15, 1997
and entered into by and between JAMES CABLE PARTNER, LP, a Delaware limited
partnership ("GRANTOR"), and NBD BANK, as documentation agent for and
representative of (in such capacity herein called "AGENT") the financial
institutions ("LENDERS") party to the Credit Agreement (as hereinafter
defined).
PRELIMINARY STATEMENTS
A. Agent, Canadian Imperial Bank of Commerce, as Administrative Agent, and
Lenders have entered into a Credit Agreement dated as of August 15, 1997 (said
Credit Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "CREDIT AGREEMENT", the terms defined
therein and not otherwise defined herein being used herein as therein defined)
with Grantor pursuant to which Lenders have made certain commitments, subject
to the terms and conditions set forth in the Credit Agreement, to extend
certain credit facilities to Grantor, and which amends and restates the
Original Credit Agreement (as defined in the Credit Agreement).
B. Grantor executed a security agreement dated June 30, 1995 (the
"Original Security Agreement") pursuant to the Original Credit Agreement, and
the parties hereto agree that this Agreement amends and restates the Original
Security Agreement in its entirety and that all liens and security interests
granted under the Original Security Agreement are continued hereunder with the
same priority and effect.
C. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Grantor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans under the Credit Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Agent as follows and the parties
hereto agree that the Original Security Agreement is amended and restated in
its entirety as follows:
SECTION 1. GRANT OF SECURITY. Grantor hereby assigns to Agent, and hereby
grants to Agent a security interest in, all of Grantor's right, title and
interest in and to the following, in each case whether now or hereafter
existing or in which Grantor now has or hereafter acquires an interest and
wherever the same may be located (the "COLLATERAL"):
(a) all equipment in all of its forms, all parts thereof and all
accessions thereto (including, but not limited to, all headends and related
electronics, towers, antennas, antenna systems, transmitter equipment, studio
equipment:, technical equipment, electronic news gathering equipment, microwave
equipment, satellite-. equipment, two-way radio equipment, telephones and
related equipment, computers and related equipment, cables, monitors, cameras
amplifiers, other film and photographic equipment, other equipment to receive,
record, store and/or transmit television signals by
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cable or otherwise, furniture and office equipment, test equipment, and motor
vehicles) (any and all such equipment, parts and accessions being the
"EQUIPMENT");
(b) all inventory in all of its forms (including, but not limited to, (i)
all films and programming materials, (ii) all goods held by Grantor for sale or
lease or to be furnished under contracts of service or so leased or furnished,
(iii) all raw materials, work in process, finished goods, and materials used or
consumed in the manufacture, packing, shipping, advertising, selling, leasing,
furnishing or production of such inventory or otherwise used or consumed in
Grantor's business, (iv) all goods in which Grantor has an interest in mass or
a joint or other interest or right of any kind, and (v) all goods which are
returned to or repossessed by Grantor and all accessions thereto and products
thereof (all such inventory, accessions and products being the "INVENTORY") and
all negotiable documents of title (including without limitation warehouse
receipts, dock receipts and bills of lading) issued by any Person covering any
Inventory (any such negotiable document of title being a "NEGOTIABLE DOCUMENT
OF TITLE");
(c) all Franchises, accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any kind
and all rights in, to and under all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, documents, instruments, general intangibles or other obligations
(any and all such Franchises', accounts, contract rights, chattel paper,
documents, instruments, general intangibles and other obligations being the
"ACCOUNTS", and any and all such security agreements, leases and other
contracts being the "RELATED CONTRACTS");
(d) all deposit accounts, including without limitation all deposit
accounts maintained with Agent;
(e) all trademarks, tradenames, tradesecrets, business names, patents,
patent applications, licenses, copyrights, registrations and franchise rights,
and all goodwill associated with any of the foregoing;
(f) to the extent not included in any other paragraph of this Section 1,
all other general intangibles (including without limitation tax refunds, rights
to payment or performance, chooses in action and judgments taken on any rights
or claims included in the Collateral);
(g) all plant fixtures, business fixtures and other fixtures and storage
and office facilities, and all accessions thereto and products thereof;
(h) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(i) all proceeds, products, rents and profits of or from any and all of
the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Agent is the loss payee thereof), or
any indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or received
when Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary.
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SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in
full when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all obligations and
liabilities of every nature of Grantor now or hereafter existing under or
arising out of or in connection with the Credit Agreement and the other Loan
Documents and all extensions or renewals thereof, ,whether for principal,
interest (including without limitation interest that, but for the filing of a
petition in bankruptcy with respect to Grantor, would accrue on such
obligations), fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or
incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from Agent or any Lender as a preference, fraudulent
transfer or otherwise (all such obligations and liabilities being the
"UNDERLYING DEBT"), and all obligations of every nature of Grantor now or
hereafter existing under this Agreement (all SUCH obligations of Grantor,
together with the Underlying Debt, being the "SECURED OBLIGATIONS").
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Agent of any of its
rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Agent shall not have any obligation or liability under any contracts and
agreements included in the Collateral by reason of this Agreement, nor shall
Agent be obligated to perform any of the obligations or duties of Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
as follows:
(a) Ownership of Collateral. Except for Permitted Encumbrances and the
interests disclosed in Schedule 4(a) annexed hereto and the security interest
created by this Agreement, Grantor owns the Collateral free and clear of any
Lien. Except with respect to Permitted Encumbrances and the interests
disclosed in Schedule 4(a) annexed hereto and such as may have been filed in
favor of Agent relating to this Agreement, no effective financing statement or
other instrument similar in effect covering Grantor's interest in and to all or
any part of the Collateral is on file in any filing or recording office.
(b) Location of Equipment and Inventory. All of the Equipment, Inventory
and Fixtures is, as of the date hereof, located at the places specified in
Schedule 4(b) annexed hereto.
(c) Office Locations; Other Names. The chief place of business, the chief
executive office and the office where Grantor keeps its records regarding the
Accounts and all originals of all chattel paper that evidence Accounts is, and
has been for the four month period preceding the date hereof, located at 710
North Woodward Avenue, Suite 180, Bloomfield Hills, MI 48304. Grantor has not
in the past done, and does not now do, business under any other name (including
any trade-name or fictitious business name) except as specified in Schedule
4(g) annexed hereto. Grantor has used such other names only in the
jurisdictions indicated on Schedule 4(c).
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<PAGE> 4
(d) Delivery of Certain Collateral. All notes and other instruments
(excluding checks) comprising any and all items of Collateral have been
delivered to Agent duly endorsed and accompanied by duly executed instruments
of transfer or assignment in blank.
(e) Governmental Authorizations. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by Grantor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Grantor, or (iii) the perfection of or the exercise by Agent of
its rights and remedies hereunder (except as may have been taken by or at the
direction of Grantor).
(f) Perfection. This Agreement, together with Uniform Commercial Code
financing statements filed with the appropriate authorities in each of the
jurisdictions specified on Schedule 4(f) and the deliveries required pursuant
to subsection (d) of Section 4, creates a valid, perfected and, except for the
interests disclosed in Schedule 4(a) annexed hereto, first priority security
interest in the Collateral, securing the payment of the Secured Obligations,
and all filings and other actions necessary or desirable to perfect and protect
such security interest have been duly made or taken.
(g) Other Information. All information heretofore, herein or hereafter
supplied to Agent by or on behalf of Grantor with respect to the Collateral is
accurate and complete in all material respects.
SECTION 5. FURTHER ASSURANCES.
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments arid
documents, and take all further action, that may be necessary or desirable, or
that Agent may request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Grantor will: (i) mark
conspicuously each item of chattel paper included in the Accounts, each Related
Contract and, at the request of Agent, each of its records pertaining to the
Collateral, with a legend, in form and substance satisfactory to Agent,
indicating that such Collateral is subject to the security interest granted
hereby, (ii) if any Account, shall be evidenced by a promissory note or other
instrument (excluding checks), deliver and pledge to Agent hereunder such note
or instrument, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Agent, (iii)
execute and file such financing or continuation statements, or Amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Agent may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby, (iv) at any
reasonable time, upon request by Agent., exhibit the Collateral to and allow
inspection of the Collateral by Agent, or persons designated by Agent, and (v)
at Agent's request, appear in and defend any action or proceeding that may
affect Grantor's title to or Agent's security interest in all or any part of
the Collateral.
(b) Grantor hereby authorizes Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of Grantor. Grantor agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing
statement signed by Grantor shall be sufficient as a financing statement and
may be filed as a financing statement in any and all jurisdictions.
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(c) Grantor will furnish to Agent from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request and
which are reasonably available to Grantor, all in reasonable detail.
SECTION 6. CERTAIN COVENANTS OF GRANTOR. GRANTOR SHALL:
(a) not use or permit any Collateral to be used unlawfully or in violation
of any provision of this Agreement or any applicable statute, regulation or
ordinance or any policy of insurance covering the Collateral;
(b) notify Agent of any change in Grantor's name, identity or corporate
structure within 15 days of such change
(c) give Agent 30 days' prior written notice of any change in Grantor's
chief place of business, chief executive office or residence or the office
where Grantor keeps its records regarding the Accounts and all originals of all
chattel paper that evidence Accounts;
(d) if Agent gives value to enable Grantor to acquire rights in or the use
of any Collateral, use such value for such purposes; and
(e) Grantor will use its best efforts not to enter into any Franchise,
contract or similar instrument within the definition of Collateral, which
prohibits the assigning of any rights of Grantor thereunder in the manner
contemplated by this Agreement.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
Grantor shall:
(a) keep the Equipment and Inventory at the places therefor specified on
Schedule 4(b) annexed hereto or, upon 30 days' prior written notice to Agent,
at such other places in jurisdictions where all action that may be necessary or
desirable, or that Agent may request, in order to perfect and protect any
security interest granted or purported to be granted hereby, or to enable Agent
to exercise and. enforce its rights and remedies hereunder, with respect to
such Equipment and Inventory shall have been taken; and
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with Grantor's past practices, and shall forthwith,
or, in the case of any loss or damage to any of the Equipment of a material
nature when subsection (c) of Section 8 is not applicable, as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements and other improvements in connection therewith that are necessary
or desirable to such end. Grantor shall promptly furnish to Agent a statement
respecting any material loss or damage to any of the Equipment;
SECTION 8. INSURANCE.
(a) Grantor shall, at its own expense, maintain insurance with respect to
the Equipment and Inventory in accordance with the terms of the Credit
Agreement. Each policy for property damage insurance shall provide for all
losses to be paid directly to Agent. Each policy shall in addition name
Grantor and Agent as insured parties thereunder (without any representation or
warranty by or obligation upon Agent) as their interests may appear and have
attached thereto a lender loss
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payable clause acceptable to Agent that shall (i) contain an agreement by the
insurer that any loss thereunder shall be payable to Agent notwithstanding any
action, inaction or breach of representation or warranty by Grantor, (ii)
provide that there shall be no recourse against Agent for payment of premiums
or other amounts with respect thereto, and (iii) provide that at least 30 days'
prior written notice of cancellation, material amendment, reduction in scope or
limits of coverage or of lapse shall be given to Agent by the insurer. Grantor
shall, if so requested by Agent, deliver to Agent original or duplicate
policies of such insurance and, as often as Agent may reasonably request, a
report of a reputable insurance broker with respect to such insurance.
Further, Grantor shall, at the request of Agent duly execute and deliver
instruments of assignment of such insurance policies to comply with the
requirements of Section 5(a) and cause the respective insurers to acknowledge
notice of such assignment. Prepayments of Loans from the proceeds of insurance
shall be made in accordance with the terms of the Credit Agreement.
(b) Reimbursement under any liability insurance maintained by Grantor
pursuant to this Section 8 may be paid directly to the Person who SHALL have
incurred liability covered by such insurance. In case of any loss involving
damage to Equipment or Inventory when subsection (C) of this Section 8 is not
applicable, Grantor shall make or cause to be made the necessary repairs to or
replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by Grantor pursuant to this Section 8 shall be paid to Grantor as
reimbursement for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuation of any Event of
Default or (ii) as otherwise required under the Credit Agreement, all insurance
payments in respect of such Equipment or Inventory shall be paid to and applied
by Agent as specified in Section 16.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED
CONTRACTS.
(a) Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts and
Related Contracts, and all originals of all chattel paper that evidence
Accounts, at the location therefor specified in Section 4 or, upon 30 days'
prior written notice to Agent, at such other location in a jurisdiction where
all action that may be necessary or desirable, or that Agent may request, in
order to perfect and protect any security interest granted or purported to be
granted hereby, or to enable Agent to exercise and enforce its rights and
remedies hereunder, with respect to such Accounts and Related Contracts shall
have been taken. Grantor will hold and preserve such records and chattel paper
and will permit representatives of Agent at any time during normal business
hours to inspect and make abstracts from such records and chattel paper, and
Grantor agrees to render to Agent, at Grantor's cost and expense, such clerical
and other assistance as may be reasonably requested with regard thereto.
Promptly upon the request of Agent,, if an Event of Default shall have occurred
and be continuing, Grantor shall deliver to Agent complete and correct copies
of each Related Contract.
(b) Grantor shall, for not less than 5 years from the date on which such
Account arose, maintain (i) complete records of each Account, including records
of all payments received, credits granted and merchandise returned, and (iii)
all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
Grantor under the Accounts and Related Contracts. In connection with such
collections, Grantor may take (and, at Agent's direction, shall take) such
action as Grantor or Agent may reasonably deem necessary or advisable to
enforce collection of
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amounts due or to become due under the Accounts; provided, however, that Agent
shall have the right at any time, upon the occurrence and during the
continuation of an Event of Default and upon written notice to Grantor of its
intention to do so, to notify the account debtors or obligers under any
Accounts of the assignment of such Accounts to Agent and to direct such account
debtors or obligers to make payment of all amounts due or to become due to
Grantor thereunder directly to Agent, to notify each Person maintaining a
lockbox or similar arrangement to which account debtors or obligers under any
Accounts have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent to or
deposited in such lockbox or other arrangement directly to Agent and, upon such
notification and at the expense of Grantor, to enforce collection of any such
Accounts and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as Grantor might have done. After
receipt by Grantor of the notice from Agent referred to in the to the preceding
sentence, (i) all amounts and proceeds (including checks and other instruments)
received by Grantor in respect of the Accounts and the Related Contracts shall
be received in trust for the benefit of Agent hereunder, shall be segregated
from other funds of Grantor and shall be forthwith paid over or delivered to
Agent in the same form as so received (with any necessary endorsement) to be
held as cash Collateral and applied as provided by Section 16, and (ii) Grantor
shall not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon (other than in a manner consistent with past
practices and approved by Agent).
SECTION 10. DEPOSIT ACCOUNTS. Upon the occurrence and during the
continuation of an Event of Default, Agent may exercise dominion and control
over, and refuse to permit further withdrawals (whether of money, securities,
]Instruments or other property) from any deposit accounts maintained with Agent
constituting part of the Collateral.
SECTION 11. TRANSFERS AND OTHER LIENS. Except as otherwise permitted by
the Credit Agreement, Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise dispose
of any of the Collateral, except as permitted by the Credit Agreement; or
(b) except for the interests disclosed in Schedule 4(a) annexed hereto and
the security interest created by this Agreement, create or suffer to exist any
Lien upon or with respect to any of the Collateral to secure the indebtedness
or other obligations of any Person.
SECTION 12. AGENT APPOINTED ATTORNEY-IN-FACT Grantor hereby irrevocably
appoints Agent as Grantor's attorney-in-fact, with fun authority in the place
and stead of Grantor and in the name of Grantor, Agent or otherwise, from time
to time upon the occurrence and during the continuance of an Event of Default
in Agent's discretion to take any action and to execute any instrument that
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation:
(a) to obtain and adjust insurance required to be maintained by Grantor or
paid to Agent pursuant to Section 8;
(b) to ask for, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
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(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any proceedings
that Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Agent with respect to any of
the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted under
this Agreement or the Credit Agreement) levied or placed upon or threatened
against the Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by Agent in its sole
discretion, any such payments made by Agent to become obligations of Grantor to
Agent, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely as
though Agent were the absolute owner thereof for all purposes, and to do, at
Agent's option and Grantor's expense, at any time or from time to time, all
acts and things that Agent deems necessary to protect, preserve or realize upon
the Collateral and Agent's security interest therein in order to effect the
intent of this Agreement, all as fully and effectively as Grantor might do.
SECTION 13. AGENT MAY PERFORM. If Grantor fails to perform any agreement
contained herein, Agent may itself perform, or cause performance of, such
agreement, and the reasonable expenses of Agent incurred in connection
therewith shall be payable by Grantor under Section 17.
SECTION 14. STANDARD OF CARE. The powers conferred on Agent hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the exercise of reasonable
care in the custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Agent accords its own property.
SECTION 15. REMEDIES.
(a) If any Event of Default shall have occurred and be; continuing, Agent
may exercise in respect of the Collateral, in addition to all other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the Uniform Commercial Code as in
effect in any relevant jurisdiction (the "CODE") (whether or not the Code
applies to the affected Collateral), and also may (a) require Grantor to, and
Grantor hereby agrees that it will at its expense and upon request of Agent
forthwith, assemble all or part of the Collateral as directed by Agent and make
it available to Agent at a place to be designated by Agent that is reasonably
convenient to both parties, (b) enter onto the property where any Collateral is
located and take possession thereof with or without judicial process, (c) prior
to the disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent
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Agent deems appropriate, (d) take possession of Grantor's premises or place
custodians in exclusive control thereof, remain on such premises and use the
same and any of Grantor's equipment for the purpose of completing any work in
process, taking any actions described in the preceding clause (c) and
collecting any Secured Obligation, and (e) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of Agent's offices or elsewhere, for cash, on credit or
for future delivery, at such time or times and at such price or prices and upon
such other terms as Agent may deem commercially reasonable. Agent or any
Lender may be the purchaser of any or all of the Collateral at any such sale
and Agent, as agent for and representative of Lenders (but not any Lender or
lenders in its or their respective individual capacities unless Requisite
Lenders shall otherwise agree in writing), shall be entitled, for the purpose
of bidding and making settlement or payment of the purchase price for all or
any portion of the Collateral sold at any such public sale, to use and apply
any of the Secured Obligations as a credit on account of the purchase price for
any Collateral payable by Agent at such sale. Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or right on the
part of Grantor, and Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to Grantor of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given.
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned. Grantor
hereby waives any claims against Agent arising by reason of the fact that the
price at which any Collateral may have been sold at such a private sale was
less than the price which might have been obtained at a public sale, even if
Agent accepts the first offer received and does not offer such Collateral to
more than one offeree. If the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all the Secured Obligations, Grantor shall
be liable for the deficiency and the reasonable fees of any attorneys employed
by Agent to collect such deficiency.
(b) Without limiting the generality of the foregoing or limiting in any
way the rights of Agent under or otherwise under applicable law, at any time
after the occurrence, and during the continuance, of an Event of Default under
subsection 7.1 of the Credit Agreement, Bank shall be entitled to apply for and
have ;3, receiver appointed under state or federal law by a court of competent
jurisdiction in an,( action taken by the Agent to enforce its rights and
remedies in order to manage, protect, preserve, sell and otherwise dispose of
all or any portion of the Collateral and continue the operation of the business
of Company, and to collect all revenues and profits thereof and apply the same
to the payment of all expenses and other charges of such receivership,
including the compensation of the receiver, and to the payment of the Loans and
other fees and expenses due as aforesaid until a sale or other disposition of
such Collateral shall be finally made and consummated.
SECTION 16. APPLICATION OF PROCEEDS. Except as expressly provided
elsewhere in this Agreement, all proceeds received by Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of Agent, be held by Agent as Collateral for,
and/or then, or at any other time thereafter, applied in full or in part by
Agent against, the Secured Obligations in the following order of priority:
FIRST: To the payment of all reasonable costs and
expenses of such sale, collection or other realization,
including reasonable compensation to Agent and its agents
and counsel, and all other expenses, liabilities and
alliances made
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or incurred by Agent in connection therewith, and all
amounts for which Agent is entitled to indemnification
hereunder and all advances made by Agent hereunder for the
account of Grantor, and to the payment of all reasonable
costs and expenses paid or incurred by Agent in connection
with the exercise of any right or remedy hereunder, all in
accordance with Section 17;
SECOND: To the payment of all other Secured
Obligations (for the ratable benefit of the holders
thereof); and
THIRD: To the payment to or upon the order of Grantor,
or to whosoever may be lawfully entitled to receive the same
or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
SECTION 17. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Agent and each Lender from and against any
and all claims, losses and liabilities in any way relating to, growing out of
or resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Agent's or such
Lender's gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
(b) Grantor shall pay to Agent upon demand the amount of any and all
reasonable costs and expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, that Agent may incur in connection,
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization
upon, any of the Collateral, (iii) the exercise or enforcement of any of the
rights of Agent hereunder, or (iv) the failure by Grantor to perform or observe
any of the provisions hereof.
SECTION 18. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the indefeasible payment in
full of the Secured Obligations and the cancellation or termination of the
Commitment, (b) be binding upon Grantor, its successors and assigns, and (c)
inure, together with the rights and remedies of Agent hereunder, to the benefit
of Agent and its successors, transferees and assigns. Without limiting the
generality of the - foregoing clause (c), but subject to the provisions of
subsection 9.1 of the Credit Agreement, any Lender may assign or Otherwise
transfer any Loans held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Lenders h(-,rein or otherwise. Upon the indefeasible payment in full of all
Secured Obligations and the cancellation or termination of the Commitments, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such Termination Agent will, at
Grantor's expense, execute and deliver to Grantor such documents as Grantor
shall reasonably request to evidence such termination.
SECTION 19. AGENT.
(a) Agent has been appointed to act as Agent hereunder by Lenders. Agent
shall be obligated, and shall have the right hereunder, to make demands, to
give notices, to exercise or refrain from exercising any rights, and to take,
or refrain from taking any action (including, without limitation,
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the release or substitution of Collateral), solely in accordance with this
Agreement and the Credit Agreement.
(b) Agent under this Agreement shall at all times be the same Person that
is Agent under the Credit Agreement. Written notice of resignation by Agent
pursuant to subsection 8.5 of the Credit Agreement shall also constitute notice
of resignation as Agent under this Agreement; removal of Agent pursuant to
subsection 8.5 of the Credit Agreement shall also constitute removal as Agent
under this Agreement; and appointment of a successor Agent pursuant to
subsection 8.5 of the Credit Agreement shall also constitute appointment of a
successor Agent under this Agreement. Upon the acceptance of any appointment
as Agent under subsection 8.5 of the Credit Agreement by a successor Agent,
that successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Agent under
this Agreement, and the retiring or removed Agent under this Agreement shall
promptly (i) transfer to such successor Agent all sums, securities and other
items of Collateral held hereunder, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Agent under this Agreement, and (ii) execute and
deliver to such successor Agent such amendments to financing statements, and
take such other actions, as may be necessary or appropriate in connection with
the assignment to such successor Agent of the security interests created
hereunder, whereupon such retiring or removed Agent shall be discharged from
its duties and obligations under this Agreement. After any retiring or removed
Agent's resignation or removal hereunder as Agent, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Agent hereunder
SECTION 20. AMENDMENTS: ETC. No amendment or waiver of any provision of
this Agreement, or consent to any departure by Grantor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Agent, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given
SECTION 21. NOTICES. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served, telexed
or sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it
in the United States mail with postage prepaid and properly addressed. For the
purposes hereof, the address of each party hereto shall be as set forth under
such party's name on the signature pages hereof or, as to either party, such
other address as shall be designated by such party in a written notice
delivered to the other party hereto.
SECTION 22. FAILURE OR INDULGENCE NOT WAIVER: REMEDIES CUMULATIVE. No
failure or delay on the part of Agent in the exercise of any power, right or
privilege hereunder shall impair such power, right or privilege or be construed
to be a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude any other or
further exercise thereof or of any other power, right or privilege. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 23. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
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SECTION 24. HEADING. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute
a part of this Agreement for any other purpose or be given any substantive
effect.
SECTION 25. GOVERNING LAW: TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF MICHIGAN, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF MICHIGAN Unless otherwise defined herein or in the Credit Agreement,
terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of
Michigan are used herein as therein defined.
SECTION 26. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF MICHIGAN, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT GRANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
Grantor hereby agrees that service of all process in any such proceeding in any
such court may be made by registered or certified mail, return- receipt
requested, to Grantor at its address provided in Section 21, such service being
hereby acknowledged by Grantor to be sufficient for personal jurisdiction in
any action against Grantor in any such court and to be otherwise effective and
binding service in every respect. Nothing; herein shall affect the right to
serve process in any other manner permitted by law or Shall limit the right of
Agent to bring proceedings against Grantor in the courts of any other
jurisdiction.
SECTION 27. WAIVER OF JULY TRIAL. GRANTOR AND AGENT HEREBY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to
be all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including without
limitation contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. Grantor and Agent each acknowledge that this
waiver is a material inducement for Grantor and Agent to enter into a business
relationship, that Grantor and Agent have already relied on this waiver in
entering into this Agreement and that each will continue to rely on This waiver
in their related future dealings. Grantor and Agent further warrant and
represent that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED ]EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
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SECTION 28. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but au such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document.
SECTION 29. RECOURSE. No recourse for the payment of the principal of or
premium, if any, or interest on any Note, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of Company in this Agreement or in any Note or because of
the creation of any Indebtedness represented thereby, shall be had against any
past, present or future partner of Company, or any officer, director or
employee, past, present or future, of Company or any past, present or future
general or limited partner of Company or of any successor corporation or
partnership or against the property or asset.,; of any such general or limited
partner, officer, employee or director, either directly or through Company or
any partner of Company or any successor corporation or general or limited
partnership, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Grantor and Agent have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
JAMES CABLE PARTNERS, L.P.
By: James Communications
Partners, its General partner
By: Jamesco, Inc., a General, Partner
By: W. R. James
----------------------------------------
Name: William R. James
--------------------------------------
Title: President
-------------------------------------
Notice Address: James Cable Partners, L.P.
710 North Woodward Avenue
Suite 180
Bloomfield Hills, Michigan 48304
Attn: William R. James
NBD BANK,
as Agent
By: W. H. Canney
----------------------------------------
Name: William H. Canney
--------------------------------------
Title: Vice President
-------------------------------------
Notice Address: NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
Attn: William Canney
X-14
<PAGE> 15
SCHEDULE 4(a)
TO SECURITY AGREEMENT
PERMITTED LIENS AND ENCUMBRANCES
Sch 4(a)-1
<PAGE> 16
SCHEDULE 4(b)
TO SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
Sch 4(b)-1
<PAGE> 17
SCHEDULE 4(f)
TO SECURITY AGREEMENT
FILING JURISDICTIONS
Sch 4(f)-1
<PAGE> 1
EXHIBIT 4.5
GUARANTY AGREEMENT
PARTIES
THIS GUARANTY AGREEMENT, dated as of August 15, 1997 (this "Guaranty"), is
made by James Cable Finance Corp., a Michigan corporation (the "Guarantor") in
favor of each of the Lenders and Agents as defined below.
RECITALS
A. JAMES CABLE PARTNERS, L.P., a Delaware limited partnership (the
"Borrower"), the lenders party thereto, NBD Bank, as documentation agent, and
Canadian Imperial Bank of Commerce, as administrative agent, are entering into
a Credit Agreement dated as of August 15, 1997 (as amended or modified from
time to time, the "Credit Agreement").
B. Pursuant to the terms of the Loan Documents the Lenders have agreed to
make certain extensions of credit to the Borrower.
C. The Guarantor is an affiliate of the Borrower, the Borrower and the
Guarantor are engaged in related businesses, and the Guarantor has derived or
will derive substantial direct and indirect benefit from the making of the
extensions of credit by the Lenders.
D. The obligation of the Lenders to make or continue to make certain
extensions of credit under the Credit Agreement are conditioned upon, among
other things, the execution and delivery by the Guarantor of this Guaranty, and
the extensions of credit under the Credit Agreement will be made in reliance
upon the issuance of this Guaranty.
AGREEMENT
In consideration of the premises and to induce the Lenders to make loans,
extend credit or make other financial accommodations, and to continue to keep
such credit and other financial accommodations available to the Borrower, the
Guarantor hereby agrees with and for the benefit of the Lenders as follows:
1. Defined Terms. As used in this Guaranty, terms defined in the first
paragraph of this Guaranty and in the recital paragraphs are used herein as
defined therein, and the following terms shall have the following meanings:
"Cumulative Guarantors" shall mean the Guarantor and all other future
guarantors of the Liabilities.
"Liabilities" shall mean all indebtedness, obligations and liabilities
of the Borrower to any of the Lenders or Agents in connection with or pursuant
to the Loan Documents, including without limitation, all principal, interest
(including but without limitation interest which, but for the filling of a
bankruptcy petition, would have accrued on the principal amount of the
Liabilities), charges, fees and all costs and expenses, including without
limitation reasonable fees and expenses of counsel, in each case
<PAGE> 2
whether now existing or hereafter arising, direct or indirect (including
without limitation any participation interest acquired by any Lender in such
indebtedness, obligations and liabilities of the Borrower to any other person),
absolute or contingent, joint and/or several, secured or unsecured,
arising by operation of law or otherwise.
All other capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Credit Agreement.
2. Guarantee. (a) The Guarantor hereby guarantees to the Lenders and the
Agents, irrevocably, absolutely and unconditionally, as primary obligor and not
as surety only, the prompt and complete payment of the Liabilities.
(b) All payments to be made under this Guaranty (except pursuant to
paragraph (c) below) shall be made to each Lender and Agent pro rata in
accordance with the unpaid amount of Liabilities held by each Lender and Agent
at the time of such payment.
(c) The Guarantor agrees to make prompt payment, on demand, of any and
all reasonable costs and expenses incurred by any Lender in connection with
enforcing the obligations of the Guarantor hereunder including without
limitation the reasonable fees and disbursements of counsel.
3. Consents to Renewals, Modifications and other Actions and Events. This
Guaranty and all of the obligations of the Guarantor hereunder shall remain in
full force and effect without regard to and shall not be released, affected or
impaired by: (a) any amendment, assignment, transfer, modification of or
addition or supplement to the Liabilities or any Agreement; (b) any extension,
indulgence, increase in the Liabilities or other action or inaction in respect
of any of the Loan Documents or otherwise with respect to the Liabilities, or
any acceptance of security for, or other guaranties of, any of the Liabilities
or Loan Documents, or any surrender, release, exchange, impairment or
alteration of any such security or guaranties including without limitation the
failing to perfect a security interest in any such security or abstaining from
taking advantage of or realizing upon any other guaranties or upon any security
interest in any such security; (c) any default by the Borrower under, or any
lack of due execution, invalidity or unenforceability of, or any irregularity
or other defect in, any of the Loan Documents; (d) any waiver by any Lender or
any other person of any required performance or otherwise of any condition
precedent or waiver of any requirement imposed by any of the Loan Documents,
any other guaranties or otherwise with respect to the Liabilities; (e) any
exercise or non-exercise of any right, remedy, power or privilege in respect of
this Guaranty, any other guaranty or any of the Loan Documents; (f) any sale,
lease, transfer or other disposition of the assets of the Borrower or any
consolidation or merger of the Borrower with or into any other person,
corporation, or entity, or any transfer or other disposition of any shares of
capital stock of the Borrower; (g) any bankruptcy, insolvency, reorganization
or similar proceedings involving or affecting the Borrower or any other
guarantor of the Liabilities; (h) the release or discharge of the Borrower from
the performance or observance of any agreement, covenant, term or condition
under any of the Liabilities or contained in any of the Loan Documents, of any
Cumulative Guarantor or of this Guaranty, by operation of law or otherwise; or
(i) any other cause whether similar or dissimilar to the foregoing which, in
the absence of this provision, would release, affect or impair the obligations,
covenants, agreements and duties of the Guarantor
GUARANTY AGREEMENT
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hereunder, including without limitation any act or omission by any Lender or
any other any person which increases the scope of the Guarantor's risk; and in
each case described in this paragraph whether or not the Guarantor shall have
notice or knowledge of any of the foregoing, each of which is specifically
waived by the Guarantor. The Guarantor warrants to the Lenders that it has
adequate means to obtain from the Borrower on a continuing basis information
concerning the financial condition and other matters with respect to the
Borrower and that it is not relying on any Lender to provide such information
either now or in the future.
4. Waivers, Etc. The Guarantor unconditionally waives: (a) notice of any
of the matters referred to in Paragraph 3 above; (b) all notices which may be
required by statute, rule of law or otherwise to preserve any rights of any
Lender, including, without limitation, notice to the Guarantor of default,
presentment to and demand of payment or performance from the Borrower and
protest for non-payment or dishonor; (c) any right to the exercise by any
Lender of any right, remedy, power or privilege in connection with any of the
Loan Documents; (d) any requirement of diligence or marshaling on the part of
any Lender; (e) any requirement that any Lender, in the event of any default by
the Borrower, first make demand upon or seek to enforce remedies against, the
Borrower or any other Cumulative Guarantor before demanding payment under or
seeking to enforce this Guaranty; (f) any right to notice of the disposition of
any security which any Lender may hold from the Borrower or otherwise and any
right to object to the commercial reasonableness of the disposition of any such
security; and (g) all errors and omissions in connection with any Lender's
administration of any of the Liabilities, any of the Loan Documents or any
other Cumulative Guarantor, or any other act or omission of any Lender which
changes the scope of the Guarantor's risk. The obligations of the Guarantor
hereunder shall be complete and binding forthwith upon the execution of this
Guaranty by it and subject to no condition whatsoever, precedent or otherwise,
and notice of acceptance hereof or action in reliance hereon shall not be
required.
5. Nature of Guaranty; Payments. This Guaranty is an absolute,
unconditional, irrevocable and continuing guaranty of payment and not a
guaranty of collection, and is wholly independent of and in addition to other
rights and remedies of any Lender with respect to the Borrower, any collateral,
any Cumulative Guarantor or otherwise, and it is not contingent upon the
pursuit by any Lender of any such rights and remedies, such pursuit being
hereby waived by the Guarantor. The obligations of the Guarantor hereunder
shall be continuing and shall continue (irrespective of any statute of
limitations otherwise applicable) and cover and include all the Liabilities of
the Borrower accruing or in the process of accruing to the Lenders before the
Lenders deliver to the Guarantor a release of this Guaranty, which is in
writing, refers specifically to this Guaranty, and is signed by a President, a
Senior Vice President, or a Vice President of each Lender. Nothing shall
discharge or satisfy the liability of the Guarantor hereunder except the full
and irrevocable payment and performance of all of the Liabilities and the
expiration or termination of all the Loan Documents. All payments to be made
by the Guarantor hereunder shall be made without set-offs or counterclaim, and
the Guarantor hereby waives the assertion of any such set-offs or counterclaims
in any proceeding to enforce its obligations hereunder. All payments to be
made by the Guarantor hereunder shall also be made without deduction or
withholding for, or on account of, any present or future taxes or other similar
charges of whatsoever nature, provided that if the Guarantor is nevertheless
required by law to make any deduction or withholding, the Guarantor shall pay
to the Lenders such additional amounts as may be necessary to ensure that the
Lenders shall receive a net sum equal to the sum which it would have received
had no such deduction or withholding been made. The Guarantor agrees that,
GUARANTY AGREEMENT
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if at any time all or any part of any payment previously applied by any Lender
to any of the Liabilities must be returned by such Lender for any reason,
whether by court order, administrative order, or settlement and whether as a
"voidable preference", "fraudulent conveyance" or otherwise, the Guarantor
remains liable for the full amount returned as if such amount had never been
received by such Lender, notwithstanding any termination of this Guaranty or
any cancellation of any of the Loan Documents and the Liabilities and all
obligations of the Guarantor hereunder shall be reinstated in such case.
6. Evidence of Liabilities. Each Lender's books and records showing the
Liabilities shall be admissible in any action or proceeding, shall be binding
upon the Guarantor for the purpose of establishing the Liabilities due from the
Borrower and shall constitute prima facie proof, absent manifest error, of the
Liabilities of the Borrower to such Lender, as well as the obligations of the
Guarantor to such Lender.
7. Subordination, Subrogation, Contribution, Etc. The Guarantor agrees
that all present and future indebtedness, obligations and liabilities of the
Borrower to the Guarantor shall be fully subordinate and junior in right and
priority of payment to any indebtedness of the Borrower to the Lenders, and,
notwithstanding anything in this Guaranty or under any other guaranty or other
agreement to the contrary, the Guarantor hereby agrees that it will not
exercise or enforce any rights of subrogation, contribution, reimbursement or
indemnity whatsoever and all rights of recourse to security for the debts and
obligations of the Borrower, whether arising under this Guaranty, under any
other guaranty or agreement, by operation of law or otherwise until all
Liabilities have been irrevocably paid in full and all Commitments to advance
funds pursuant to the Loan Documents shall have expired or been terminated.
8. Assignment by Lenders. Each Lender shall have the right to assign and
transfer this Guaranty to any assignee of any portion of the Liabilities. Each
Lender's successors and assigns hereunder shall have the right to rely upon and
enforce this Guaranty.
9. Joint and Several Obligations. The obligations of the Guarantor
hereunder and all other Cumulative Guarantors shall be joint and several and
the Guarantor shall be liable for all of the Liabilities to the extent provided
herein regardless of any other Cumulative Guarantors, and each Lender shall
have the right, in its sole discretion to pursue its remedies against the
Guarantor without the need to pursue its remedies against any other Cumulative
Guarantor, whether now or hereafter in existence, or against any one or more
Cumulative Guarantors separately or against any two or more jointly, or against
some separately and some jointly.
10. Representations and Warranties. The Guarantor hereby represents and
warrants to the Lenders that:
(a) the execution, delivery and performance by the Guarantor of this
Guaranty are within its corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official, and do not contravene or
constitute a default under, any provision of applicable law or regulation or of
the articles of incorporation or other charter documents or bylaws of the
Guarantor, or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Guarantor, or result in the creation or imposition
of any lien, security interest or other charge or encumbrance on any asset of
the Guarantor;
GUARANTY AGREEMENT
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(b) this Guaranty constitutes a legal, valid and binding agreement of
the Guarantor, enforceable against the Guarantor in accordance with its terms;
(c) as of the date hereof, each of the following is true and correct
for the Guarantor: (i) the fair saleable value and the fair valuation of the
Guarantor's property is greater than the total amount of its liabilities
(including contingent liabilities) and greater than the amount that would be
required to pay its probable aggregate liability on its existing debts as they
become absolute and matured, (ii) the Guarantor's capital is not unreasonably
small in relation to its current and/or contemplated business or other
undertaken transactions, and (iii) the Guarantor does not intend to incur, or
believe that it will incur, debt beyond its ability to pay such debts as they
become due; and
(d) the Borrower and the Guarantor are engaged as an integrated group in
the cable television business that the Guarantor has requested the Lenders to
continue to lend and to make credit available to the Borrower for the purpose
of financing the integrated operations of the Borrower and the Guarantor, with
the Guarantor expecting to derive benefit, direct or indirectly, from the loans
and other credit extended by the Lenders to the Borrower, both in the
Guarantor's separate capacity and as a member of the integrated group, inasmuch
as the successful operation and condition of the Guarantor is dependent upon
the continued successful performance of the functions of the integrated group
as a whole. The Guarantor hereby determines and agrees that the execution,
delivery and performance of this Guaranty are necessary and convenient to the
conduct, promotion or attainment of the business of the Guarantor and in
furtherance of the corporate purposes of the Guarantor.
11. Binding on Successors and Assigns. This Guaranty shall be the valid,
binding and enforceable obligation of the Guarantor and its successors and
assigns.
12. Indemnity. As a separate, additional and continuing obligation, the
Guarantor unconditionally and irrevocably undertakes and agrees with each
Lender that, should the Liabilities not be recoverable from the Guarantor as
guarantor under this Guaranty for any reason whatsoever (including, without
limitation, by reason of any provision of any of the Liabilities or the Loan
Documents being or becoming void, unenforceable, or otherwise invalid under any
applicable law) then, notwithstanding any knowledge thereof by any Lender at
any time, the Guarantor as original and independent obligor, upon demand by the
Lenders, will make payment to the Lenders of the Liabilities by way of a full
indemnity.
13. Cumulative Rights and Remedies, Etc. The obligations of the Guarantor
under this Guaranty are continuing obligations and a new cause of action shall
arise in respect of each default hereunder. No course of dealing on the part
of any Lender, nor any delay or failure on the part of any Lender in exercising
any right, power or privilege hereunder, shall operate as a waiver of such
right, power, or privilege or otherwise prejudice the Lenders' rights and
remedies hereunder; nor shall any single or partial exercise thereof preclude
any further exercise thereof or the exercise of any other right, power or
privilege. No right or remedy conferred upon or reserved to any Lender under
this Guaranty is intended to be exclusive of any other right or remedy, and
every right and remedy shall be cumulative and in addition to every other right
or remedy given hereunder or now or hereafter existing under any applicable
law. Every
GUARANTY AGREEMENT
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right and remedy given by this Guaranty or by applicable law to the Lenders may
be exercised from time to time and as often as may be deemed expedient by
any Lender.
14. Severability. If any one or more provisions of this Guaranty should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way be affected, impaired, prejudiced or disturbed thereby, and any provision
hereunder found partially unenforceable shall be interpreted to be enforceable
to the fullest extent possible. If at any time all or any portion of the
obligation of the Guarantor under this Guaranty would otherwise be determined
by a court of competent jurisdiction to be invalid, unenforceable or avoidable
under Section 548 of the federal Bankruptcy Code or under any fraudulent
conveyance or transfer laws or similar applicable law of any jurisdiction, then
notwithstanding any other provisions of this Guaranty to the contrary such
obligation or portion thereof of the Guarantor under this Guaranty shall be
limited to the greatest of (i) the value of any quantified economic benefits
accruing to the Guarantor as a result of this Guaranty, (ii) an amount equal to
95% of the excess on the date the relevant Liabilities were incurred of the
present fair saleable value of the assets of the Guarantor over the amount of
all liabilities of the Guarantor, contingent or otherwise, and (iii) the
maximum amount of which this Guaranty is determined to be enforceable.
15. Merger; Amendments. This Guaranty is intended as a final expression
of the subject matter hereof and is also intended as a complete and exclusive
statement of the terms hereof. The Guarantor's liability hereunder is
independent of and in addition to its liability under any other guaranty
previously of subsequently executed. No course of dealing, course of
performance or trade usage, and no parole evidence of any nature, shall be used
to supplement or modify any terms hereof, nor are there any conditions to the
full effectiveness of this Guaranty. None of the terms and provisions of this
Guaranty may be waived, altered, modified or amended in any way except by an
instrument in writing executed by duly authorized officers of each Lender and
the Guarantor.
16. Governing Law; Headings. This Guaranty shall be governed by and
construed in accordance with the laws of the State of Michigan without giving
effect to the choice of law principles of such state. The headings of the
various paragraphs hereof are for the convenience of reference only and shall
in no way modify any of the terms or provisions hereof.
17. Notices. Any notice, demand, consent or request given or made to the
Guarantor by any Lender shall be deemed to have been duly given or made if sent
in writing (including telecommunications) to the Guarantor to the address or
telex or telecopy number set forth below the name of the Guarantor on the
signature page hereof, or at such other address or telex or telecopy number as
the Guarantor may hereafter specify to the Lenders in writing. All notices or
other communications sent by means of telecopy, telex or other wire
transmission shall be made with request for assurance of receipt in a manner
typical with respect to communications of that type. Written notices or other
communications shall be deemed delivered upon receipt if delivered by hand or
by telecopy, three business days after mailing if mailed, or one business day
after deposit with an overnight courier service if delivered by overnight
courier. Notices or other communications delivered by hand shall be deemed
delivered upon receipt.
18. RECOURSE. No recourse under or upon any obligation, covenant or
agreement of Guarantor in this Agreement shall be had against any officer,
director or employee, past, present or
GUARANTY AGREEMENT
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future, of the Guarantor or of any successor corporation or against the
property or asset of any such officer, employee or director, either directly or
thought the Guarantor or any successor corporation, whether by virtue or any
constitution, statue or rule of law, or by the enforcement of any assessment or
penalty or otherwise.
18. WAIVER OF JURY TRIAL. THE LENDERS, IN ACCEPTING THIS GUARANTY, AND
THE GUARANTOR, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
GUARANTY OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS GUARANTY OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THEM. NEITHER THE LENDERS NOR
THE GUARANTOR SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE
DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY OF THE
LENDERS OR THE GUARANTOR EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF
THEM. THIS GUARANTY IS FREELY AND VOLUNTARILY GIVEN TO THE LENDERS BY THE
GUARANTOR WITHOUT ANY DURESS OR COERCION, AND AFTER THE GUARANTOR HAS EITHER
CONSULTED WITH COUNSEL OR BEEN GIVEN AN OPPORTUNITY TO DO SO. THE GUARANTOR
HAS CAREFULLY AND COMPLETELY READ ALL OF THE TERMS AND PROVISIONS OF THIS
GUARANTY AND OF EACH AGREEMENT.
EXECUTED and effective as of the 15th day of August, 1997.
JAMES CABLE FINANCE CORP.
By: W. R. James
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Its: President
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GUARANTY AGREEMENT
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EXHIBIT 4.6
GUARANTOR SECURITY AGREEMENT
This GUARANTOR SECURITY AGREEMENT (this "AGREEMENT") is dated as of August
15, 1997 and entered into by and between JAMES CABLE FINANCE CORP., a Michigan
corporation ("GRANTOR"), and NBD BANK, as documentation agent for and
representative of (in such capacity herein called "AGENT") the financial
institutions ("LENDERS") party to the Credit Agreement (as hereinafter
defined).
PRELIMINARY STATEMENTS
A. Agent, Canadian Imperial Bank of Commerce, as Administrative Agent, and
Lenders have entered into a Credit Agreement dated as of August 15, 1997 (said
Credit Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "CREDIT AGREEMENT", the terms defined
therein and not otherwise defined herein being used herein as therein defined)
with James Cable Partners, L.P., a Delaware limited partnership ("Borrower")
pursuant to which Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Borrower.
B. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Grantor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans under the Credit Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Agent as follows:
SECTION 1. GRANT OF SECURITY. Grantor hereby assigns to Agent, and hereby
grants to Agent a security interest in, all of Grantor's right, title and
interest in and to the following, in each case whether now or hereafter
existing or in which Grantor now has or hereafter acquires an interest and
wherever the same may be located (the "COLLATERAL"):
(a) all equipment in all of its forms, all parts thereof and all
accessions thereto (including, but not limited to, all headends and related
electronics, towers, antennas, antenna systems, transmitter equipment, studio
equipment:, technical equipment, electronic news gathering equipment, microwave
equipment, satellite-. equipment, two-way radio equipment, telephones and
related equipment, computers and related equipment, cables, monitors, cameras
amplifiers, other film and photographic equipment, other equipment to receive,
record, store and/or transmit television signals by cable or otherwise,
furniture and office equipment, test equipment, and motor vehicles) (any and
all such equipment, parts and accessions being the "EQUIPMENT");
(b) all inventory in all of its forms (including, but not limited to, (i)
all films and programming materials, (ii) all goods held by Grantor for sale or
lease or to be furnished under contracts of service or so leased or furnished,
(iii) all raw materials, work in process, finished goods, and materials used or
consumed in the manufacture, packing, shipping, advertising, selling, leasing,
furnishing or production of such inventory or otherwise used or consumed in
Grantor's business, (iv) all goods in
<PAGE> 2
which Grantor has an interest in mass or a joint or other interest or right of
any kind, and (v) all goods which are returned to or repossessed by Grantor and
all accessions thereto and products thereof (all such inventory, accessions and
products being the "INVENTORY") and all negotiable documents of title
(including without limitation warehouse receipts, dock receipts and bills of
lading) issued by any Person covering any Inventory (any such negotiable
document of title being a "NEGOTIABLE DOCUMENT OF TITLE");
(c) all Franchises, accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any kind
and all rights in, to and under all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, documents, instruments, general intangibles or other obligations
(any and all such Franchises', accounts, contract rights, chattel paper,
documents, instruments, general intangibles and other obligations being the
"ACCOUNTS", and any and all such security agreements, leases and other contracts
being the "RELATED CONTRACTS");
(d) all deposit accounts, including without limitation all deposit
accounts maintained with Agent;
(e) all trademarks, tradenames, tradesecrets, business names, patents,
patent applications, licenses, copyrights, registrations and franchise rights,
and all goodwill associated with any of the foregoing;
(f) to the extent not included in any other paragraph of this Section 1,
all other general intangibles (including without limitation tax refunds, rights
to payment or performance, chooses in action and judgments taken on any rights
or claims included in the Collateral);
(g) all plant fixtures, business fixtures and other fixtures and storage
and office facilities, and all accessions thereto and products thereof;
(h) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(i) all proceeds, products, rents and profits of or from any and all of
the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Agent is the loss payee thereof), or
any indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or received
when Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in
full when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all obligations and
liabilities of every nature of Grantor and of Borrower now or hereafter
existing under or arising out of or in connection with the Credit Agreement and
the other Loan Documents (including without limitation any guaranty executed by
the Grantor at any time, as amended or modified from time to time pursuant to
the Credit Agreement) and all extensions or
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renewals thereof, ,whether for principal, interest (including without
limitation interest that, but for the filing of a petition in bankruptcy with
respect to Grantor, would accrue on such obligations), fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from Agent or any Lender
as a preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "UNDERLYING DEBT"), and all obligations of every nature
of Grantor now or hereafter existing under this Agreement (all SUCH obligations
of Grantor and of Borrower, together with the Underlying Debt, being the
"SECURED OBLIGATIONS").
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Agent of any of its
rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Agent shall not have any obligation or liability under any contracts and
agreements included in the Collateral by reason of this Agreement, nor shall
Agent be obligated to perform any of the obligations or duties of Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
as follows:
(a) Ownership of Collateral. Except for Permitted Encumbrances and the
interests disclosed in Schedule 4(a) annexed hereto and the security interest
created by this Agreement, Grantor owns the Collateral free and clear of any
Lien. Except with respect to Permitted Encumbrances and the interests
disclosed in Schedule 4(a) annexed hereto and such as may have been filed in
favor of Agent relating to this Agreement, no effective financing statement or
other instrument similar in effect covering Grantor's interest in and to all or
any part of the Collateral is on file in any filing or recording office.
(b) Location of Equipment and Inventory. All of the Equipment, Inventory
and Fixtures is, as of the date hereof, located at the places specified in
Schedule 4(b) annexed hereto.
(c) Office Locations; Other Names. The chief place of business, the chief
executive office and the office where Grantor keeps its records regarding the
Accounts and all originals of all chattel paper that evidence Accounts is, and
has been for the four month period preceding the date hereof, located at 710
North Woodward Avenue, Suite 180, Bloomfield Hills, MI 48304. Grantor has not
in the past done, and does not now do, business under any other name (including
any trade-name or fictitious business name) except as specified in Schedule
4(g) annexed hereto. Grantor has used such other names only in the
jurisdictions indicated on Schedule 4(c).
(d) Delivery of Certain Collateral. All notes and other instruments
(excluding checks) comprising any and all items of Collateral have been
delivered to Agent duly endorsed and accompanied by duly executed instruments
of transfer or assignment in blank.
(e) Governmental Authorizations. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by Grantor of the security
interest granted hereby, (ii) the execution, delivery or performance of
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this Agreement by Grantor, or (iii) the perfection of or the exercise by Agent
of its rights and remedies hereunder (except as may have been taken by or at
the direction of Grantor).
(f) Perfection. This Agreement, together with Uniform Commercial Code
financing statements filed with the appropriate authorities in each of the
jurisdictions specified on Schedule 4(f) and the deliveries required pursuant
to subsection (d) of Section 4, creates a valid, perfected and, except for the
interests disclosed in Schedule 4(a) annexed hereto, first priority security
interest in the Collateral, securing the payment of the Secured Obligations,
and all filings and other actions necessary or desirable to perfect and protect
such security interest have been duly made or taken.
(g) Other Information. All information heretofore, herein or hereafter
supplied to Agent by or on behalf of Grantor with respect to the Collateral is
accurate and complete in all material respects.
SECTION 5. FURTHER ASSURANCES.
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Agent may request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Grantor will: (i) mark
conspicuously each item of chattel paper included in the Accounts, each Related
Contract and, at the request of Agent, each of its records pertaining to the
Collateral, with a legend, in form and substance satisfactory to Agent,
indicating that such Collateral is subject to the security interest granted
hereby, (ii) if any Account, shall be evidenced by a promissory note or other
instrument (excluding checks), deliver and pledge to Agent hereunder such note
or instrument, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Agent, (iii)
execute and file such financing or continuation statements, or Amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Agent may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby, (iv) at any
reasonable time, upon request by Agent., exhibit the Collateral to and allow
inspection of the Collateral by Agent, or persons designated by Agent, and (v)
at Agent's request, appear in and defend any action or proceeding that may
affect Grantor's title to or Agent's security interest in all or any part of
the Collateral.
(b) Grantor hereby authorizes Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of Grantor. Grantor agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing
statement signed by Grantor shall be sufficient as a financing statement and
may be filed as a financing statement in any and all jurisdictions.
(c) Grantor will furnish to Agent from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request and
which are reasonably available to Grantor, all in reasonable detail.
SECTION 6. CERTAIN COVENANTS OF GRANTOR. GRANTOR SHALL:
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<PAGE> 5
(a) not use or permit any Collateral to be used unlawfully or in violation
of any provision of this Agreement or any applicable statute, regulation or
ordinance or any policy of insurance covering the Collateral;
(b) notify Agent of any change in Grantor's name, identity or corporate
structure within 15 days of such change
(c) give Agent 30 days' prior written notice of any change in Grantor's
chief place of business, chief executive office or residence or the office
where Grantor keeps its records regarding the Accounts and all originals of all
chattel paper that evidence Accounts;
(d) if Agent gives value to enable Grantor to acquire rights in or the use
of any Collateral, use such value for such purposes; and
(e) Grantor will use its best efforts not to enter into any Franchise,
contract or similar instrument within the definition of Collateral, which
prohibits the assigning of any rights of Grantor thereunder in the manner
contemplated by this Agreement.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
Grantor shall:
(a) keep the Equipment and Inventory at the places therefor specified on
Schedule 4(b) annexed hereto or, upon 30 days' prior written notice to Agent,
at such other places in jurisdictions where all action that may be necessary or
desirable, or that Agent may request, in order to perfect and protect any
security interest granted or purported to be granted hereby, or to enable Agent
to exercise and. enforce its rights and remedies hereunder, with respect to
such Equipment and Inventory shall have been taken; and
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with Grantor's past practices, and shall forthwith,
or, in the case of any loss or damage to any of the Equipment of a material
nature when subsection (c) of Section 8 is not applicable, as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements and other improvements in connection therewith that are necessary
or desirable to such end. Grantor shall promptly furnish to Agent a statement
respecting any material loss or damage to any of the Equipment;
SECTION 8. INSURANCE.
(a) Grantor shall, at its own expense, maintain insurance with respect to
the Equipment and Inventory in accordance with the terms of the Credit
Agreement. Each policy for property damage insurance shall provide for all
losses to be paid directly to Agent. Each policy shall in addition name
Grantor and Agent as insured parties thereunder (without any representation or
warranty by or obligation upon Agent) as their interests may appear and have
attached thereto a lender loss payable clause acceptable to Agent that shall
(i) contain an agreement by the insurer that any loss thereunder shall be
payable to Agent notwithstanding any action, inaction or breach of
representation or warranty by Grantor, (ii) provide that there shall be no
recourse against Agent for payment of premiums or other amounts with respect
thereto, and (iii) provide that at least 30 days' prior written notice of
cancellation, material amendment, reduction in scope or limits of coverage or
of lapse shall be given to Agent by the insurer. Grantor shall, if so
requested by Agent, deliver to Agent original or duplicate
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<PAGE> 6
policies of such insurance and, as often as Agent may reasonably request, a
report of a reputable insurance broker with respect to such insurance.
Further, Grantor shall, at the request of Agent duly execute and deliver
instruments of assignment of such insurance policies to comply with the
requirements of Section 5(a) and cause the respective insurers to acknowledge
notice of such assignment. Prepayments of Loans from the proceeds of insurance
shall be made in accordance with the terms of the Credit Agreement.
(b) Reimbursement under any liability insurance maintained by Grantor
pursuant to this Section 8 may be paid directly to the Person who SHALL have
incurred liability covered by such insurance. In case of any loss involving
damage to Equipment or Inventory when subsection (C) of this Section 8 is not
applicable, Grantor shall make or cause to be made the necessary repairs to or
replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by Grantor pursuant to this Section 8 shall be paid to Grantor as
reimbursement for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuation of any Event of
Default or (ii) as otherwise required under the Credit Agreement, all insurance
payments in respect of such Equipment or Inventory shall be paid to and applied
by Agent as specified in Section 16.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED
CONTRACTS.
(a) Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts and
Related Contracts, and all originals of all chattel paper that evidence
Accounts, at the location therefor specified in Section 4 or, upon 30 days'
prior written notice to Agent, at such other location in a jurisdiction where
all action that may be necessary or desirable, or that Agent may request, in
order to perfect and protect any security interest granted or purported to be
granted hereby, or to enable Agent to exercise and enforce its rights and
remedies hereunder, with respect to such Accounts and Related Contracts shall
have been taken. Grantor will hold and preserve such records and chattel paper
and will permit representatives of Agent at any time during normal business
hours to inspect and make abstracts from such records and chattel paper, and
Grantor agrees to render to Agent, at Grantor's cost and expense, such clerical
and other assistance as may be reasonably requested with regard thereto.
Promptly upon the request of Agent,, if an Event of Default shall have occurred
and be continuing, Grantor shall deliver to Agent complete and correct copies
of each Related Contract.
(b) Grantor shall, for not less than 5 years from the date on which such
Account arose, maintain (i) complete records of each Account, including records
of all payments received, credits granted and merchandise returned, and (iii)
all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
Grantor under the Accounts and Related Contracts. In connection with such
collections, Grantor may take (and, at Agent's direction, shall take) such
action as Grantor or Agent may reasonably deem necessary or advisable to
enforce collection of amounts due or to become due under the Accounts;
provided, however, that Agent shall have the right at any time, upon the
occurrence and during the continuation of an Event of Default and upon written
notice to Grantor of its intention to do so, to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to Agent and to
direct such account debtors or obligors to make payment of all amounts due or
to become due to Grantor thereunder directly to Agent, to notify each Person
maintaining a lockbox or similar arrangement to which account debtors or
obligors under any
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<PAGE> 7
Accounts have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent to or
deposited in such lockbox or other arrangement directly to Agent and, upon such
notification and at the expense of Grantor, to enforce collection of any such
Accounts and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as Grantor might have done. After
receipt by Grantor of the notice from Agent referred to in the to the preceding
sentence, (i) all amounts and proceeds (including checks and other instruments)
received by Grantor in respect of the Accounts and the Related Contracts shall
be received in trust for the benefit of Agent hereunder, shall be segregated
from other funds of Grantor and shall be forthwith paid over or delivered to
Agent in the same form as so received (with any necessary endorsement) to be
held as cash Collateral and applied as provided by Section 16, and (ii) Grantor
shall not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon (other than in a manner consistent with past
practices and approved by Agent).
SECTION 10. DEPOSIT ACCOUNTS. Upon the occurrence and during the
continuation of an Event of Default, Agent may exercise dominion and control
over, and refuse to permit further withdrawals (whether of money, securities,
]Instruments or other property) from any deposit accounts maintained with Agent
constituting part of the Collateral.
SECTION 11. TRANSFERS AND OTHER LIENS. Except as otherwise permitted by
the Credit Agreement, Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise dispose
of any of the Collateral, except as permitted by the Credit Agreement; or
(b) except for the interests disclosed in Schedule 4(a) annexed hereto and
the security interest created by this Agreement, create or suffer to exist any
Lien upon or with respect to any of the Collateral to secure the indebtedness
or other obligations of any Person.
SECTION 12. AGENT APPOINTED ATTORNEY-IN-FACT Grantor hereby irrevocably
appoints Agent as Grantor's attorney-in-fact, with fun authority in the place
and stead of Grantor and in the name of Grantor, Agent or otherwise, from time
to time upon the occurrence and during the continuance of an Event of Default
in Agent's discretion to take any action and to execute any instrument that
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation:
(a) to obtain and adjust insurance required to be maintained by Grantor or
paid to Agent pursuant to Section 8;
(b) to ask for, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any proceedings
that Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Agent with respect to any of
the Collateral;
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<PAGE> 8
(e) to pay or discharge taxes or Liens (other than Liens permitted under
this Agreement or the Credit Agreement) levied or placed upon or threatened
against the Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by Agent in its sole
discretion, any such payments made by Agent to become obligations of Grantor to
Agent, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely as
though Agent were the absolute owner thereof for all purposes, and to do, at
Agent's option and Grantor's expense, at any time or from time to time, all
acts and things that Agent deems necessary to protect, preserve or realize upon
the Collateral and Agent's security interest therein in order to effect the
intent of this Agreement, all as fully and effectively as Grantor might do.
SECTION 13. AGENT MAY PERFORM. If Grantor fails to perform any agreement
contained herein, Agent may itself perform, or cause performance of, such
agreement, and the reasonable expenses of Agent incurred in connection
therewith shall be payable by Grantor under Section 17.
SECTION 14. STANDARD OF CARE. The powers conferred on Agent hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the exercise of reasonable
care in the custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Agent accords its own property.
SECTION 15. REMEDIES.
(a) If any Event of Default shall have occurred and be; continuing, Agent
may exercise in respect of the Collateral, in addition to all other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the Uniform Commercial Code as in
effect in any relevant jurisdiction (the "CODE") (whether or not the Code
applies to the affected Collateral), and also may (a) require Grantor to, and
Grantor hereby agrees that it will at its expense and upon request of Agent
forthwith, assemble all or part of the Collateral as directed by Agent and make
it available to Agent at a place to be designated by Agent that is reasonably
convenient to both parties, (b) enter onto the property where any Collateral is
located and take possession thereof with or without judicial process, (c) prior
to the disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Agent deems appropriate, (d) take possession of Grantor's premises
or place custodians in exclusive control thereof, remain on such premises and
use the same and any of Grantor's equipment for the purpose of completing any
work in process, taking any actions described in the preceding clause (c) and
collecting any Secured Obligation, and (e) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of Agent's offices or elsewhere, for cash, on credit or
for future delivery, at such time or times and at such price or prices and upon
such other terms as Agent may deem commercially reasonable. Agent or any
Lender may be the purchaser of
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<PAGE> 9
any or all of the Collateral at any such sale and Agent, as agent for and
representative of Lenders (but not any Lender or lenders in its or their
respective individual capacities unless Requisite Lenders shall otherwise agree
in writing), shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Agent at such sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of Grantor,
and Grantor hereby waives (to the extent permitted by applicable law) all
rights of redemption, stay and/or appraisal which it now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted. Grantor agrees that, to the extent notice of sale shall be required
by law, at least ten days' notice to Grantor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. Agent may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Grantor hereby waives
any claims against Agent arising by reason of the fact that the price at which
any Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if Agent accepts
the first offer received and does not offer such Collateral to more than one
offeree. If the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantor shall be liable
for the deficiency and the reasonable fees of any attorneys employed by Agent
to collect such deficiency.
(b) Without limiting the generality of the foregoing or limiting in any
way the rights of Agent under or otherwise under applicable law, at any time
after the occurrence, and during the continuance, of an Event of Default under
subsection 7.1 of the Credit Agreement, Bank shall be entitled to apply for and
have ;3, receiver appointed under state or federal law by a court of competent
jurisdiction in an,( action taken by the Agent to enforce its rights and
remedies in order to manage, protect, preserve, sell and otherwise dispose of
all or any portion of the Collateral and continue the operation of the business
of Company, and to collect all revenues and profits thereof and apply the same
to the payment of all expenses and other charges of such receivership,
including the compensation of the receiver, and to the payment of the Loans and
other fees and expenses due as aforesaid until a sale or other disposition of
such Collateral shall be finally made and consummated.
SECTION 16. APPLICATION OF PROCEEDS. Except as expressly provided
elsewhere in this Agreement, all proceeds received by Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of Agent, be held by Agent as Collateral for,
and/or then, or at any other time thereafter, applied in full or in part by
Agent against, the Secured Obligations in the following order of priority:
FIRST: To the payment of all reasonable costs and
expenses of such sale, collection or other realization,
including reasonable compensation to Agent and its agents
and counsel, and all other expenses, liabilities and
alliances made or incurred by Agent in connection therewith,
and all amounts for which Agent is entitled to
indemnification hereunder and all advances made by Agent
hereunder for the account of Grantor, and to the payment of
all reasonable costs and expenses paid or incurred by Agent
in connection with the exercise of any right or remedy
hereunder, all in accordance with Section 17;
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<PAGE> 10
SECOND: To the payment of all other Secured
Obligations (for the ratable benefit of the holders
thereof); and
THIRD: To the payment to or upon the order of Grantor,
or to whosoever may be lawfully entitled to receive the same
or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
SECTION 17. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Agent and each Lender from and against any
and all claims, losses and liabilities in any way relating to, growing out of
or resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Agent's or such
Lender's gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
(b) Grantor shall pay to Agent upon demand the amount of any and all
reasonable costs and expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, that Agent may incur in connection,
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization
upon, any of the Collateral, (iii) the exercise or enforcement of any of the
rights of Agent hereunder, or (iv) the failure by Grantor to perform or observe
any of the provisions hereof.
SECTION 18. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the indefeasible payment in
full of the Secured Obligations and the cancellation or termination of the
Commitment, (b) be binding upon Grantor, its successors and assigns, and (c)
inure, together with the rights and remedies of Agent hereunder, to the benefit
of Agent and its successors, transferees and assigns. Without limiting the
generality of the - foregoing clause (c), but subject to the provisions of
subsection 9.1 of the Credit Agreement, any Lender may assign or Otherwise
transfer any Loans held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Lenders h(-,rein or otherwise. Upon the indefeasible payment in full of all
Secured Obligations and the cancellation or termination of the Commitments, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such Termination Agent will, at
Grantor's expense, execute and deliver to Grantor such documents as Grantor
shall reasonably request to evidence such termination.
SECTION 19. AGENT.
(a) Agent has been appointed to act as Agent hereunder by Lenders. Agent
shall be obligated, and shall have the right hereunder, to make demands, to
give notices, to exercise or refrain from exercising any rights, and to take,
or refrain from taking any action (including, without limitation, the release
or substitution of Collateral), solely in accordance with this Agreement and
the Credit Agreement.
(b) Agent under this Agreement shall at all times be the same Person that
is Agent under the Credit Agreement. Written notice of resignation by Agent
pursuant to subsection 8.5 of the Credit Agreement shall also constitute notice
of resignation as Agent under this Agreement; removal of Agent pursuant to
subsection 8.5 of the Credit Agreement shall also constitute removal as Agent
under
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this Agreement; and appointment of a successor Agent pursuant to subsection 8.5
of the Credit Agreement shall also constitute appointment of a successor Agent
under this Agreement. Upon the acceptance of any appointment as Agent under
subsection 8.5 of the Credit Agreement by a successor Agent, that successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Agent under this Agreement,
and the retiring or removed Agent under this Agreement shall promptly (i)
transfer to such successor Agent all sums, securities and other items of
Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the performance of the duties of
the successor Agent under this Agreement, and (ii) execute and deliver to such
successor Agent such amendments to financing statements, and take such other
actions, as may be necessary or appropriate in connection with the assignment
to such successor Agent of the security interests created hereunder, whereupon
such retiring or removed Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Agent's
resignation or removal hereunder as Agent, the provisions of this Agreement
shall inure to its benefit as to any actions taken or omitted to be taken by it
under this Agreement while it was Agent hereunder
SECTION 20. AMENDMENTS: ETC. No amendment or waiver of any provision of
this Agreement, or consent to any departure by Grantor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Agent, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given
SECTION 21. NOTICES. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served, telexed
or sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it
in the United States mail with postage prepaid and properly addressed. For the
purposes hereof, the address of each party hereto shall be as set forth under
such party's name on the signature pages hereof or, as to either party, such
other address as shall be designated by such party in a written notice
delivered to the other party hereto.
SECTION 22. FAILURE OR INDULGENCE NOT WAIVER: REMEDIES CUMULATIVE. No
failure or delay on the part of Agent in the exercise of any power, right or
privilege hereunder shall impair such power, right or privilege or be construed
to be a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude any other or
further exercise thereof or of any other power, right or privilege. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 23. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
SECTION 24. HEADING. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute
a part of this Agreement for any other purpose or be given any substantive
effect.
SECTION 25. GOVERNING LAW: TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF MICHIGAN, WITHOUT REGARD TO
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CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF
A JURISDICTION OTHER THAN THE STATE OF MICHIGAN Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of Michigan are used herein as therein defined.
SECTION 26. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF MICHIGAN, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT GRANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
Grantor hereby agrees that service of all process in any such proceeding in any
such court may be made by registered or certified mail, return- receipt
requested, to Grantor at its address provided in Section 21, such service being
hereby acknowledged by Grantor to be sufficient for personal jurisdiction in
any action against Grantor in any such court and to be otherwise effective and
binding service in every respect. Nothing; herein shall affect the right to
serve process in any other manner permitted by law or Shall limit the right of
Agent to bring proceedings against Grantor in the courts of any other
jurisdiction.
SECTION 27. WAIVER OF JULY TRIAL. GRANTOR AND AGENT HEREBY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to
be all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including without
limitation contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. Grantor and Agent each acknowledge that this
waiver is a material inducement for Grantor and Agent to enter into a business
relationship, that Grantor and Agent have already relied on this waiver in
entering into this Agreement and that each will continue to rely on This waiver
in their related future dealings. Grantor and Agent further warrant and
represent that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED ]EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
SECTION 28. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but au such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document.
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<PAGE> 13
IN WITNESS WHEREOF, Grantor and Agent have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
JAMES CABLE FINANCE CORP.
By: W. R. James
-------------------------------------
Name: William R. James
-----------------------------------
Title: President
----------------------------------
Notice Address: 710 North Woodward Avenue
Suite 180
Bloomfield Hills, Michigan 48304
Attn: William R. James
NBD BANK,
as Agent
By: W. H. Canney
-------------------------------------
Name: WIlliam H. Canney
-----------------------------------
Title: Vice President
----------------------------------
Notice Address: NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
Attn: William Canney
13
<PAGE> 14
SCHEDULE 4(a)
TO SECURITY AGREEMENT
PERMITTED LIENS AND ENCUMBRANCES
Sch 4(a)-1
<PAGE> 15
SCHEDULE 4(b)
TO SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
Sch 4(b)-1
<PAGE> 16
SCHEDULE 4(f)
TO SECURITY AGREEMENT
FILING JURISDICTIONS
Sch 4(f)-1
<PAGE> 1
EXHIBIT 10.1
================================================================================
SECURITIES PURCHASE AGREEMENT
by and among
JAMES CABLE PARTNERS, L.P.
and
JAMES CABLE FINANCE CORP.
and
THE INITIAL PURCHASERS NAMED HEREIN
______________________________
Dated as of August 12, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions ..................................................... 1
Section 1.2. Accounting Terms; Financial Statements .......................... 6
ARTICLE II
ISSUE OF NOTES; PURCHASE AND SALE OF
NOTES; RIGHTS OF HOLDERS OF NOTES;
OFFERING BY INITIAL PURCHASERS
Section 2.1. Issue of Notes .................................................. 7
Section 2.2. Purchase, Sale and Delivery of Notes ............................ 7
Section 2.3. Registration Rights of Holders of Notes ......................... 8
Section 2.4. Offering by the Initial Purchasers .............................. 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES; RESALE OF NOTES
Section 3.1. Representations and Warranties of the Issuers ................... 8
Section 3.2. Resale of Notes .................................................21
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
Section 4.1. Conditions Precedent to Obligations of
the Initial Purchasers .......................................22
ARTICLE V
COVENANTS
Section 5.1. Covenants of the Issuers ........................................24
-i-
<PAGE> 3
ARTICLE VI
FEES
Section 6.1. Costs, Expenses and Taxes .......................................27
ARTICLE VII
INDEMNITY
Section 7.1. Indemnity .......................................................28
Section 7.2. Contribution ....................................................31
Section 7.3. Registration Rights Agreement ...................................32
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival of Provisions .........................................32
Section 8.2. Termination ....................................................32
Section 8.3. No Waiver; Modifications in Writing .......................
Section 8.4. Information Supplied by the Initial
Purchasers ...................................................34
Section 8.5. Communications .................................................34
Section 8.6. Execution in Counterparts ......................................35
Section 8.7. Successors .....................................................35
Section 8.8. Governing Law ..................................................35
Section 8.9. Severability of Provisions .....................................35
Section 8.10. Headings .......................................................35
SIGNATURE PAGE ...............................................................36
SCHEDULE I
Exhibit A
Exhibit B
-ii-
<PAGE> 4
SECURITIES PURCHASE AGREEMENT, dated as of August 12, 1997 (the
"Agreement"), among JAMES CABLE PARTNERS, L.P., a Delaware limited partnership
(the "Company"), JAMES CABLE FINANCE CORP., a Michigan corporation and a
wholly-owned subsidiary of the Company ("Finance Corp." and, together with the
Company, the "Issuers"), CIBC WOOD GUNDY SECURITIES CORP. ("CIBC"), and FIRST
CHICAGO CAPITAL MARKETS, INC. ("First Chicago") (the "Initial Purchasers").
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Accredited Investor" has the meaning provided therefor in Section 3.2
of this Agreement.
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Person in question. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling", "controlled by" and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by agreement
or otherwise; provided, however, that beneficial ownership of at least 10% of
the voting securities of a Person shall be deemed to be control.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof and in effect.
<PAGE> 5
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"Basic Documents" means, collectively, the Indenture, the Notes, the
Registration Rights Agreement and this Agreement.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, Partnership Interests and any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, such partnership, limited
liability company or partnership or any other entity.
"Closing" has the meaning provided therefor in Section 2.2 of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Act.
"Default" means any event, act or condition which, with notice or lapse
of time or both, would constitute an Event of Default.
"Environmental Claim" means any written allegation, notice of
violation, claim, demand, abatement order or other order by any Tribunal or any
Person for any response or corrective action, any damage, including, without
limitation, personal injury (including sickness, disease or death), property
damage, contribution, indemnity, indirect or consequential damages, damage to
the environment, nuisance, pollution, contamination or other adverse effects on
the environment, or for fines, penalties or restrictions, in each case arising
under any Environmental Law, including without limitation, relating to,
resulting from or in connection with Hazardous Materials and relating to the
Issuers or any Facilities.
"Environmental Laws" means the common law and all status, ordinance,
orders, rules, regulations or decrees relating to (i) fines, injunctions,
penalties, damages, contribution, cost recovery compensation, losses or
injuries resulting from the Release or threatened Release of Hazardous
Materials, (ii) the generation, use, storage, treatment, transportation or
disposal of Hazardous Materials, or (iii) pollution or protection of human
health, safety or the environment, including without limitation, ambient air,
outdoor air, soil, surface wa-
<PAGE> 6
-3-
ter, ground water, land or subsurface strata, including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery act (42
U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33
U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section 136 et
seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.)
and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section
11001 et seq.), each as amended or supplemented, and any analogous present
statutes and regulations promulgated pursuant thereto, each as in effect as of
the date of determination, provided, however, that as used in Section 3.1(y),
the term "Environmental Laws" means, Environmental Laws in effect on the
Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means any event defined as an Event of Default in
the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
"Exchange Notes" shall have the meaning provided therefor in the
Registration Rights Agreement.
"Facilities" means any and all real property (including without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by the Issuers of any
of their respective predecessors in interest.
"Final Memorandum" has the meaning provided therefor in Section 2.1 of
this Agreement.
"Hazardous Materials" means any pollutant, contaminant, toxic,
hazardous or extremely hazardous substance, constituent or waster, or any other
constituent, waster, material, compound or substance including, without
limitation, petroleum including crude oil or any fraction thereof, or any
petroleum product, subject to regulation under any Environmental Law.
<PAGE> 7
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"Indemnified Party" has the meaning provided therefor in Section 7.1(c)
of this Agreement.
"Indemnifying Party" has the meaning provided therefor in Section
7.1(c) of this Agreement.
"Indenture" means the indenture dated as of August 15, 1997 among the
Issuers, and Unites States Trust Company of New York, as Trustee, under which
the Notes will be issued.
"Initial Purchasers" has the meaning set forth in the introductory
paragraph to this Agreement.
"Lien" means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including without limitation, any Capitalized Lease Obligations (as defined in
the Indenture)), conditional sales, or other title retention agreement having
substantially the same economic effect as any of the foregoing.
"Material Adverse Effect" means, with respect to the Issuers, a
material adverse effect on the business, condition (financial or otherwise),
results of operations or prospects of the Issuers, taken as a whole; provided
that, with respect to the Issuers, "Material Adverse Effect" shall also mean a
material adverse effect on the ability of the Issuers to perform their
obligations under this Agreement or the Basic Documents.
"Memorandum" has the meaning provided therefor in Section 2.1 of this
Agreement.
"Notes" means the 10 3/4% Senior Notes due 2004 of the Issuers.
"Offering" has the meaning assigned thereto in the Memorandum.
"Offering Materials" has the meaning provided therefor in Section 7.1
of this Agreement.
"Partnership Interest" means any general or limited partnership
interest and any interest as a member of a limited liability company or a
limited liability partnership.
<PAGE> 8
-5-
"Person" means any individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint-stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"PORTAL" means the Private Offering, Resales, and Trading through
Automated Linkages Market.
"Preliminary Memorandum" has the meaning provided therefor in Section
2.1 of this Agreement.
"Private Exchange Notes" shall have the meaning provided therefor in
the Registration Rights Agreement.
"Proceeding" has the meaning provided therefor in Section 7.1(c) of
this Agreement.
"QIB" has the meaning provided therefor in Section 3.2 of this
Agreement.
"Real Property Assets" means interests in land, buildings, improvements
and fixtures attached thereto or used in the operation thereof, in each case
owned or leased (as lessee) by the Issuers and, as used in Section 3.1(y),
including land, buildings, improvements and fixtures operated by the Issuers.
"Registration Rights Agreement" means the registration rights agreement
among the Issuers and the Initial Purchasers relating to the Notes.
"Release" means any spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dumping, leaching or
migration of Hazardous Materials (including, without limitation, the
abandonment or disposal of any barrels, containers or other closed receptacles
containing any Hazardous Materials.
"State" means each of the states of the United States, the District of
Columbia and the Commonwealth of Puerto Rico.
"State Commission" means any agency of any State having jurisdiction to
enforce such State's securities laws.
"Subsidiaries" means, with respect to any Person, any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or
<PAGE> 9
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acquired, (i) in the case of a corporation, of which more than 50% of the total
voting power of the Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, officers or trustees
thereof is held by such first-named Person or any of its Subsidiaries; or (ii)
in the case of a partnership, limited liability company, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the
direction of the management and policies of such entity by contract or
otherwise or if in accordance with generally accepted accounting principles
such entity is consolidated with the first-named Person for financial statement
purposes.
"Taxes" has the meaning provided therefor in Section 3.1(u) of this
Agreement.
"Time of Purchase" has the meaning provided therefor in Section 2.2 of
this Agreement.
"Tribunal" means any government, any arbitration panel, any court of
any governmental department, commission, board, bureau, agency authority or
instrumentality of the United States of America or any state, province,
commonwealth, nation, territory, possession, county, parish, town, township,
village or municipality, whether now or hereafter constituted and/or existing.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, and the rules and regulations of the Commission thereunder.
Section 1.2. Accounting Terms; Financial Statements. All accounting
terms used herein not expressly defined in this Agreement shall have the
respective meanings given to them in accordance with sound accounting practice.
The term "sound accounting practice" shall mean such accounting practice as, in
the opinion of the independent accountants regularly retained by the Company,
conforms at the time to generally accepted accounting principles in the United
States applied on a consistent basis except for changes with which such
accountants concur. All determinations as to which accounting principles apply
shall be made in accordance with sound accounting practice.
<PAGE> 10
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ARTICLE II
ISSUE OF NOTES; PURCHASE AND SALE
OF NOTES; RIGHTS OF HOLDERS OF NOTES;
OFFERING BY INITIAL PURCHASERS
Section 2.1. Issue of Notes. The Company has authorized the issuance
of $100,000,000 aggregate principal amount of the Notes which are to be issued
pursuant to the Indenture. Each Note will be substantially in the form of the
Note set forth as Exhibit A to the Indenture.
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Act, in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Issuers have prepared a
preliminary offering memorandum dated July 23, 1997 (the "Preliminary
Memorandum") and prepared a final offering memorandum dated August 12, 1997
(the "Final Memorandum" and, together with the Preliminary Memorandum, the
"Memorandum") setting forth or including a description of the terms of the
Notes, the terms of the offering, a description of the Issuers and any material
developments relating to the Issuers occurring after the date of the most
recent financial statements included therein.
Section 2.2. Purchase, Sale and Delivery of Notes. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Issuers agree that
they will sell to each Initial Purchaser, and each Initial Purchaser agrees,
acting severally and not jointly, that it will purchase from the Issuers at the
Time of Purchase, the principal amount of the Notes set forth opposite the name
of such Initial Purchaser on Schedule I hereto at a price equal to 97% of the
principal amount thereof.
The purchase, sale and delivery of the Notes will take place at a
closing (the "Closing") at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York, at 10:00 A.M., New York time, on August 15, 1997,
or such later date and time, if any, as the Initial Purchasers and the Company
shall agree. The time at which such Closing is concluded is herein called the
"Time of Purchase."
<PAGE> 11
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One or more certificates in definitive form for the Notes that the
Initial Purchasers have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Initial Purchasers
request upon notice to the Company at least 24 hours prior to the Closing,
shall be delivered by or on behalf of the Issuers to the Initial Purchasers,
against payment by or on behalf of the Initial Purchasers of the purchase price
therefor by wire transfer of immediately available funds wired in accordance
with the written instructions of the Company. The Issuers will make such
certificate or certificates for the Notes available for checking and packaging
by the Initial Purchasers at the offices of CIBC or First Chicago, or such
other place as CIBC and First Chicago may designate, at least 24 hours prior to
the Closing.
Section 2.3. Registration Rights of Holders of Notes. The Initial
Purchasers and their direct and indirect transferees of the Notes will have
such rights with respect to the registration thereof under the Act and
qualification of the Indenture under the Trust Indenture Act as are set forth
in the Registration Rights Agreement.
Section 2.4. Offering by the Initial Purchasers. The Initial
Purchasers propose to make an offering of the Notes at the price and upon the
terms set forth in the Final Memorandum, as soon as practicable after this
Agreement is entered into and as in the judgment of the Initial Purchasers is
advisable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; RESALE OF NOTES
Section 3.1. Representations and Warranties of the Issuers. The
Issuers, jointly and severally, represent and warrant to and agree with each of
the Initial Purchasers as follows:
(a) The Final Memorandum, as of its date and (if amended or
supplemented in accordance with Section 5.1(a) hereof, as so amended or
supplemented) at the Time of Purchase, will not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations
and warranties set forth in this Sec-
<PAGE> 12
-9-
tion 3.1(a) do not apply to statements or omissions made in reliance
upon and in conformity with information relating to the Initial
Purchasers furnished to the Company in writing by the Initial Purchasers
expressly for use in the Final Memorandum or any amendment or supplement
thereto as set forth in Section 8.4 hereof.
(b) The audited financial statements of the Company set forth in
the Final Memorandum fairly present the financial position, results of
operations and cash flows of the Company at the dates and for the
periods to which they relate and have been prepared in accordance with
generally accepted accounting principles consistently applied (except as
otherwise stated therein); the summary and selected financial data in
the Final Memorandum present fairly the financial information shown
therein and have been prepared and compiled on a basis consistent with
audited financial statements included therein, except as otherwise
stated therein; and the adjusted financial information and the related
notes thereto included in the Final Memorandum have been prepared using
reasonable assumptions and have been prepared in accordance with the
applicable requirements of the Act and include all adjustments necessary
to present fairly such financial information. The audited balance sheet
of Finance Corp. set forth in the Final Memorandum fairly presents the
financial position of Finance Corp. at the date indicated and has been
prepared in accordance with generally accepted accounting principles.
Deloitte & Touche LLP, which has reported upon the audited financial
statements included in the Memorandum, is an independent public
accounting firm as required by the Act and the rules and regulations
thereunder.
(c) The Company is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has filed all reports with the Secretary of State of the State of
Delaware required to obtain a certificate of existence from that office.
Finance Corp. is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan and has filed all
reports with the Michigan Department of Consumer and Industry Services
required to obtain a certificate of existence from that office. Each of
the Company and Finance Corp. is duly qualified and in good standing as
a foreign limited partnership or a foreign corporation, and is
authorized to do business, in each jurisdiction in which the ownership
or leasing of any
<PAGE> 13
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property or the character of its operations makes such qualification
necessary and in which the failure so to qualify could reasonably be
expected to have a Material Adverse Effect. Finance Corp. is a
wholly-owned Subsidiary of the Company and neither the Company nor
Finance Corp. owns, directly or indirectly, any shares of Capital Stock
or any other equity interest in, or long-term debt securities of, any
other Person.
(d) As of the Time of Purchase (after giving effect to the
Offering and the Refinancing (as defined in the Final Memorandum)), the
Company will have the capitalization as set forth in the column headed
"As Adjusted" under the caption "Capitalization" in the Final
Memorandum, except for (i) a reduction in the amount of "other debt" and
(ii) changes in "partners' deficit" resulting from the conduct of the
Company's business in the ordinary course since June 30, 1997. The
amount of the Company's "partners' deficit" at July 31, 1997 did not
differ materially from the amount thereof at June 30, 1997. All of the
issued and outstanding Capital Stock of Finance Corp. are validly
issued, fully paid and nonassessable and were not issued in violation of
any preemptive or similar rights. Except as set forth in the Final
Memorandum, (i) there are no outstanding subscriptions, options,
warrants, rights, convertible securities or other binding agreements or
commitments of any character obligating the Issuers to issue any
securities and (ii) there is no agreement, understanding or arrangement
among the Issuers and their respective securityholders or any other
Person relating to the ownership or disposition of any Capital Stock in
the Issuers or the governance of the Issuers' affairs, and such
agreements, arrangements or understandings will not be breached or
violated as a result of the execution and delivery of, or the
consummation of the transactions contemplated by, this Agreement and the
Basic Documents.
(e) This Agreement has been duly authorized, executed and
delivered by the Issuers and (assuming the due authorization, execution
and delivery by the Initial Purchasers), is a valid and legally binding
agreement of the Issuers, enforceable against each of them in accordance
with its terms except (i) that the enforcement hereof may be subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and to general principles of equity and the
discretion of the court before which any proceeding there-
<PAGE> 14
-11-
for may be brought and (ii) as any rights to indemnity or contribution
hereunder may be limited by federal and state securities laws and public
policy considerations.
(f) The Indenture has been duly authorized by the Issuers and,
when executed and delivered by the Issuers (assuming the due
authorization, execution and delivery by the Trustee), will constitute a
valid and legally binding agreement of the Issuers, enforceable against
each of them in accordance with its terms except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(g) The Registration Rights Agreement has been duly authorized
by the Issuers and, when executed and delivered by the Issuers (assuming
the due authorization, execution and delivery by the Initial
Purchasers), will constitute a valid and legally binding agreement of
the Issuers, enforceable against each of them in accordance with its
terms except (i) that the enforcement thereof may be subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and to general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought and (ii) as any rights to indemnity or contribution thereunder
may be limited by federal and state securities laws and public policy
considerations.
(h) The Notes, the Exchange Notes and the Private Exchange Notes
have each been duly authorized by the Issuers and, when executed by the
Issuers and authenticated by the Trustee in accordance with the
provisions of the Indenture and, in the case of the Notes, delivered to
and paid for by the Initial Purchasers in accordance with the terms of
this Agreement, will be entitled to the benefits of the Indenture and
will constitute valid and legally binding obligations of the Issuers
enforceable in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally, and (ii) general
principles of eq-
<PAGE> 15
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uity and the discretion of the court before which any proceeding
therefor may be brought.
(i) Immediately after the consummation of the transactions
contemplated by this Agreement (including the use of proceeds from the
sale of Notes at the Time of Purchase), the fair value (as contemplated
by Section 101(32) of the Bankruptcy Code) and present fair saleable
value (as such phrase is used in the Uniform Fraudulent Conveyance Act)
of the assets of the Company (on a consolidated basis) will exceed the
sum of its stated liabilities and identified contingent liabilities; the
Company (on a consolidated basis) will not be, after giving effect to
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby (including the use
of proceeds from the sale of Notes at the Time of Purchase), (i) left
with unreasonably small capital with which to carry on its business as
it is proposed to be conducted, (ii) unable to pay its debts (contingent
or otherwise) as they mature or (iii) otherwise insolvent.
(j) Each of the Issuers (to the extent a party thereto) has all
requisite power and authority to (i) execute, deliver and perform its
obligations under this Agreement and each of the Basic Documents, (ii)
execute, deliver and perform its obligations under all other agreements
and instruments executed and delivered by it pursuant to or in
connection with this Agreement, and each of the Basic Documents, (iii)
issue the Notes, in the manner and for the purpose contemplated by this
Agreement and (iv) consummate each of the transactions contemplated
hereby and thereby.
(k) Subsequent to the date as of which information is given in
the Final Memorandum (if amended or supplemented in accordance with
Section 5.1(a) hereof, as so amended or supplemented), there has not
been (i) any event or condition that has had or that could reasonably be
expected to have a Material Adverse Effect, (ii) any transaction entered
into by the Issuers, other than in the ordinary course of business, that
is material to the Issuers, or (iii) any dividend or distribution of any
kind declared, paid or made by the Company on its partnership interests.
(l) Except as set forth in the Final Memorandum, there is no
action, suit, investigation or proceeding,
<PAGE> 16
-13-
governmental or otherwise, pending or, to the best knowledge of the
Company, threatened to which the Issuers are or would be a party or of
which the properties or assets of the Issuers are or may be subject that
(i) seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance and sale of the Notes by the Issuers or any of
the other transactions contemplated hereby, (ii) questions the legality
or validity of any such transactions or seeks to recover damages or
obtain other relief in connection with any such transactions or (iii)
could, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(m) The execution, delivery and performance by the Issuers (to
the extent a party thereto) of this Agreement and the Basic Documents,
and the issuance and sale by the Issuers of the Notes, and the
execution, delivery and performance by the Issuers (to the extent a
party thereto) of all other agreements and instruments to be executed
and delivered by the Issuers, pursuant hereto or thereto or in
connection herewith or therewith, and compliance by the Issuers (to the
extent a party thereto) with the terms and provisions hereof and
thereof, do not and will not (i) violate any provision of any law, rule
or regulation (including, without limitation, Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System), order, writ,
judgment, decree, determination or award presently in effect or in
effect at the Time of Purchase having applicability to the Issuers (ii)
conflict with or result in a breach of or constitute a default under the
organizational documents of the Issuers or, as of the Time of Purchase,
any indenture or loan or credit agreement, or any other material
agreement or instrument, to which the Issuers, is a party or by which
the Issuers, or any of their respective properties or assets may be
bound or affected, or (iii) except as contemplated by this Agreement and
the Basic Documents, result in, or require the creation or imposition
of, any Lien upon or with respect to any of the properties now owned or
hereafter acquired by the Issuers, except, in each case, where such
violation, conflict, default or creation or imposition of any Lien could
not (individually or in the aggregate) reasonably be expected to have a
Material Adverse Effect.
(n) Each agreement or instrument executed and delivered by the
Issuers (to the extent a party thereto) in connection with this
Agreement and the Basic Documents has been duly and validly authorized,
executed and delivered
<PAGE> 17
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by the Issuers (to the extent a party thereto) and constitutes or will
constitute a valid and legally binding obligation of the Issuers (to the
extent a party thereto), enforceable against them in accordance with its
terms, except (i) that the enforcement thereof may be subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and to general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought and (ii) as any rights to indemnity and contribution hereunder
and thereunder may be limited by applicable law.
(o) Neither of the Issuers is currently or, after giving effect
to the consummation of the transactions contemplated by this Agreement
and the Basic Documents, will be (i) in violation of its respective
organizational documents, (ii) in default (nor will an event occur which
with notice or passage of time or both would constitute such a default)
under or in violation of any indenture or loan or credit agreement or
any other material agreement or instrument to which it is a party or by
which it or any of its properties or assets may be bound or affected
(except as set forth in the Final Memorandum), (iii) in violation of any
order of any court, arbitrator or governmental body or (iv) in violation
of or will have violated any statute, rule or regulation of any
governmental authority, which default or violation (individually or in
the aggregate) could reasonably be expected to (x) affect the legality,
validity or enforceability of this Agreement or any of the Basic
Documents or (y) have a Material Adverse Effect.
(p) Except as set forth in the Final Memorandum, no
authorization, consent, approval, license, qualification or formal
exemption from, nor any filing, declaration or registration with, any
court, governmental agency, securities exchange or any regulatory
authority, the Communications Act of 1934, as amended, including,
without limitation, the Cable Communications Policy Act of 1984 (the
"1984 Cable Act"), the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), the Telecommunications
Act of 1996 (the "1996 Telecom Act" and, together with the 1984 Cable
Act and the 1992 Cable Act, the "Cable Acts") or any order, rule or
regulation of the Federal Communications Commission ("FCC"), is required
in connection with the execution, delivery or performance by the Issuers
of this Agreement, or any of the other Basic Documents or any of the
transactions contemplated
<PAGE> 18
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thereby, except (i) as may be required under state securities or "blue
sky" laws or the laws of any foreign jurisdiction in connection with the
offer and sale of the Notes or (ii) as could not (individually or in the
aggregate) reasonably be expected to have a Material Adverse Effect.
All such authorizations, consents, approvals, licenses, qualifications,
exemptions, filings, declarations and registrations set forth in the
Final Memorandum (other than as disclosed therein) which are required to
have been obtained by the date hereof have been obtained or made, as the
case may be, and are in full force and effect and not the subject of any
pending or, to the knowledge of the Company, threatened attack by appeal
or direct proceeding or otherwise.
(q) The Issuers are not and immediately after the Time of
Purchase will not be "investment companies" or, to the Company's
knowledge, companies "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(r) The execution and delivery of this Agreement and the other
Basic Documents and the sale of the Notes to the Initial Purchasers will
not involve any non-exempt prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code on the part of the
Issuers. No Reportable Event (as defined in Section 4043 of ERISA) has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Employee
Benefit Plan (as defined below), and the Issuers and Commonly Controlled
Entities have complied in all material respects with the applicable
provisions of ERISA and the Code in connection with the Employee Benefit
Plans (as defined below). The present value of all accrued benefits
under each Employee Benefit Plan subject to Title IV of ERISA (based on
the current liability, interest rate and other assumptions used in
preparation of the plan's Form 5500 Annual Report) did not, as of the
last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of
such plan allocable to such accrued benefits. Neither of the Issuers,
nor any Commonly Controlled Entity (as defined below) has had a complete
or partial withdrawal from any Multiemployer Plan (as defined in Section
4001(a)(3) of ERISA), and neither the Issuers, nor any Commonly
Controlled Entity would become subject to any liability under ERISA if
the Issuers, or any such Commonly Controlled Entity were to withdraw
<PAGE> 19
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completely from all Multiemployer Plans as of the valuation date most
closely preceding the date on which such representation is made or
deemed made. No such Multiemployer Plan is in reorganization or
insolvent. There are no material liabilities of the Issuers, or any
Commonly Controlled Entity for post-retirement benefits to be provided
to their current and former employees under Plans which are welfare
benefit plans (as described in Section 3(1) of ERISA). With respect to
each Employee Benefit Plan, no event has occurred and there exists no
conditions or set of circumstances in connection with which the Company
or any of its subsidiaries may, directly or indirectly (through a
Commonly Controlled Entity or otherwise) be subject to material
liability under the Code, ERISA or any other applicable law, except for
liability for benefit claims and funding obligations payable in the
ordinary course. "Commonly Controlled Entity" shall mean any person or
entity that, together with any Issuer, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code. "Employee Benefit
Plan" shall mean an employee benefit plan, as defined in Section 3(3) of
ERISA, which is maintained or contributed to by an Issuer, or any
Commonly Controlled Entity or to which an Issuer, or any Commonly
Controlled Entity may have liability.
(s) The Company has good and valid title to, or valid and
enforceable leasehold interests in, all properties and assets identified
in the Final Memorandum as owned or leased, respectively, by it free and
clear of all Liens, except (i) such Liens as are described in the Final
Memorandum or (ii) Liens created in the ordinary course of business
which are Permitted Liens (as defined in the Indenture). All of the
leases material to the business of the Company and under which the
Company holds properties described in the Final Memorandum, are valid
and binding as leased by them, with such exceptions as are not material
and do not interfere with the use made and proposed to be made of such
properties by the Company.
(t) No form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act) was used by the
Issuers or their representatives in connection with the offer and sale
of the Notes. Neither of the Issuers nor any Person authorized to act
for any of them has, either directly or indirectly, sold or offered for
sale any of the Notes or any other similar security of the Issuers to,
or solicited any offers to buy any thereof from, or has otherwise
approached or negoti-
<PAGE> 20
-17-
ated in respect thereof with, any Person or Persons other than with or
through the Initial Purchasers; and the Issuers agree that neither they
nor any Person acting on their behalf will sell or offer for sale any
Notes to, or solicit any offers to buy any Notes from, or otherwise
approach or negotiate in respect thereof with, any Person or Persons so
as thereby to bring the issuance or sale of any of the Notes within the
provisions of Section 5 of the Act.
(u) All tax returns required to be filed by the Issuers in any
jurisdiction (including foreign jurisdictions) have been so filed and
all taxes, assessments, fees and other charges including, without
limitation, withholding taxes, penalties, and interest ("Taxes") due or
claimed to be due have been paid, other than those Taxes being contested
in good faith and those Taxes for which adequate reserves or accruals
have been established in accordance with generally accepted accounting
principles, except where the failure to file such returns or to pay such
Taxes could not reasonably be expected to have, singly or in the
aggregate, a Material Adverse Effect. The Company knows of no actual or
proposed additional tax assessments for any fiscal period against the
Issuers that, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect.
(v) The Company is the sole and exclusive owner or licensee of
all trade names, unregistered trademarks and service marks, brand names,
patents, registered and unregistered copyrights, registered trademarks
and service marks, and all applications for any of the foregoing and all
permits, grants and licenses or other rights with respect thereto
(collectively, the "Intellectual Property"), the absence of which
(individually or in the aggregate) would have or could reasonably be
expected to have a Material Adverse Effect. Except as set forth in the
Final Memorandum, neither of the Issuers has been charged with any
material infringement of any Intellectual Property or been notified or
advised of any material claim of any other Person relating to any
Intellectual Property which infringements or claims (individually or in
the aggregate) would have a Material Adverse Effect. None of the
Intellectual Property owned or licensed by the Company is material to
the Company.
(w) Except as set forth in the Final Memorandum, the Issuers
comply with all, and have no liability under any,
<PAGE> 21
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laws, rules and regulations (including, without limitation, all
applicable environmental laws, rules and regulations) applicable to the
Issuers, and the Issuers own or possess and are operating in compliance
in all material respects with the terms, provisions, conditions,
restrictions and limitations contained in all licenses, approvals,
certificates and permits (including, without limitation, environmental
permits) from all Federal, state, territorial, foreign and local
governmental and regulatory authorities which are necessary to own or
lease their respective properties and assets and to the conduct of their
respective businesses (other than where the failure to be in compliance
with or liability under such laws, rules, regulations, licenses,
approvals, certificates or permits could not reasonably be expected to
have a Material Adverse Effect). There are no citations or notices of
forfeiture or other proceedings pending or, to the best knowledge of the
Company, threatened or any basis therefor which would lead to the
revocation, termination, suspension or non-renewal of any such license,
approval, certificate or permit except where all such revocations,
terminations, suspensions or non-renewals, individually or in the
aggregate, would not have a Material Adverse Effect. Other than as
disclosed in the Final Memorandum, (i) there are no license renewal or
rate or tariff proceedings existing, pending or, to the best knowledge
of the Company, threatened against the Issuers that would have a
Material Adverse Effect, and (ii) there are no restrictions or
limitations contained in any applicable license, approval, certificate
or permit, or, to the best knowledge of the Company, threatened or
proposed in any pending or contemplated hearing, proceeding or
procedure, that would have a Material Adverse Effect.
(x) Except as set forth in the Final Memorandum,
(1) none of the Issuers has received (a) any written notice or
claim to the effect that it is or may be liable to any Person under any
Environmental Law, except as would not reasonably be expected to have a
Material Adverse Effect or (b) any written notice of potential liability
or request for information under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended or any
comparable state laws regarding any matter except as would not
reasonably be expected to have a Material Adverse Effect, and none of
the Issuers is presently involved in any investigation, response or
corrective action relating to or in connection with any Hazard-
<PAGE> 22
-19-
ous Materials at any location except for such of the foregoing which
would not reasonable be expected to have a Material Adverse Effect;
(2) none of the Issuers or any of their Real Property Assets or,
to the Company's knowledge, any Facilities, are subject to any
outstanding written order with any governmental authority or written
agreement with any Person relating to (a) any actual or potential
violation of or liability under Environmental Laws or (b) any
Environmental Claims except, in each case, for such of the foregoing
which would not reasonably be expected to have a Material Adverse
Effect;
(3) there are currently no Releases and, to the best knowledge of
the Issuers, there have been no Releases of Hazardous Materials at, on,
under or from any of the Real Property Assets in a manner that could
reasonably be expected to give rise to an Environmental Claim except for
Releases which would not reasonably be expected to have a Material
Adverse Effect, and none of the Issuers has reported a Release of any
Hazardous Materials that could reasonably be expected to give rise to an
Environmental Claim except for Releases which would not reasonably be
expected to have a Material Adverse Effect;
(4) no underground storage tanks or surface impoundments are on
or at any Real Property Assets which require response, corrective or
other action under any applicable Environmental Law, in each case, which
would reasonably be expected to have a Material Adverse Effect;
(5) no Environmental Lien in favor of any Person has been filed
with respect to any Real Property Assets or other assets of the Issuers
except for such Lien which would not reasonably be expected to have a
Material Adverse Effect; and
(6) there have been no past or present events, conditions or
activities which could reasonably be expected to prevent the Issuers
from complying with, or to give rise to any liability or any of them
under, any applicable Environmental Law which would reasonably be
expected to have a Material Adverse Effect.
(y) The Notes, the Indenture, and the Registration Rights
Agreement conform in all material respects to the description thereof in
the Final Memorandum.
<PAGE> 23
-20-
(z) Assuming the accuracy of the Initial Purchasers'
representations and warranties set forth in Section 3.2 hereof, and the
due performance by the Initial Purchasers of the covenants and
agreements set forth in Section 3.2 hereof, the offer and sale of the
Notes to the Initial Purchasers in the manner contemplated by this
Agreement and the Memorandum does not require registration under the Act
and the Indenture does not require qualification under the Trust
Indenture Act.
(aa) Except as set forth in the Final Memorandum, there is no
strike, labor dispute, slowdown or work stoppage with the employees of
the Company which is pending or, to the best knowledge of the Company,
threatened.
(bb) The Company carries insurance (including self insurance) in
such amounts and covering such risks as in its reasonable determination
is adequate for the conduct of its business and the value of its
properties.
(cc) No securities of the Issuers are of the same class (within
the meaning of Rule 144A under the Act) as the Notes and listed on a
national securities exchange registered under Section 6 of the Exchange
Act, or quoted in a U.S. automated interdealer quotation system.
(dd) Neither of the Issuers has taken, nor will either of them
take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation
of the price of the Notes.
(ee) None of the Issuers, any of their respective Affiliates or
any person acting on its or their behalf (other than the Initial
Purchasers) has engaged in any directed selling efforts (as that term is
defined in Regulation S under the Act ("Regulation S") with respect to
the Notes and the Company and their respective Affiliates and any person
acting on its or their behalf (other than the Initial Purchasers) have
acted in accordance with the offering restrictions requirements of
Regulation S.
(ff) The statistical and market-related data included in the
Final Memorandum are based on or derived from sources which the Company
believes to be reliable and accurate or represents the Company's good
faith estimates that are made on the basis of data derived from such
sources.
<PAGE> 24
-21-
(gg) Except as stated in the Final Memorandum, the Company does
not know of any claims for services, either in the nature of a finder's
fee or financial advisory fee, with respect to the offering of the Notes
and the transactions contemplated by the Final Memorandum.
(hh) Except as set forth in the Final Memorandum, to the best of
the Company's knowledge: (1) the Issuers own or possess and are
operating in compliance in all material respects with the terms,
provisions, conditions, restrictions and limitations contained in all
franchises from all state, territorial, foreign and local governmental
and regulatory authorities which are necessary to own or lease their
respective properties and assets and to the conduct of their respective
businesses; (2) there are no citations or notices of forfeiture or other
proceedings pending or threatened or any basis therefor which would lead
to the revocation, termination, suspension or non-renewal of any such
franchise; and (3) there are no restrictions or limitations contained in
any applicable franchise or threatened or proposed in any pending or
contemplated hearing, proceeding or procedure that would prevent the
Company from conducting its business in the manner set forth in the
Final Memorandum.
Section 3.2. Resale of Notes. Each of the Initial Purchasers
represents and warrants (as to itself only) that it is a "qualified
institutional buyer" as defined in Rule 144A of the Act ("QIB"). Each of the
Initial Purchasers represents and warrants to and agrees with the Issuers (as to
itself only) that (a) it has not and will not solicit offers for, or offer or
sell, the Notes by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act; and (b) it has
and will solicit offers for the Notes only from, and will offer the Notes only
to (A) in the case of offers inside the United States, (i) Persons whom the
Initial Purchasers reasonably believe to be QIBs or, if any such Person is
buying for one or more institutional accounts for which such Person is acting as
fiduciary or agent, only when such Person has represented to the Initial
Purchasers that each such account is a QIB, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, and, in each case,
in transactions under Rule 144A or (ii) a limited number of other institutional
investors reasonably believed by the Initial Purchasers to be "Accredited
Investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of the Act) that,
prior to their purchase of the Notes,
<PAGE> 25
-22-
deliver to the Initial Purchasers a letter containing the representations and
agreements set forth in Annex A to the Final Memorandum and (B) in the case of
offers outside the United States, in compliance with Regulation S, to Persons
other than U.S. Persons, as defined in Regulation S ("foreign purchasers," which
term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)); provided, however, that, in the case of this clause (B),
in purchasing such Notes such Persons are deemed to have represented and agreed
as provided under the caption "Notice to Investors" contained in the Final
Memorandum.
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
Section 4.1. Conditions Precedent to Obligations of the Initial
Purchasers. The obligation of each Initial Purchaser to purchase the Notes to be
purchased by it hereunder is subject, at the Time of Purchase, to the
satisfaction of the following conditions:
(a) At the Time of Purchase, the Initial Purchasers shall have
received the opinions, dated as of the Time of Purchase and addressed to
the Initial Purchasers, of Miller, Canfield, Paddock and Stone, P.L.C.,
counsel for the Issuers, and of Cole Raywid & Braverman, special
regulatory Counsel for the Issuers, each in form and substance
satisfactory to counsel for the Initial Purchasers, to the effect as set
forth on Exhibit A and Exhibit B, respectively, hereto.
(b) The Initial Purchasers shall have received an opinion,
addressed to the Initial Purchasers in form and substance satisfactory
to the Initial Purchasers and dated the Time of Purchase, of Cahill
Gordon & Reindel, counsel to the Initial Purchasers.
(c) The Initial Purchasers shall have received from Deloitte &
Touche LLP a comfort letter or letters dated the date hereof and the
Closing in form and substance reasonably satisfactory to counsel to the
Initial Purchasers.
(d) The representations and warranties made by the Issuers
herein shall be true and correct in all material
<PAGE> 26
-23-
respects (except for changes expressly provided for in this Agreement)
on and as of the Time of Purchase with the same effect as though such
representations and warranties had been made on and as of the Time of
Purchase, the Issuers shall have complied in all material respects with
all agreements as set forth in or contemplated hereunder and in the
Basic Documents required to be performed by them at or prior to the Time
of Purchase and the Company shall have furnished to each Purchaser a
certificate, dated the Time of Purchase, to such effect.
(e) Subsequent to the date of the Final Memorandum, (i) there
shall not have been any change, or any development involving a
prospective change, which has had or could reasonably be expected to
have a Material Adverse Effect and (ii) the Issuers shall have conducted
their respective businesses only in the ordinary course.
(f) At the Time of Purchase and after giving effect to the
consummation of the transactions contemplated by this Agreement and the
Basic Documents, there shall exist no Default or Event of Default.
(g) The purchase of and payment for the Notes by the Initial
Purchasers hereunder shall not be prohibited or enjoined (temporarily or
permanently) by any applicable law or governmental regulation
(including, without limitation, Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System).
(h) At the Time of Purchase, the Initial Purchasers shall have
received a certificate, dated the Time of Purchase, from either of
William R. James or C. Timothy Trenary and Daniel K. Shoemaker stating
that the conditions specified in Sections 4.1(d), (e), (f) and (g) have
been satisfied or duly waived at the Time of Purchase.
(i) Each of the Basic Documents shall be satisfactory in form
and substance to each of the Initial Purchasers and shall have been
executed and delivered by all the respective parties thereto and shall
be in full force and effect.
(j) All proceedings taken in connection with the issuance of the
Notes and the transactions contemplated by this Agreement, the Basic
Documents and all documents and papers relating thereto shall be
reasonably satisfactory to the Initial Purchasers and counsel to the
Initial Pur-
<PAGE> 27
-24-
chasers. The Initial Purchasers and counsel to the Initial Purchasers
shall have received copies of such papers and documents as they may
reasonably request in connection therewith, all in form and substance
reasonably satisfactory to them.
(k) The sale of the Notes hereunder shall not have been enjoined
(temporarily or permanently) at the Time of Purchase.
On or before the Closing, the Initial Purchasers and counsel to
the Initial Purchasers shall have received such further documents, opinions,
certificates and schedules or other instruments relating to the business,
corporate, legal and financial affairs of the Issuers as they may reasonably
request.
ARTICLE V
COVENANTS
Section 5.1. Covenants of the Issuers. The Issuers covenant and
agree with each of the Initial Purchasers that:
(a) The Issuers will not amend or supplement the Final
Memorandum or any amendment or supplement thereto of which the Initial
Purchasers shall not previously have been advised and furnished a copy
for a reasonable period of time prior to the proposed amendment or
supplement and as to which the Initial Purchasers shall not have given
their consent, which consent shall not be unreasonably withheld. During
the period described in Section 5.1(c), the Issuers will promptly, upon
the reasonable request of the Initial Purchasers or counsel to the
Initial Purchasers, make any amendments or supplements to the
Preliminary Memorandum or the Final Memorandum that may be necessary or
advisable in connection with the resale of the Notes by the Initial
Purchasers.
(b) During the period described in Section 5.1(c), the Issuers
will cooperate with the Initial Purchasers in arranging for the
qualification of the Notes for offering and sale under the securities or
"Blue Sky" laws of such jurisdictions as the Initial Purchasers may
designate and will continue such qualifications in effect for as long as
may be reasonably necessary to complete the resale of the Notes;
provided, however, that in connection therewith,
<PAGE> 28
-25-
the Issuers shall not be required to qualify as a foreign corporation or
to execute a general consent to service of process in any jurisdiction
or subject itself to taxation in excess of a nominal dollar amount in
any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the sale by the Initial Purchasers
of all of the Notes or the Private Exchange Notes, or, if earlier, one
year after the Time of Purchase, any event occurs or information becomes
known as a result of which the Final Memorandum as then amended or
supplemented would include any untrue statement of a material fact, or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, or if for any other reason it is necessary during such
period to amend or supplement the Final Memorandum to comply with
applicable law, the Issuers will promptly notify the Initial Purchasers
thereof (who thereafter will not use such Final Memorandum until
appropriately amended or supplemented) and will prepare, at the expense
of the Issuers, an amendment or supplement to the Final Memorandum that
corrects such statement or omission or effects such compliance.
(d) During the period described in Section 5.1(c), the Issuers
will, without charge, provide to the Initial Purchasers and to counsel
to the Initial Purchasers as many copies of the Preliminary Memorandum
and the Final Memorandum or any amendment or supplement thereto as the
Initial Purchasers may reasonably request.
(e) The Issuers will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For and during the period ending on the date no Notes are
outstanding, the Issuers will furnish to the Initial Purchasers copies
of all reports and other communications (financial or otherwise)
furnished by the Issuers to the Trustee or the holders of the Notes and,
promptly after available, copies of any reports or financial statements
furnished to or filed by the Issuers with the Commission or any national
securities exchange on which any class of securities of the Company may
be listed.
<PAGE> 29
-26-
(g) Prior to the Time of Purchase, the Company will furnish to
the Initial Purchasers, as soon as they have been prepared, a copy of
any unaudited interim financial statements of the Company for any period
subsequent to the period covered by the most recent financial statements
appearing in the Final Memorandum.
(h) None of the Issuers or any of their Affiliates will sell,
offer for sale or solicit offers to buy or otherwise negotiate in
respect of any "security" (as defined in the Act) which could be
integrated with the sale of the Notes in a manner which would require
the registration under the Act of the Notes.
(i) The Issuers will not solicit any offer to buy or offer to
sell the Notes by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or
in any manner involving a public offering within the meaning of Section
4(2) of the Act.
(j) For so long as any of the Notes remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Act and not salable in full under Rule 144 under the Act (or any
successor provision), the Issuers will make available, upon request, to
any seller of such Notes and to a prospective purchaser designated by
such Seller, the information specified in Rule 144A(d)(4) under the Act,
unless the Issuers are then subject to Section 13 or 15(d) of the
Exchange Act.
(k) The Issuers will use their best efforts to (i) permit the
Notes to be included for quotation on PORTAL and (ii) permit the Notes
to be eligible for clearance and settlement through The Depository Trust
Company.
(l) The Issuers (to the extent a party thereto) will do and
perform all things required to be done and performed by them under this
Agreement and the Basic Documents prior to or after the Closing and to
satisfy all conditions precedent on their part to the obligations of the
Initial Purchasers to purchase and accept delivery of the Notes.
(m) In connection with Notes offered and sold in an offshore
transaction (as defined in Regulation S) the Issuers will not register
any transfer of such Notes not made in accordance with the provisions of
Regulation S and
<PAGE> 30
-27-
will not, except in accordance with the provisions of Regulation S, if
applicable, issue any such Notes in the form of definitive securities.
ARTICLE VI
FEES
Section 6.1. Costs, Expenses and Taxes. The Issuers, jointly and
severally, agree to pay all costs and expenses incident to the performance of
their obligations under this Agreement, whether or not the transactions
contemplated herein are consummated or this Agreement is terminated pursuant to
Section 8.2 hereof, including, but not limited to, all costs and expenses
incident to (i) the negotiation, preparation, printing, word processing,
reproduction, execution and delivery of this Agreement, each of the Basic
Documents, any amendment or supplement to or modification of any of the
foregoing and any and all other documents furnished pursuant hereto or thereto
or in connection herewith or therewith, (ii) any costs of printing the
Preliminary Memorandum and the Final Memorandum and any amendment or supplement
thereto, any other marketing related materials, (iii) all arrangements relating
to the delivery to the Initial Purchasers of copies of the foregoing documents,
(iv) the fees and disbursements of the counsel, the accountants and any other
experts or advisors retained by the Issuers, (v) preparation (including
printing), issuance and delivery to the Initial Purchasers of the Notes, (vi)
the qualification of the Notes under state securities and "Blue Sky" laws,
including filing fees, word processing and reproduction costs of any "Blue Sky"
memoranda and fees and disbursements of counsel to the Initial Purchasers
relating thereto, (vii) expenses in connection with any meetings with
prospective investors in the Notes, (viii) fees and expenses of the trustee,
including fees and expenses of counsel to the Trustee, (ix) all expenses and
listing fees incurred in connection with the application for quotation of the
Notes on PORTAL, (x) any fees charged by investment rating agencies for the
rating of the Notes, and (xi) except as limited by Article VII, all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses), if any, in connection with the enforcement of this Agreement, the
Notes or any other agreement furnished pursuant hereto or thereto or in
connection herewith or therewith. In addition, the Issuers shall pay any and
all stamp, transfer and other similar taxes payable or determined to be payable
in connection with the execution and delivery of
<PAGE> 31
-28-
this Agreement, any Basic Document or the issuance of the Notes, and shall save
and hold each Initial Purchaser harmless from and against any and all
liabilities with respect to or resulting from any delay in paying, or omission
to pay, such taxes.
ARTICLE VII
INDEMNITY
Section 7.1. Indemnity.
(a) Indemnification by the Issuers. The Issuers, jointly and
severally, agree and covenant to hold harmless and indemnify each of the Initial
Purchasers and any Affiliates thereof (including any director, officer,
employee, agent or controlling Person of any of the foregoing) from and against
any losses, claims, damages, liabilities and expenses (including expenses of
investigation) to which such Initial Purchaser and its Affiliates may become
subject arising out of or based upon any untrue statement or alleged untrue
statement of any material fact contained in the Memorandum and any amendments or
supplements thereto, the Basic Documents or any application or other documents
filed with the Commission or any State Commission (collectively, the "Offering
Materials") or arising out of or based upon the omission or alleged omission to
state in any of the Offering Materials a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Issuers shall not be liable under this paragraph (a) to the
extent that such losses, claims, damages or liabilities arose out of or are
based upon an untrue statement or omission made in any of the documents referred
to in this paragraph (a) in reliance upon and in conformity with the information
relating to the Initial Purchasers furnished in writing by such Initial
Purchasers for inclusion therein; provided, further, that the Issuers shall not
be liable under this paragraph (a) to the extent that such losses, claims,
damages or liabilities arose out of or are based upon an untrue statement or
omission made in any Memorandum that is corrected in the Final Memorandum (or
any amendment or supplement thereto) if the person asserting such loss, claim,
damage or liability purchased Notes from an Initial Purchaser in reliance on
such Memorandum but was not given the Final Memorandum (or any amendment or
supplement thereto) on or prior to the confirmation of the sale of such Notes.
The Issuers, on a joint and several basis, further agree to reimburse
<PAGE> 32
-29-
each Initial Purchaser for any reasonable legal and other expenses as they are
incurred by it in connection with investigating, preparing to defend or
defending any lawsuits, claims or other proceedings or investigations arising in
any manner out of or in connection with such Person being an Initial Purchaser;
provided that if the Issuers reimburse an Initial Purchaser hereunder for any
expenses incurred in connection with a lawsuit, claim or other proceeding for
which indemnification is sought, such Initial Purchaser hereby agrees to refund
such reimbursement of expenses to the extent that the losses, claims, damages or
liabilities are not entitled to indemnification hereunder. The Issuers further
agree that the indemnification, contribution and reimbursement commitments set
forth in this Article VII shall apply whether or not an Initial Purchaser is a
formal party to any such lawsuits, claims or other proceedings. The indemnity,
contribution and expense reimbursement obligations of the Issuers under this
Article VII shall be in addition to any liability the Issuers may otherwise
have.
(b) Indemnification by the Initial Purchasers. Each of the
Initial Purchasers agrees and covenants, severally and not jointly, to hold
harmless and indemnify the Issuers and any Affiliates thereof (including any
director, officer, employee, agent or controlling Person of any of the
foregoing) from and against any losses, claims, damages, liabilities and
expenses insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement of any material fact contained in
the Offering Materials, or upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or omission was made in reliance upon and in conformity with the
information relating to such Initial Purchaser furnished in writing by such
Initial Purchaser for inclusion therein. The indemnity, contribution and
expense reimbursement obligations of the Initial Purchasers under this Article
VII shall be in addition to any liability the Initial Purchasers may otherwise
have.
(c) Procedure. If any Person shall be entitled to indemnity
hereunder (each an "Indemnified Party"), such Indemnified Party shall give
prompt written notice to the party or parties from which such indemnity is
sought (each an "Indemnifying Party") of the commencement of any action, suit,
investigation or proceeding, governmental or otherwise (a "Proceeding"), with
respect to which such Indemnified Party seeks indemnification or contribution
pursuant hereto; provided, however, that the failure so to notify the
Indemnifying
<PAGE> 33
-30-
Parties shall not relieve the Indemnifying Parties from any obligation or
liability except to the extent that the Indemnifying Parties have been
prejudiced materially by such failure. The Indemnifying Parties shall have the
right, exercisable by giving written notice to an Indemnified Party promptly
after the receipt of written notice from such Indemnified Party of such
Proceeding, to assume, at the Indemnifying Parties' expense, the defense of any
such Proceeding, with counsel reasonably satisfactory to such Indemnified Party;
provided, however, that an Indemnified Party or parties (if more than one such
Indemnified Party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or parties unless: (1) the Indemnifying Parties agree to
pay such fees and expenses; or (2) the Indemnifying Parties fail promptly to
assume the defense of such Proceeding or fail to employ counsel reasonably
satisfactory to such Indemnified Party or parties; or (3) the named parties to
any such Proceeding (including any impleaded parties) include both such
Indemnified Party or parties and the Indemnifying Party or an Affiliate of the
Indemnifying Party and such Indemnified Parties, and the Indemnified Parties
shall have been advised in writing by counsel that there may be one or more
legal defenses available to such Indemnified Party or parties that are different
from or additional to those available to the Indemnifying Parties, in which
case, if such Indemnified Party or parties notifies the Indemnifying Parties in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Parties, the Indemnifying Parties shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
Indemnifying Parties, it being understood, however, that, the Indemnifying
Parties shall not, in connection with any one such Proceeding or separate but
substantially similar or related Proceedings in the same jurisdiction, arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for such Indemnified Party or Parties, or for fees
and expenses that are not reasonable. No Indemnified Party or Parties will
settle any Proceeding without the consent of the Indemnifying Party or Parties
(but such consent shall not be unreasonably withheld). No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened Proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release
<PAGE> 34
-31-
of such Indemnified Party from all liability or claims that are the subject of
such Proceeding.
Section 7.2. Contribution. If for any reason the indemnification
provided for in Section 7.1 of this Agreement is unavailable to an Indemnified
Party, or insufficient to hold it harmless, in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then each applicable
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other, but
also the relative fault of the Indemnifying and Indemnified Parties in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Indemnifying and
Indemnified Parties shall be deemed to be in the same proportion as the total
proceeds from the offering of the Notes (before deducting expenses) received by
the Issuers bear to the total discounts and commissions received by each Initial
Purchaser. The relative fault of the Indemnifying and Indemnified Parties shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Indemnifying or
Indemnified Parties and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses incurred by such party in connection with investigating or
defending any such claim.
The Issuers and each of the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to the immediately
preceding paragraph were determined pro rata or per capita or by any other
method of allocation which does not take into account the equitable
considerations referred to in such paragraph. Notwithstanding any other
provision of this Section 7.2, no Initial Purchaser shall be obligated to make
contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by such Initial Purchaser under this
Agreement, less the aggregate amount of any damages that such Initial Purchaser
has otherwise been required to pay by reason of the untrue or
<PAGE> 35
-32-
alleged untrue statements or the omissions or alleged omissions to state a
material fact. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
Section 7.3. Registration Rights Agreement. Notwithstanding
anything to the contrary in this Article 7, the indemnification and contribution
provisions of the Registration Rights Agreement shall govern any claim with
respect thereto.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival of Provisions. The representations,
warranties and covenants of the Issuers and the Initial Purchasers made herein,
the indemnity and contribution agreements contained herein and each of the
provisions of Articles VI, VII and VIII shall remain operative and in full force
and effect regardless of (a) any investigation made by or on behalf of the
Issuers, any Initial Purchaser or any Indemnified Party, (b) acceptance of any
of the Notes and payment therefor, (c) any termination of this Agreement, or (d)
disposition of the Notes by the Initial Purchasers whether by redemption,
exchange, sale or otherwise.
Section 8.2. Termination. () This Agreement may be terminated
in the sole discretion of the Initial Purchasers by notice to the Company given
prior to the Time of Purchase in the event that the Issuers shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
their part to be performed or satisfied hereunder at or prior thereto or, if at
or prior to the Closing:
(i) the Issuers shall have sustained any loss or
interference with respect to their businesses or
properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or
from any strike, labor dispute, slow down or work
stoppage or any legal or governmental proceeding, which
loss or interference, in the sole judgment of the
Initial Purchasers, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment
of the Initial Purchasers, any event or development
<PAGE> 36
-33-
that, individually or in the aggregate, has or could
have a Material Adverse Effect (including without
limitation a Change of Control (as defined in the
Indenture) of the Issuers, except in each case as
described in the Final Memorandum (exclusive of any
amendment or supplement thereto);
(ii) trading in securities of the Company or in securities
generally on the New York Stock Exchange, American
Stock Exchange or the Nasdaq National Market shall have
been suspended or minimum or maximum prices shall have
been established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign
power, or (B) an outbreak or escalation of any other
insurrection or armed conflict involving the United
States or any other national or international calamity
or emergency, or (C) any material change in the
financial markets of the United States which, in the
case of (A), (B) or (C) above and in the sole judgment
of the Initial Purchasers, makes it impracticable or
inadvisable to proceed with the offering or the
delivery of the Notes as contemplated by the Final
Memorandum; or
(v) any securities of the Company shall have been
downgraded or placed on any "watch list" for possible
downgrading by any nationally recognized statistical
rating organization.
(b) Termination of this Agreement pursuant to this Section 8.2
shall be without liability of any party to any other party except as provided in
Section 8.1 hereof.
Section 8.3. No Waiver; Modifications in Writing. No failure or
delay on the part of the Issuers or either Initial Purchaser in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein
<PAGE> 37
-34-
are cumulative and are not exclusive of any remedies that may be available to
the Issuers or any Initial Purchaser at law or in equity or otherwise. No
waiver of or consent to any departure by the Issuers from any provision of this
Agreement shall be effective unless signed in writing by the party entitled to
the benefit thereof, provided that notice of any such waiver shall be given to
each party hereto as set forth below. Except as otherwise provided herein, no
amendment, modification or termination of any provision of this Agreement shall
be effective unless signed in writing by or on behalf of each of the Issuers
and each Initial Purchaser. Any amendment, supplement or modification of or to
any provision of this Agreement, any waiver of any provision of this Agreement,
and any consent to any departure by the Issuers from the terms of any provision
of this Agreement, shall be effective only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Agreement, no notice to or demand on the Issuers in any case
shall entitle the Issuers to any other or further notice or demand in similar
or other circumstances.
Section 8.4. Information Supplied by the Initial Purchasers. The
statements set forth in the first paragraph on page (i), the fourth and the
fifth sentences of the third paragraph, the fourth sentence of the fifth
paragraph and in the seventh and eighth paragraphs under the heading "Plan of
Distribution" in the Final Memorandum (to the extent such statements relate to
the Initial Purchasers) constitute the only information furnished by the Initial
Purchasers to the Company for the purposes of Sections 3.1(a) and 7.1(a) and (b)
hereof.
Section 8.5. Communications. All notices, demands and other
communications provided for hereunder shall be in writing, and, (a) if to the
Initial Purchasers, shall be given by registered or certified mail, return
receipt requested, telex, telegram, telecopy, courier service or personal
delivery, addressed to CIBC Wood Gundy Securities Corp., 425 Lexington Avenue,
3rd floor, New York, New York 10017, and First Chicago Capital Markets, Inc.,
One First National Plaza, Suite 0701, 8th Floor, Chicago, IL 60670-0701 with a
copy to Cahill Gordon & Reindel, 80 Pine Street, New York, New York, 10005,
Attention: Roger Meltzer, Esq. and (b) if to the Issuers, shall be given by
similar means to 710 North Woodward Avenue, Suite 180, Bloomfield Hills,
Michigan 48304, Attn: Chief Financial Officer, with copies to Miller, Canfield,
Paddock and Stone, P.L.C., 1400 N. Woodward Ave., Suite 100, Bloomfield Hills,
Michigan, 48304 Attn: J. Kevin Trimmer. In each case notices,
<PAGE> 38
-35-
demands and other communications shall be deemed given when received.
Section 8.6. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 8.7. Successors. This Agreement shall inure to the
benefit of and be binding upon the Initial Purchasers, the Issuers and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
Person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such Persons and for the benefit of no other Person except that (i)
the indemnities of the Issuers contained in Section 7.1(a) of this Agreement
shall also be for the benefit of the directors, officers, employees and agents
of the Initial Purchasers and any Person or Persons who control the Initial
Purchasers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchasers contained in
Section 7.1(b) of this Agreement shall also be for the benefit of the directors
of the Issuers, their officers and any Person or Persons who control the Issuers
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.
No purchaser of Notes from the Initial Purchasers will be deemed a successor
because of such purchase.
Section 8.8. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE
A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 8.9. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
<PAGE> 39
-36-
Section 8.10. Headings. The Article and Section headings and
Table of Contents used or contained in this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
JAMES CABLE PARTNERS, L.P.
By: James Communications Partners,
a Michigan co-partnership,
its General Partner
By: Jamesco Inc.,a Michigan
corporation, its partner
By: /s/ William R. James
-----------------------------
Name: William R. James
Title: President
JAMES CABLE FINANCE CORP.
By: /s/ William R. James
-----------------------------
Name: William R. James
Title: President
<PAGE> 41
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ William P. Phoenix
--------------------------------
Name: William P. Phoenix
Title: Managing Director
FIRST CHICAGO CAPITAL MARKETS, INC.
By: /s/ Thomas H. Goody
--------------------------------
Name: Thomas H. Goody
Title: Director
<PAGE> 42
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Notes
- ----------------- ----------------
<S> <C>
CIBC Wood Gundy Securities Corp. $ 80,000,000
First Chicago Capital Markets, Inc. 20,000,000
----------------
Total $100,000,000
----------------
</TABLE>
<PAGE> 43
-2-
EXHIBIT A
Form of Opinion of Counsel to the Issuers
Opinion, dated the Closing Date and addressed to the Initial
Purchasers, of Miller, Canfield, Paddock and Stone, P.L.C., counsel to the
Issuers, to the effect that:
(i) Each of the Company and Finance Corp. has been duly
organized and is validly existing as a limited
partnership or corporation, as the case may be, in good
standing under the laws of its jurisdiction of
organization and has all requisite partnership or
corporate power and authority, as the case may be, to
own its properties and to conduct its business as
described in the Final Memorandum. Each of the Company
and Finance Corp. is duly qualified to do business as a
foreign partnership or corporation, as the case may be,
and is in good standing in all other jurisdictions
where the ownership or leasing of its properties or the
conduct of its business requires such qualification,
except where the failure to be so qualified would not,
individually or in the aggregate, have a Material
Adverse Effect.
(ii) The Company has the authorized, issued and outstanding
capitalization set forth in the Final Memorandum; all
of the outstanding partnership interests or shares of
capital stock of the Company and Finance Corp., as the
case may be, have been duly authorized and validly
issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar
rights.
(iii) Except as set forth in the Final Memorandum (A) no
options, warrants or other rights to purchase from
either of the Company or Finance Corp., Partnership
Interests or shares of capital stock, as the case may
be, or ownership interests in either of the Company or
Finance Corp. are outstanding, (B) no agreements or
other obligations to issue, or other rights to convert,
any obligation into, or exchange any
<PAGE> 44
-3-
securities for, shares of capital stock or ownership
interests in the Company or Finance Corp. are
outstanding and (C) no holder of securities of the
Company or Finance Corp. is entitled to have such
securities registered under a registration statement
filed by the Issuers pursuant to the Registration
Rights Agreement.
(iv) Each of the Issuers has all requisite partnership or
corporate power and authority, as the case may be, to
execute, deliver and perform each of its obligations
under the Indenture, the Notes, the Exchange Notes and
the Private Exchange Notes; the Indenture meets the
requirements for qualification under the TIA; the
Indenture has been duly and validly authorized,
executed and delivered by the Issuers and (assuming the
due authorization, execution and delivery thereof by
the Trustee) will constitute the valid and legally
binding agreement of the Issuers, enforceable against
the Issuers in accordance with its terms, except that
the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general
principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
(v) The Notes are in the form contemplated by the
Indenture. The Notes have each been duly and validly
authorized by the Issuers and, when duly executed and
delivered by the Issuers and paid for by the Initial
Purchasers in accordance with the terms of the Purchase
Agreement (assuming the due authorization, execution
and delivery of the Indenture by the Trustee and due
authentication and delivery of the Notes by the Trustee
in accordance with the Indenture), will constitute the
valid and legally binding obligations of the Issuers,
entitled to the benefits of the Indenture, and
enforceable against the Issuers in accordance with
their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in
effect relating to creditors' rights gen-
<PAGE> 45
-4-
erally and (ii) general principles of equity and the
discretion of the court before which any proceeding
therefor may be brought.
(vi) The Exchange Notes and the Private Exchange Notes have
been duly and validly authorized by the Issuers, and
when the Exchange Notes and the Private Exchange Notes
have been duly executed and delivered by the Issuers in
accordance with the terms of the Registration Rights
Agreement and the Indenture (assuming the due
authorization, execution and delivery of the Indenture
by the Trustee and due authentication and delivery of
the Exchange Notes and the Private Exchange Notes by
the Trustee in accordance with the Indenture), will
constitute the valid and legally binding obligations of
the Issuers, entitled to the benefits of the Indenture,
and enforceable against the Issuers in accordance with
their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the
court before which any proceeding therefor may be
brought.
(vii) Each of the Issuers has all requisite partnership or
corporate power, as the case may be, and authority to
execute, deliver and perform its obligations under the
Registration Rights Agreement; the Registration Rights
Agreement has been duly and validly authorized,
executed and delivered by the Issuers and (assuming due
authorization, execution and delivery thereof by the
Initial Purchasers) will constitute the valid and
legally binding agreement of the Issuers, enforceable
against the Issuers in accordance with its terms,
except that (A) the enforcement thereof may be subject
to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the
court before which any proceeding therefor may be
brought and (B) any rights to indemnity or contribution
thereunder may be limited by fed-
<PAGE> 46
-5-
eral and state securities laws and public policy
considerations.
(viii) Each of the Issuers has all requisite partnership or
corporate power and authority, as the case may be, to
execute, deliver and perform its obligations under this
Agreement and to consummate the transactions
contemplated hereby; this Agreement and the
consummation by the Issuers of the transactions
contemplated hereby have been duly and validly
authorized by the Issuers. This Agreement has been
duly executed and delivered by the Issuers.
(ix) The Indenture, the Notes and the Registration Rights
Agreement conform in all material respects to the
descriptions thereof contained in the Final Memorandum.
(x) No legal or governmental proceedings are pending or, to
the knowledge of such counsel, threatened to which any
of Issuers is a party or to which the property or
assets of the Issuers are subject which, if determined
adversely to the Issuers, would result, individually or
in the aggregate, in a Material Adverse Effect, or
which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or
sale of the Notes to be sold hereunder or the
consummation of the other transactions described in the
Final Memorandum under the caption "Use of Proceeds."
(xi) The execution, delivery and performance of this
Agreement, the Indenture, the Registration Rights
Agreement and the consummation of the transactions
contemplated hereby and thereby (including, without
limitation, the issuance and sale of the Notes to the
Initial Purchasers) will not conflict with or
constitute or result in a breach or a default under (or
an event which with notice or passage of time or both
would constitute a default under) or violation of any
of (i) the terms or provisions of any Contract known to
such counsel, except for any such conflict, breach,
violation, default or event which would not,
individually or in the aggregate, have a Material
Adverse Effect,
<PAGE> 47
-6-
(ii) the limited partnership agreement, the certificate
of incorporation or bylaws (or similar organizational
document), as the case may be, of the Company or
Finance Corp., or (iii) (assuming compliance with all
applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 8
hereof) any statute, judgment, decree, order, rule or
regulation known to such counsel to be applicable to
the Company or Finance Corp. or any of their respective
properties or assets, except for any such conflict,
breach or violation which would not, individually or in
the aggregate, have a Material Adverse Effect.
(xii) No consent, approval, authorization or order of any
governmental authority is required for the issuance and
sale by the Issuers of the Notes to the Initial
Purchasers or the consummation by the Company of the
other transactions contemplated hereby, except such as
may be required under Blue Sky laws, as to which such
counsel need express no opinion, and those which have
previously been obtained.
(xiii) To the knowledge of such counsel, there are no material
contracts or other documents which would be required to
be described in a prospectus pursuant to the Act that
are not described in the Final Memorandum.
(xiv) Neither the Company nor Finance Corp. is, or
immediately after the sale of the Notes to be sold
hereunder and the application of the proceeds from such
sale (as described in the Final Memorandum under the
caption "Use of Proceeds") will be, an "investment
company" as such term is defined in the Investment
Company Act of 1940, as amended.
(xv) No registration under the Act of the Notes is required
in connection with the sale of the Notes to the Initial
Purchasers as contemplated by this Agreement and the
Final Memorandum or in connection with the initial
resale of the Notes by the Initial Purchasers in
accordance with Section 8 of this Agreement, and prior
to the
<PAGE> 48
-7-
commencement of the Exchange Offer (as defined in the
Registration Rights Agreement) or the effectiveness of
the Shelf Registration Statement (as defined in the
Registration Rights Agreement), the Indenture is not
required to be qualified under the TIA, in each case
assuming (i) (A)that the purchasers who buy such Notes
in the initial resale thereof are qualified
institutional buyers as defined in Rule 144A
promulgated under the Act ("QIBs") or accredited
investors as defined in Rule 501(a) (1), (2), (3) or
(7) promulgated under the Act ("Accredited Investors")
or (B) that the offer or sale of the Notes is made in
an offshore transaction as defined in Regulation S,
(ii) the accuracy of the Initial Purchasers'
representations in Section 8 and those of the Company
contained in this Agreement regarding the absence of a
general solicitation in connection with the sale of
such Notes to the Initial Purchasers and the initial
resale thereof and (iii) the due performance by the
Initial Purchasers of the agreements set forth in
Section 8 hereof.
(xvi) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance,
execution or delivery of the Notes will violate
Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System.
In addition, we have participated in conferences with officers
and other representatives of the Issuers, representatives of the independent
public accountants and representatives of the Initial Purchasers at which the
contents of the Memorandum were discussed and, although we are not passing upon
and do not assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Final Memorandum (except as indicated in
clause (ix) above) and have not made any independent check or verification
thereof, on the basis of the foregoing (relying as to materiality to a large
extent upon the statements of officers and other representatives of each of the
Issuers) no facts have come to our attention that have caused us to believe that
the Final Memorandum as of its date and as of the Closing Date contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
<PAGE> 49
EXHIBIT B
Form of Opinion of Cole Raywid & Braverman
(1) the execution, delivery and performance by each of the Issuers of
its obligations under the Offering Materials (to the extent each is a
party thereto) did not or will not result in a violation of the
Communications Act of 1934, as amended, including the Cable
Communications Policy Act of 1984 (the "1984 Cable Act"), the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act") or the Telecommunications Act of 1996 (the "1996 Telecom
Act" and, together with the 1984 Cable Act and the 1992 Cable Act, the
"Cable Acts") or any order, rule or regulation of the FCC;
(2) no consent, approval, authorization, order, registration or
qualification of or with the FCC is required under the Communications
Act, the Cable Acts, or the rules and regulations of the FCC for the
execution and delivery by each of the Issuers of, and the performance by
each of the Issuers of its obligations under any of the Offering
Materials (to the extent each is a party thereto);
(3) other than matters described in the Final Memorandum, such counsel
does not know of any proceedings threatened, pending or contemplated
before the FCC or any federal or state court against or involving the
properties, businesses or franchises of the Company which could
reasonably be expected to have a Material Adverse Effect;
(4) the statements in the Final Memorandum under the captions "RISK
FACTORS-Substantial Regulation in the Cable Television Industry,"
"BUSINESS-Franchises," "RISK FACTORS-Non-Exclusive Franchises;
Non-Renewal or Termination of Franchises", "BUSINESS-Competition" and
"LEGISLATION AND REGULATION" insofar as such statements summarize
applicable provisions of the Communications Act, the Cable Acts and the
published orders, rules and regulations of the FCC promulgated
thereunder are accurate summaries in all material respects of the
provisions purported to be summarized under such captions in the Final
Memorandum; and the FCC statutes and regulations summarized in such
captions are the FCC statutes and regulations that are material to the
Issuers' business as described in the Final Memorandum.
<PAGE> 1
EXHIBIT 10.2
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of August 15, 1997
by and among
JAMES CABLE PARTNERS, L.P.
and
JAMES CABLE FINANCE CORP.
and
THE INITIAL PURCHASERS
named herein
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
1. Definitions............................................................... 1
2. Exchange Offer............................................................ 5
3. Shelf Registration........................................................ 8
4. Additional Interest.......................................................10
5. Registration Procedures...................................................12
6. Registration Expenses.....................................................23
7. Indemnification...........................................................24
8. Rules 144 and 144A........................................................25
9. Underwritten Registrations................................................28
10. Miscellaneous............................................................29
(a) Remedies................................................................29
(b) Enforcement.............................................................29
(c) No Inconsistent Agreements..............................................29
(d) Adjustments Affecting Registrable Notes.................................30
(e) Amendments and Waivers..................................................30
(f) Notices.................................................................30
(g) Successors and Assigns..................................................31
(h) Counterparts............................................................31
(i) Headings................................................................31
(j) GOVERNING LAW...........................................................31
(k) Severability............................................................31
(l) Entire Agreement........................................................32
(m) Joint and Several Obligations...........................................32
(n) Notes Held by the Issuers or their Affiliates...........................32
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
August 15, 1997, by and among JAMES CABLE PARTNERS, L.P., a Delaware limited
partnership (the "Company"), JAMES CABLE FINANCE CORP., a Michigan corporation
("Finance Corp." and, together with the Company, the "Issuers"), and CIBC WOOD
GUNDY SECURITIES CORP. ("CIBC") and FIRST CHICAGO CAPITAL MARKETS, INC., as
initial purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the Securities
Purchase Agreement, dated as of August 12, 1997 among the Issuers and the
Initial Purchasers (the "Purchase Agreement") relating to the sale by the
Company to the Initial Purchasers of $100,000,000 aggregate principal amount of
the Company's 10 3/4% Senior Notes due 2004 (the "Notes"). In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the Issuers have
agreed to provide the registration rights set forth in this Agreement to the
Initial Purchasers and their direct and indirect transferees and assigns. The
execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
Advice: See Section 5.
Applicable Period: See Section 2(b).
Closing: See the Purchase Agreement.
Company: See the introductory paragraph to this Agreement.
Effectiveness Date: The 120th day after the Issue Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(c).
<PAGE> 4
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Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Filing Date: The 30th day after the Issue Date.
Finance Corp.: See the introductory paragraph to this
Agreement.
Holder: Any holder of a Registrable Note or Registrable
Notes.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of August___, 1997, among
the Issuers and United States Trust Company of New York, as trustee, pursuant
to which the Notes are being issued, as amended or supplemented from time to
time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this
Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date on which the original Notes are sold to
the Initial Purchasers pursuant to the Purchase Agreement.
Issuers: See the introductory paragraph to this Agreement.
NASD: See Section 5(t).
Notes: See the introductory paragraph to this Agreement.
Participant: See Section 7(a).
<PAGE> 5
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Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
Private Exchange: See Section 2(b).
Private Exchange Notes: See Section 2(b).
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Notes covered by such Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs to this
Agreement.
Records: See Section 5(o).
Registrable Notes: The Notes upon original issuance of the
Notes and at all times subsequent thereto and, if issued, the Private Exchange
Notes, until in the case of any such Notes or any such Private Exchange Notes,
as the case may be, (i) a Registration Statement covering such Notes or such
Private Exchange Notes has been declared effective by the SEC and such Notes or
such Private Exchange Notes, as the case may be, have been exchanged and/or
disposed of in accordance with such effective Registration Statement, (ii) such
Notes or such Private Exchange Notes, as the case may be, are sold in
compliance with Rule 144, (iii) in the case of any Note, such Note has been
exchanged for an Exchange Note or Exchange Notes pursuant to an Exchange Offer
or (iv) such Notes or such Private Exchange Notes, as the case may be, cease to
be outstanding.
Registration Default: See Section 4(a).
Registration Statement: Any registration statement of the
Company or the Guarantors, including, but not limited
<PAGE> 6
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to, the Exchange Registration Statement, which covers any of the Registrable
Notes pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule_144A) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule_144) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent,
the trustee under any indenture governing the Exchange Notes and Private
Exchange Notes (if any).
<PAGE> 7
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Underwritten registration or underwritten offering: A
registration under the Securities Act in which securities of the Company are
sold to an underwriter(s) for reoffering to the public.
2. Exchange Offer
(a) Each of the Issuers jointly and severally agrees to
use its best efforts to file with the SEC as soon as practicable after the
Closing, but in no event later than the Filing Date, documents pertaining to an
offer to exchange (the "Exchange Offer") any and all of the Registrable Notes
for a like aggregate principal amount of debt securities of the Issuers which
are identical in all material respects to the Notes (the "Exchange Notes") (and
which are entitled to the benefits of the Indenture or a trust indenture which
is substantially identical to the Indenture (other than such changes to the
Indenture or any such identical trust indenture as are necessary to comply with
any requirements of the SEC to effect or maintain the qualification thereof
under the TIA) and which, in either case, has been qualified under the TIA),
except that the Exchange Notes shall have been registered pursuant to an
effective registration statement under the Securities Act and will not contain
terms with respect to transfer restrictions. The documents pertaining to the
Exchange Offer will be filed under the Securities Act on the appropriate form
(the "Exchange Registration Statement") and the Exchange Offer will comply with
all applicable tender offer rules and regulations under the Exchange Act. Each
of the Issuers jointly and severally agrees to use its best efforts to (x)
cause the Exchange Registration Statement to become effective under the
Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer
open for at least 30 days (or longer if required by applicable law) after the
date that notice of the Exchange Offer is mailed to Holders; and (z) consummate
the Exchange Offer on or prior to the 60th day following the date the Exchange
Registration Statement is declared effective (in any event on or prior to the
180th day following the Issue Date) (or, in the event of any extension of the
Exchange Offer required by applicable law, the earliest day following any such
extension). Each Holder who participates in the Exchange Offer will be
required to represent that any Exchange Notes received by it will be acquired
in the ordinary course of its business, that at the time of the consummation of
the Exchange Offer such Holder will have no arrangement or understanding with
any Person to participate in the distribution of the Exchange Notes in
violation of the provisions of the Securities Act, that such Holder is not an
affiliate of either of the Issuers within the meaning of Rule 405
<PAGE> 8
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promulgated under the Securities Act or if it is such an affiliate, that it
will comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable and that is not acting on behalf of
any Person who could not truthfully make the foregoing representations. Upon
consummation of the Exchange Offer in accordance with this Section_2, the
provisions of this Agreement shall continue to apply, mutatis mutandis, solely
with respect to Registrable Notes that are Private Exchange Notes and Exchange
Notes held by Participating Broker-Dealers, and the Issuers shall have no
further obligation to register Registrable Notes (other than Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers) pursuant to
Section 3 of this Agreement.
(b) The Issuers shall include within the Prospectus contained in
the Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act)
of Exchange Notes received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies, in
the reasonable judgment of the Initial Purchasers, represent the prevailing
views of the staff of the SEC. Such "Plan of Distribution" section shall also
allow the use of the Prospectus by all Persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Notes.
Each of the Issuers shall use its best efforts to keep the Exchange
Statement effective and to amend and supplement the Prospectus contained
therein in order to permit such Prospectus to be lawfully delivered by all
Persons subject to the prospectus delivery requirements of the Securities Act
for such period of time as such Persons must comply with such requirements in
order to resell the Exchange Notes, provided that such period shall not exceed
180 days (or such longer period if extended pursuant to the last paragraph of
Section 5) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having, or which are reasonably
likely to be determined to have, the
<PAGE> 9
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status as an unsold allotment in the initial distribution, the Issuers upon the
request of such Initial Purchasers shall, simultaneously with the delivery of
the Exchange Notes in the Exchange Offer, issue and deliver to such Initial
Purchasers, in exchange (the "Private Exchange") for the Notes held by such
Initial Purchasers, a like principal amount of debt securities of the Issuers
that are identical in all material respects to the Exchange Notes (the "Private
Exchange Notes") (and which are issued pursuant to the same indenture as the
Exchange Notes) except for the placement of a restrictive legend on the Private
Exchange Notes. If possible, the Private Exchange Notes shall bear the same
CUSIP number as the Exchange Notes. Interest on the Exchange Notes and Private
Exchange Notes will accrue from the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or, if no
interest has been paid on the Notes, from the Issue Date.
In connection with the Exchange Offer, the Issuers shall:
(i) mail to each Holder a copy of the Prospectus forming
part of the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York; and
permit Holders to withdraw tendered Notes at any time prior to the close
of business, New York City time, on the last business day on which the
Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer or
the Private Exchange, as the case may be, the Issuers shall:
(i) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in princi-
<PAGE> 10
-8-
pal amount to the Notes of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture substantially identical to the
Indenture, which in either event will provide that (1) the Exchange Notes will
not be subject to the transfer restrictions set forth in the Indenture and (2)
the Private Exchange Notes will be subject to the transfer restrictions set
forth in the Indenture. The Indenture or such indenture shall provide that the
Exchange Notes, the Private Exchange Notes and the Notes will have the right to
vote and give consents together on all matters presented to such holders for
votes or consents as one class and that neither the Exchange Notes, the Private
Exchange Notes nor the Notes will have the right to vote or consent as a
separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer, the
Issuers or Holders of at least a majority in aggregate principal amount of the
Registrable Notes reasonably determine in good faith that (i) the Exchange
Notes would not, upon receipt, be freely transferable by such Holders which are
not affiliates (within the meaning of the Securities Act) of the Issuers
without restriction under the Securities Act and without restrictions under
applicable state securities laws, (ii)_the interests of the Holders under this
Agreement would be adversely affected by the consummation of the Exchange Offer
or (iii) after conferring with counsel, the SEC is unlikely to permit the
commencement of the Exchange Offer prior to the Effectiveness Date, (2)
subsequent to the consummation of the Private Exchange, any holder of the
Private Exchange Notes so requests but in no event subsequent to two hundred
ninety days following the consummation of the Exchange Offer or (3) the
Exchange Offer is commenced and not consummated within 180_days of the Issue
Date, then the Issuers shall promptly deliver to the Holders and the Trustee
written notice thereof (the "Shelf Notice") and shall file an Initial Shelf
Registration pursuant to Section 3. Following the delivery of a Shelf Notice
to the Holders of Registrable Notes (in the circumstances contemplated by
clauses (1) and (3) of the preceding sentence), the Issuers shall not have any
further obligation to conduct the Exchange Offer or the Private Exchange under
this Section 2.
3. Shelf Registration
If a Shelf Notice is required to be delivered as contemplated by
Section 2(c), then:
<PAGE> 11
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(a) Initial Shelf Registration . The Issuers shall prepare and file
with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the then existing
Registrable Notes (the "Initial Shelf Registration"). If the Issuers shall
have not yet filed an Exchange Registration Statement, each of the Issuers
shall use its best efforts to file with the SEC the Initial Shelf Registration
on or prior to the Filing Date. In any other instance, each of the Issuers
shall use its best efforts to file with the SEC the Initial Shelf Registration
as promptly as practicable but, in any event, within 30 days following delivery
of the Shelf Notice. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes for
resale by such Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuers shall not
permit any securities other than the Registrable Notes to be included in the
Initial Shelf Registration or any Subsequent Shelf Registration. Each of the
Issuers shall use its best efforts to cause the Initial Shelf Registration to
be declared effective under the Securities Act, if an Exchange Registration
Statement has not yet been declared effective, on or prior to the Effectiveness
Date, or, in any other instance, as soon as practicable after the filing
thereof and in no event later than 45 days after filing of the Initial Shelf
Registration, and to keep the Initial Shelf Registration continuously effective
under the Securities Act until the date which is 24 months from the date on
which such Initial Shelf Registration is declared effective (subject to
extension pursuant to the last paragraph of Section 5 hereof), or such shorter
period ending when (i) all Registrable Notes covered by the Initial Shelf
Registration have been sold in the manner set forth and as contemplated in the
Initial Shelf Registration or (ii) a Subsequent Shelf Registration covering all
of the Registrable Notes has been declared effective under the Securities Act
(the "Effectiveness Period").
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
or any Subsequent Shelf Registration ceases to be effective for any reason at
any time prior to the termination of the Effectiveness Period, each of the
Issuers shall use its best efforts to promptly restore the effectiveness
thereof, and in any event shall, within 45 days of such cessation of
effectiveness, amend the Shelf Registration in a manner reasonably expected to
restore the effectiveness thereof, or file an additional "shelf" Registration
Statement pursuant to Rule 415 covering all of the then existing Registrable
Notes (a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration
is filed, each of the Issuers shall use its best efforts to cause the
Subsequent Shelf Regis-
<PAGE> 12
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tration to be declared effective as soon as practicable after such filing
and to keep such Registration Statement continuously effective for a period
equal to the number of days in the Effectiveness Period less the aggregate
number of days during which the Initial Shelf Registration or any Subsequent
Shelf Registration was previously continuously effective. As used herein the
term "Shelf Registration" means the Initial Shelf Registration and any
Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly supplement
and amend the Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration or if required by the Securities Act. The Issuers shall promptly
supplement and amend the Shelf Registration if any such supplement or amendment
is requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any
underwriter(s) of such Registrable Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the Holders of
Registrable Notes will suffer damages if the Company fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay additional interest on the Notes ("Additional
Interest") under the circumstances and to the extent set forth below:
(i) if neither the Exchange Registration Statement nor the Initial
Shelf Registration has been filed on or prior to the Filing Date;
(ii) if neither the Exchange Registration Statement nor the Initial
Shelf Registration has been declared effective on or prior to the
Effectiveness Date;
(ii) if an Initial Shelf Registration required by Section 2(c)(2) has
not been filed on or prior to the date 30 days after delivery of the Shelf
Notice;
(iv) if an Initial Shelf Registration required by Section 2(c)(2) has
not been declared effective on or
<PAGE> 13
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prior to the date 75 days after the delivery of the Shelf Notice;
and/or
(iv) if (A) the Company has not exchanged the Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the date 180 days after the Issue Date or (B) the Exchange
Registration Statement ceases to be effective at any time prior to the
time that the Exchange Offer is consummated or (C) if applicable, the
Shelf Registration has been declared effective and such Shelf Registration
ceases to be effective at any time prior to the termination of the
Effectiveness Period;
(each such event referred to in clauses_(i) through (v) above is a
"Registration Default"). The sole remedy available to Holders of the Notes for
a Registration Default will be the accrual of Additional Interest as follows:
the per annum interest rate on the Notes will increase by .50% during the first
90-day period following the occurrence of a Registration Default and until it
is waived or cured; and the per annum interest rate will increase by an
additional .25% for each subsequent 90-day period during which the Registration
Default remains uncured, up to a maximum additional interest rate of 2.0% per
annum, provided, however, that only Holders of Private Exchange Notes shall be
entitled to receive Additional Interest as a result of a Registration Default
pursuant to clause (iii) or (iv), provided, further, that (1) upon the filing
of the Exchange Registration Statement or the Initial Shelf Registration (in
the case of (i) above), (2) upon the effectiveness of the Exchange Registration
Statement or a Shelf Registration (in the case of (ii) above), (3) upon the
filing of the Shelf Registration (in the case of (iii) above), (4) upon the
effectiveness of the Shelf Registration (in the case of (iv) above), or
(5) upon the exchange of Exchange Notes for all Notes tendered or the
effectiveness of a Shelf Registration (in the case of (v)(A) above), or upon
the subsequent effectiveness of the Exchange Registration Statement which had
ceased to remain effective or the effectiveness of a Shelf Registration (in the
case of (v)(B) above), or upon the subsequent effectiveness of the Shelf
Registration which had ceased to remain effective (in the case of (v)(C)
above), Additional Interest on the Notes as a result of such clause (i), (ii),
(iii), (iv) or (v) (or the relevant subclause thereof), as the case may be,
shall cease to accrue and the interest rate on the Notes will revert to the
interest rate originally borne by the Notes.
<PAGE> 14
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(b) The Issuers shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be
payable in cash semi-annually on each August 15 and February 15 (to the Holders
of record on the August 1 and February 1 immediately preceding such dates),
commencing with the first such date occurring after any such Additional
Interest commences to accrue and until such Registration Default is cured, by
depositing with the Trustee, in trust for the benefit of such Holders,
immediately available funds in sums sufficient to pay such Additional Interest.
The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the Registrable
Notes, multiplied by a fraction, the numerator of which is the number of days
such Additional Interest rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months and, in the case
of a partial month, the actual number of days elapsed), and the denominator of
which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant to
Section 2 or 3 hereof, the Issuers shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto the Issuers
shall:
(a) Prepare and file with the SEC, as provided herein, a Registration
Statement or Registration Statements as prescribed by Section 2 or 3, and
use their respective best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein,
provided that, if (1) such filing is pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before filing any Registration Statement or Prospectus
or any amendments or supplements thereto, the Issuers shall, if requested,
furnish to and afford the Holders of the Registrable Notes covered by such
Registration Statement and each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriter(s), if any, a
reasonable
<PAGE> 15
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opportunity to review copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed (to the extent practicable, at least 5 business days prior
to such filing). The Issuers shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to the filing of such
document, if the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement, or such Participating
Broker-Dealer, as the case may be, their counsel, or the managing
underwriter(s), if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement, as
the case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable Period,
as the case may be; cause the related Prospectus to be supplemented by any
prospectus supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act and the
Exchange Act applicable to them with respect to the disposition of all
securities covered by such Registration Statement as so amended or in such
Prospectus as so supplemented and with respect to the subsequent resale of any
securities being sold by a Participating Broker-Dealer covered by any such
Prospectus; the Issuers shall be deemed not to have used their best efforts to
keep a Registration Statement effective during the Applicable Period if any of
them voluntarily takes any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers seeking to
sell Exchange Notes not being able to sell such Registrable Notes or such
Exchange Notes during that period unless such action is required by applicable
law or unless the Issuers comply with this Agreement, including without
limitation, the provisions of clauses 5(c)(v) and (vi) below.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, notify the selling
<PAGE> 16
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Holders of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriter(s), if any, promptly
(but in any event within two business days), and confirm such notice in
writing, (i) when a Prospectus or any prospectus supplement or post-effective
amendment thereto has been filed, and, with respect to a Registration Statement
or any post-effective amendment thereto, when the same has become effective
under the Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment thereto including financial
statements and schedules, documents incorporated or deemed to be incorporated
by reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary Prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
Prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Issuers contained in
any agreement (including any underwriting agreement) contemplated by Section
5(n) below cease to be true and correct, (iv) of the receipt by either of the
Issuers of any notification with respect to the suspension of the qualification
or exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event or any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in, or amendments or supplements to,
such Registration Statement, Prospectus or documents so that, in the case of
the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the
case of the Prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not
<PAGE> 17
-15-
misleading, and (vi) of either Issuer's reasonable determination that a
post-effective amendment to a Registration Statement would be necessary or
appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use their best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable Notes
or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale
in any jurisdiction, and, if any such order is issued, to use their best
efforts to obtain the withdrawal of any such order as promptly as practicable.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter(s), if any, or the Holders of a majority
in aggregate principal amount of the Registrable Notes being sold in connection
with an underwritten offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the managing
underwriter(s), if any, or such Holders reasonably request to be included
therein and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, furnish to each selling Holder of Registrable Notes who so
requests and to each such Participating Broker-Dealer who so requests and to
counsel and the managing underwriter(s), if any, without charge, one conformed
copy of the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and schedules,
and, if requested, all documents incorporated
<PAGE> 18
-16-
or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, deliver to each selling Holder of Registrable Notes, or each
such Participating Broker-Dealer, as the case may be, their counsel, and the
managing underwriter or underwriters, if any, without charge, as many copies of
the Prospectus or Prospectuses (including each form of preliminary Prospectus)
and each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject to the
last paragraph of this Section_5, each of the Issuers hereby consents to the
use of such Prospectus and each amendment or supplement thereto by each of the
selling Holders of Registrable Notes or each such Participating Broker-Dealer,
as the case may be, and the managing underwriter or underwriters or agents, if
any, and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers of
the Exchange Notes pursuant to, such Prospectus and any amendment or supplement
thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use their best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification of (or exemption from such registration or
qualification), such Registrable Notes for offer and sale under the securities
or Blue Sky laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters, if any, reasonably request in writing, provided that where
Exchange Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, the Issuers agree to cause
their counsel to perform Blue Sky investigations and file registrations and
qualifications
<PAGE> 19
-17-
required to be filed pursuant to this Section 5(h); keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; provided that neither of the Issuers shall be required to (A)
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C) subject
itself to taxation in any such jurisdiction where it is not otherwise so
subject.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Notes and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Notes to be sold, which certificates
shall not bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company; and enable such Registrable Notes to
be in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or Holders may reasonably request.
(j) Use their best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller
or sellers thereof or the managing underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be required
solely as a consequence of the nature of such selling Holder's business, in
which case each of the Issuers will cooperate in all reasonable respects with
the filing of such Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi), as promptly as reasonably practicable prepare and (subject
<PAGE> 20
-18-
to Section 5(a)) file with the SEC, at the joint and several expense of each of
the Issuers, a supplement or post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the
Exchange Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(l) Use their best efforts to cause the Registrable Notes covered by a
Registration Statement or the Exchange Notes, as the case may be, to be rated
with the appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement or the Exchange Notes, as the case may be, or the
managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i)_provide the Trustee with certificates
for the Registrable Notes or Exchange Notes, as the case may be, in a form
eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP
number for the Registrable Notes or Exchange Notes, as the case may be.
(n) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of debt securities similar to the Notes and
take all such other actions as are reasonably requested by the managing
underwriter(s), if any, in order to expedite or facilitate the registration or
the disposition of such Registrable Notes, and in such connection, (i) make
such representations and warranties to the managing underwriter or underwriters
on behalf of any underwriters, with respect to the business of the Company and
its subsidiaries and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in underwritten
offerings of debt securities similar to the Notes, and confirm the same if and
when requested; (ii) obtain opinions of counsel to the Issuers and updates
thereof in form and substance reasonably satisfactory to the managing
underwriter or underwriters, addressed to the managing underwriter or
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings of debt securities similar to the Notes and such other
matters as may be reasonably requested by the managing underwriter(s); (iii)
obtain "cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriter or underwriters from the
independent certified public accountants of the Issuers (and, if necessary, any
other independent certified public accountants of any subsidiary of any of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to the managing underwriter or underwriters
on behalf of any underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwrit-
<PAGE> 21
-19-
ten offerings of debt securities similar to the Notes, and confirm the same if
and when requested; (ii) obtain opinions of counsel to the Issuers and updates
thereof in form and substance reasonably satisfactory to the managing
underwriter or underwriters, addressed to the managing underwriter or
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings of debt securities similar to the Notes and such other
matters as may be reasonably requested by the managing underwriter(s); (iii)
obtain "cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing under or underwriters from the
independent certified public accountants of the Issuers (and, if necessary,
any other independent certified public accountants of any subsidiary of any of
the Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to the managing underwriter or underwriters
on behalf of any underwriters, such letter to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings of debt securities similar to the Notes and such
other matters may be reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures no less favorable than
those set forth in Section 7 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, make available for inspection by any selling Holder of such
Registrable Notes being sold, or each such Participating Broker-Dealer, as the
case may be, the managing underwriter or underwriters participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or other
agent
<PAGE> 22
-20-
retained by any such selling Holder or each such Participating Broker-Dealer,
as the case may be (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries (collectively, the "Records") as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities, and
cause the officers, directors and employees of the Company and its subsidiaries
to supply all information in each case reasonably requested by any such
Inspector in connection with such Registration Statement. Records which the
Company determines, in good faith, to be confidential and any Records which
they notify the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to avoid or
correct a material misstatement or material omission in such Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction or (iii) the information
in such Records has been made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer or
underwriter will be required to agree that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be used
by it as the basis for any market transactions in the securities of the Issuers
or for any purpose other than in connection with such Registration Statement
unless and until such is made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer will
be required to further agree that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give prompt notice
to the Company and allow the Company to undertake appropriate action to prevent
disclosure of the Records deemed confidential at their expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange Registration
Statement or the first Registration Statement relating to the Registrable
Notes; and in connection therewith, cooperate with the trustee under any such
indenture and the Holders of the Registrable Notes, to effect such changes to
such indenture as may be required for
<PAGE> 23
-21-
such indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use its best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45
days after the end of any 12-month period (or 90 days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Notes are sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuers, in a form customary for
underwritten offerings of debt securities similar to the Notes, addressed to
the Trustee for the benefit of all Holders of Registrable Notes participating
in the Exchange Offer or the Private Exchange, as the case may be, and which
includes an opinion that (i)_each of the Issuers has duly authorized, executed
and delivered the Exchange Notes and Private Exchange Notes and the related
indenture and (ii)_each of the Exchange Notes or the Private Exchange Notes, as
the case may be, and related indenture constitute a legal, valid and binding
obligation of each of the Issuers, enforceable against each of the Issuers in
accordance with its respective terms (with customary exceptions).
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuers (or to such
other Person as directed by the Issuers) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Issuers shall mark, or
cause to be marked, on such Registrable Notes that such Registrable Notes are
being canceled in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be; and, in no event shall such
<PAGE> 24
-22-
Registrable Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the
"NASD").
(u) Use their respective best efforts to take all other reasonable
steps necessary to effect the registration of the Registrable Notes
covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, as the
Issuers may, from time to time, reasonably request. The Issuers may exclude
from such registration the Registrable Notes of any seller or Participating
Broker-Dealer who fails to furnish such information within a reasonable time
after receiving such request. Each seller as to which any Shelf Registration
is being effected agrees to furnish promptly to the Issuers all information
required to be disclosed in order to make the information previously furnished
to the Issuers by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold
by such Participating Broker-Dealer, as the case may be, that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Registrable Notes covered by such
Registration Statement or Prospectus or Exchange Notes to be sold by such
Holder or Participating Broker-Dealer, as the case may be, until such Holder's
or Participating Broker-Dealer's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(k), or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and has received copies of any amendments or supplements
thereto. In the event the Company shall give any such
<PAGE> 25
-23-
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to
be sold by such Holder or Participating Broker-Dealer, as the case may be,
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) or (y) the Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers,
jointly and severally, whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, including, without limitation, (i)
all registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions in the United States (x) where the Holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h), in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing Prospectuses if the printing of
Prospectuses is reasonably requested by the managing underwriter or
underwriters, if any, or, in respect of Registrable Notes or Exchange Notes to
be sold by any Participating Broker-Dealer during the Applicable Period, if
reasonably requested by the Holders of a majority in aggregate principal amount
of the Registrable Notes included in any Registration Statement or of such
Exchange Notes, as the case may be), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Issuers and fees and
disbursements of special counsel for the sellers of Registrable Notes (subject
to the provisions of Section 6(b)), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(n)(iii)
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or inci-
<PAGE> 26
-24-
dent to such performance), (vi) rating agency fees, (vii) Securities Act
liability insurance, if the Issuers desire such insurance, (viii) fees and
expenses of the Trustee, (ix) fees and expenses of all other Persons retained
by the Issuers, (x) internal expenses of the Issuers (including, without
limitation, all salaries and expenses of officers and employees of the Issuers
performing legal or accounting duties), (xi) the expense of any annual audit,
(xii) the fees and expenses incurred in connection with any listing of the
securities to be registered on any securities exchange and (xiii) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures
and any other documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Issuers,
jointly and severally, shall reimburse the Holders of the Registrable Notes
being registered in such registration for the reasonable fees and disbursements
of not more than one counsel (in addition to appropriate local counsel) chosen
by the Holders of a majority in aggregate principal amount of the Registrable
Notes to be included in such Registration Statement and other reasonable
out-of-pocket expenses of the Holders of Registrable Notes incurred in
connection with the registration of the Registrable Notes. The Issuers shall
not have any obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities.
7. Indemnification
(a) Each of the Issuers, jointly and severally, agrees to indemnify
and hold harmless each Holder of Registrable Notes and each Participating
Broker-Dealer selling Exchange Notes during the Applicable Period, the officers
and directors of each such Person, and each Person, if any, who controls any
such Person within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "Participant"), from and against any
and all losses, claims, damages and liabilities (including, without limitation,
the reasonable legal fees and other expenses actually incurred in connection
with any suit, action or proceeding or any claim asserted) caused by, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary Prospectus, or caused by, arising out
of or based upon any omission or alleged
<PAGE> 27
-25-
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in conformity
with information relating to any Participant furnished to the Company in
writing by such Participant expressly for use therein; provided that the
foregoing indemnity with respect to any preliminary Prospectus shall not inure
to the benefit of any Participant (or to the benefit of an officer or director
of such Participant or any Person controlling such Participant) from whom the
Person asserting any such losses, claims, damages or liabilities purchased
Registrable Notes or Exchange Notes if such untrue statement or omission or
alleged untrue statement or omission made in such preliminary Prospectus is
eliminated or remedied in the related Prospectus (as amended or supplemented if
the Company shall have furnished any amendments or supplements thereto) and a
copy of the related Prospectus (as so amended or supplemented) shall have been
furnished by such Participant at or prior to the sale of such Registrable Notes
or Exchange Notes, as the case may be, to such Person.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Issuers, their respective directors
and officers and each Person who controls either of the Issuers within the
meaning of Section_15 of the Securities Act or Section 20 of the Exchange Act
to the same extent as the foregoing indemnity from the Issuers to each
Participant and shall have the rights and duties given to the Issuers in
paragraph (c) of this Section 7 (except that if the Issuers shall have assumed
the defense thereof, such Participant shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such Participant),
but only with reference to information relating to such Participant furnished
to the Issuers in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary Prospectus. The liability of any Participant under this
paragraph (b) shall in no event exceed the proceeds received by such
Participant from sales of Registrable Notes or Exchange Notes giving rise to
such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of
<PAGE> 28
-26-
which indemnity may be sought pursuant to either paragraph (a) or (b) of this
Section 7, such Person (the "Indemnified Person") shall promptly notify the
Person against whom such indemnity may be sought (the "Indemnifying Person") in
writing, and the Indemnifying Person, upon request of the Indemnified Person,
shall retain one counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others the Indemnifying Person may
reasonably designate in such proceeding and shall pay the reasonable fees and
expenses incurred by such counsel related to such proceeding. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed in writing to the contrary, (ii) the
Indemnifying Person has failed to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding (including
any impleaded parties) include both the Indemnifying Person and the Indemnified
Person and such Indemnified Person shall have been advised by counsel that
there may be one or more legal defenses available to it which are different
from or additional to those available to any such Indemnifying Person. It is
understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate law firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes
and Exchange Notes sold by all such Participants and any such separate firm for
the Issuers, their directors, their officers and such control Persons of the
Issuers shall be designated in writing by the Issuers. The Indemnifying Person
shall not be liable for any settlement of any proceeding ef-
<PAGE> 29
-27-
fected without its prior written consent, but if settled with such consent or
if there is a final judgment for the plaintiff for which the Indemnified Person
is entitled to indemnification pursuant to this Agreement, the Indemnifying
Person agrees to indemnify any Indemnified Person as provided in Section 7 from
and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified Person
shall have requested an Indemnifying Person to reimburse the Indemnified Person
for reasonable fees and expenses incurred by counsel as contemplated by the
third sentence of this paragraph, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 60 days after receipt
by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement; provided, however, that the
Indemnifying Person shall not be liable for any settlement effected without its
consent pursuant to this sentence if the Indemnifying Party is contesting, in
good faith, the request for reimbursement. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional release (or any other release reasonably acceptable to the
Indemnified Person) of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraphs (a) and (b) of
this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein (other than as a
result of the proviso set forth in Section 7(a)), then each Indemnifying Person
under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Issuers on
the one hand and the Participants on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Issuers on the one hand and the Participants on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Issuers or by
the Participants and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by
any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result
<PAGE> 30
-28-
of the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, in no event
shall a Participant be required to contribute any amount in excess of the
amount by which proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes exceeds the amount of any damages that such Participant
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
Each of the Issuers covenants that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any
time the Company is not required to file such reports, it will, upon the
request of any Holder of Registrable Notes, make publicly available other
information of a like nature so long as necessary to permit sales pursuant to
Rule 144 or Rule 144A. Each of the Issuers further covenants that so long as
any Registrable Notes remain outstanding to make available to any Holder of
Registrable Notes in connection with any sale thereof, the information required
by Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Registrable Notes pursuant to (a)_such Rule 144A, or (b) any similar rule or
regulation hereafter adopted by the SEC.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banking firm or firms
that will underwrite the offering and the manager or managers that will manage
the offering will be selected by the Holders of a majority in aggregate
<PAGE> 31
-29-
principal amount of such Registrable Notes included in such offering and shall
be reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any underwritten
offering hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by either Issuer of any of its
obligations under this Agreement, other than the occurrence of an event which
requires payment of Additional Interest, each Holder of Registrable Notes, in
addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. Each of the Issuers, jointly
and severally, agree that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agrees, jointly and severally, that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) Enforcement. The Trustee shall be authorized to enforce the
provisions of this Agreement for the ratable benefit of the Holders.
(c) No Inconsistent Agreements. Neither of the Issuers has
entered, as of the date hereof, and the Issuers shall not enter, after the date
of this Agreement, into any agreement with respect to any of their securities
that is inconsistent with the rights granted to the Holders of Registrable
Notes in this Agreement or otherwise conflicts with the provisions hereof.
Neither of the Issuers has entered or will enter into any agreement with
respect to any of its securities which will grant to any Person piggy-back
rights with respect to a Registration Statement required to be filed under this
Agreement.
(d) Adjustments Affecting Registrable Notes. Neither of the
Issuers shall, directly or indirectly, take any action with respect to the
Registrable Notes as a class that
<PAGE> 32
-30-
would adversely affect the ability of the Holders of Registrable Notes to
include such Registrable Notes in a registration undertaken pursuant to this
Agreement.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Issuers have obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount of Registrable Notes. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does
not directly or indirectly affect, impair, limit or compromise the rights of
other Holders of Registrable Notes may be given by Holders of at least a
majority in aggregate principal amount of the Registrable Notes being sold by
such Holders pursuant to such Registration Statement, provided that the
provisions of this sentence may not be amended, modified or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(f) Notices. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, next-day courier or telecopier:
(i) if to a Holder of Registrable Notes or any Participating
Broker-Dealer, at the most current address given by the Trustee to the
Issuers; and if to the Issuers, to James Cable Partners, L.P. and James
Cable Finance Corp., 710 North Woodward Avenue, Suite 180, Bloomfield
Hills, Michigan 48304, Attention: Chief Financial Officer and with a copy
to Miller, Canfield, Paddock and Stone, P.L.C., 1400 North Woodward
Avenue, Suite 100, Bloomfield Hills, Michigan 48304, Attention: J. Kevin
Trimmer.
All such notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered; (ii) five business
days after being deposited in the mail, postage prepaid, if mailed; (iii) one
business day after being timely delivered to a next-day courier;
<PAGE> 33
-31-
and (iv) when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Registrable Notes.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction.
(l) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final expression
of their agreement, and is intended to be a complete and exclusive statement
of the agree-
<PAGE> 34
-32-
ment and understanding of the parties hereto in respect of the subject matter
contained herein and therein.
(m) Joint and Several Obligations. Unless otherwise stated herein,
each of the obligations of the Issuers under this Agreement shall be joint and
several obligations of each of them.
(n) Notes Held by the Issuers or their Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes
is required hereunder, Registrable Notes held by the Issuers or their
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
<PAGE> 35
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above
JAMES CABLE PARTNERS, L.P.
By: James Communications Partners,
a Michigan co-partnership,
its General Partner
By: Jamesco Inc., a Michigan
corporation, its Partner
By: /s/ William R. James
----------------------------
Name: William R. James
Title: President
JAMES CABLE FINANCE CORP.,
a Michigan corporation
By: /s/ William R. James
-----------------------------
Name: William R. James
Title: President
<PAGE> 36
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ William P. Phoenix
----------------------------
Name: William P. Phoenix
Title: Managing Director
FIRST CHICAGO CAPITAL MARKETS, INC.
By: Thomas H. Gordy
-----------------------------
Name: Thomas H. Gordy
Title: Director
<PAGE> 1
EXHIBIT 10.3
1994 GENERAL PARTNER
INCENTIVE COMPENSATION AGREEMENT
THIS 1994 GENERAL PARTNER INCENTIVE COMPENSATION AGREEMENT is dated
as of December 31, 1994 between James Cable Partners, L.P., a Delaware limited
partnership (the "Partnership") and James Communications Partners, a Michigan
general partnership and the general partner of the Partnership (the "General
Partner").
W I T N E S S E T H
WHEREAS, the General Partner and those parties admitted as limited
partners of the Partnership (the "Limited Partners") have previously entered
into the First Amended and Restated Agreement of Limited Partnership dated as
of September 21, 1992, as amended from time to time (the "Limited Partnership
Agreement"); and
WHEREAS, the General Partner, as the general partner of the
Partnership, is entitled to receive certain compensation for its services to
the Partnership, reimbursement of certain expenses and certain other payments
in accordance with the terms and conditions of the Limited Partnership
Agreement; and
WHEREAS, the Limited Partners have determined that it would be in the
best interests of the Partnership to provide for compensation for the General
Partner in addition to that already provided under the Limited Partnership
Agreement, in order to create incentives for the General Partner to operate the
cable television systems owned by the Partnership so as to increase cash flow
from current operations while at the same time controlling expenses incurred in
the ordinary course of Partnership operations;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
1.1 "Company Cash Flow" means System Cash Flow less management
fees paid to the General Partner, legal and accounting expenses incurred in the
ordinary course of Partnership operations and non-system expenses incurred in
the ordinary course of Partnership operations.
1.2 "General Partner" means James Communications Partners, a
Michigan general partnership, as the general partner of the Partnership.
<PAGE> 2
1.3 "Incentive Compensation Pool" means two percent (2%) of
Partnership Net Value, determined as of that date on which the Partnership no
longer owns any of the Systems.
1.4 "Limited Partners" means the parties admitted as limited
partners of the Partnership in accordance with the terms of the Limited
Partnership Agreement.
1.5 "Limited Partnership Agreement" means the First Amended and
Restated Agreement of Limited Partnership dated as of September 21, 1992, as
amended from time to time.
1.6 "Partnership" means James Cable Partners, L.P., a Delaware
limited partnership.
1.7 "Partnership Advisory Board" means the Partnership Advisory
Board created pursuant to the Limited Partnership Agreement.
1.8 "Partnership Net Value" means the fair market value of all of
the assets of the Partnership, less Partnership debts and other accrued
liabilities, other than those owed to Partners, and without regard to any
liability under this Agreement.
1.9 "System Cash Flow" means the revenues derived from the Systems
less system expenses. System Cash Flow for any year shall be revised or
restated, as the case may be, to take into account any reduction caused by any
rate reductions or rebates undertaken as a result of action taken by the
Federal Communication Commission or any state or local body or agency which
exercises jurisdiction or regulatory authority over the Systems.
1.10 "Systems" means the cable television systems owned and
operated by the Partnership.
SECTION 2. INCENTIVE COMPENSATION PAYABLE TO GENERAL PARTNER
2.1 Payment of Incentive Compensation Award. In the event that
all or any of the Systems are sold, exchanged or otherwise disposed of, the
General Partner shall, at the time of the last such sale, exchange or other
disposition, receive a cash incentive compensation award equal to its vested
interest in the Incentive Compensation Pool. The Incentive Compensation Pool
shall be determined as of the date of closing of the last of any such sale,
exchange or other disposition but after giving effect to any such transaction.
The incentive compensation award shall be paid to the General Partner after
payment of or appropriate reservation for liabilities or debts of the
Partnership but prior to any payment or distribution to Partners on, for or
with respect to their interests in the Partnership. The incentive compensation
award shall, when paid, be treated as additional compensation paid to the
General Partner in such year for financial and tax purposes and shall not
-2-
<PAGE> 3
reduce the General Partner's capital account in the Partnership. Once earned
pursuant to the terms of this Agreement, the General Partner's interest in an
incentive compensation award shall be vested and irrevocable and the General
Partner need not be a Partner or the general partner of the Partnership at the
time of payment of such award. In no event shall the payment of an the
incentive compensation award be conditioned upon Partnership income or the lack
thereof in the year of payment.
SECTION 3. VESTING
3.1 Vesting Schedule. The General Partner shall become vested in
its incentive compensation award according to the following schedule:
Percent Performance
Vested Targets
------- -----------
100% Meet or exceed System
Cash Flow and Company
Cash Flow targets
for 1995, 1996 and 1997
66-2/3% Meet System Cash Flow and Company Cash
Flow targets for both 1996 and 1997 but
not 1995
33-1/3% Meet System Cash Flow and Company Cash
Flow targets for 1997 but not 1996
For purposes of this Agreement, the System Cash Flow targets are:
Year Target
---- ------
1995 $ 17,000,000
1996 $ 17,500,000
1997 $ 18,000,000
For purposes of this Agreement, the Company Cash Flow targets are:
Year Target
---- ------
1995 $ 14,800,000
1996 $ 15,250,000
1997 $ 15,700,000
3.2 Adjustments to Targets. The above targets shall be adjusted by
the Partnership Advisory Board to take into account any additions to or
subtractions from the number of Systems. In addition, the above targets shall
be adjusted by the Partnership
-3-
<PAGE> 4
Advisory Board, both prospectively and retroactively, to reflect any rate
reductions undertaken as a result of action taken by the Federal Communication
Commission or any state or local body or agency which exercises jurisdiction or
regulatory authority over the Systems.
3.3 Vesting on Early Sale. If some or all of the Systems are
sold, exchanged, or otherwise disposed of prior to January 1, 1998, the
following special vesting rules shall apply:
(i) If some (but not all) of the Systems are sold, exchanged
or otherwise disposed of prior to January 1, 1998, the General Partner shall
have earned the vested portion of the incentive compensation award attributable
to the System or Systems sold, exchanged or otherwise disposed of. For this
purpose, the General Partner's entitlement to an incentive compensation award
under this Agreement attributable to such System or Systems shall be deemed to
have become vested by one-third for each year in which the Partnership has met
or exceeded the System Cash Flow and Company Cash Flow targets set forth in
Section 3.1 above.
(ii) If all of the Systems are sold, exchanged or otherwise
disposed of prior to January 1, 1998, the General Partner shall become vested
in the entire incentive compensation award payable under this Agreement if the
Partnership has met or exceeded the System Cash Flow and Company Cash Flow
targets set forth in Section 3.1 above for each year which ends prior to such
sale, exchange or disposition.
Except for the proration described above, any incentive compensation award
attributable to a sale, exchange or disposition prior to January 1, 1998 shall
otherwise be computed and paid pursuant to Section 2 above.
SECTION 4. WITHDRAWAL OR REMOVAL OF GENERAL PARTNER
If the General Partner withdraws voluntarily as general partner of
the Partnership or is removed pursuant to Section 7.3 of the Limited
Partnership Agreement, its right to receive any incentive compensation under
this Agreement shall cease. However, if the General Partner otherwise ceases
to be the general partner of the Partnership for any other reason at any time
prior to the time all of the Systems are sold, exchanged or otherwise disposed
of, it will be entitled to receive that portion of its incentive compensation
award that vested prior to such cessation. For this purpose, the General
Partner's entitlement to an incentive compensation award under this Agreement
shall be deemed to have become vested by one-third for each year in which the
Partnership has met or exceeded the System Cash Flow and Company Cash Flow
targets set forth in Section 3.1 above. In such event, the determination of
the incentive compensation award and the payment of that award shall be
determined pursuant to Section 2 above.
-4-
<PAGE> 5
SECTION 5. AGREEMENT UNFUNDED
Nothing contained in this Agreement shall create or be construed to
create a trust of any kind. To the extent that the General Partner earns a
right to incentive compensation under this Agreement, such right shall be no
greater than the right of an unsecured general creditor of the Partnership.
All payments of incentive compensation hereunder shall be made from the general
assets of the Partnership and no separate fund shall be established and no
segregation of assets shall be made to assure payment of any award earned
pursuant to this Agreement.
SECTION 6. AMENDMENTS AND WAIVERS
Any provision of this Agreement may be amended or waived if, but only
if, such amendment or waiver is in writing and signed by the Partnership and
the General Partner, whether or not the General Partner is at that time the
general partner of the Partnership. Any amendment or waiver that would have
the effect of increasing the amount payable to the General Partner hereunder
shall be effective only if the Limited Partnership Agreement shall have been
amended to permit the Partnership to enter into such amendment or waiver.
SECTION 7. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
SECTION 8. ASSIGNMENT
The General Partner shall have the right, directly or indirectly, to
assign, alienate or encumber any rights or amounts (but not duties) that are or
may become payable hereunder.
SECTION 9. CONSTRUCTION
9.1 Authority of Partnership Advisory Board. The Partnership
Advisory Board shall have full discretionary power and authority to construe,
interpret and administer this Agreement (including but not limited to the
System Cash Flow and Company Cash Flow targets set forth in Section 3.1 above)
and its provisions. The Partnership Advisory Board also shall have the power
to correct any defect, supply any omission, or reconcile any inconsistency in
such manner and to such extent as the Partnership Advisory Board shall deem
proper to carry out and put into effect the spirit and objectives of this
Agreement. All decisions, actions or interpretations of the Board shall be
final, conclusive and binding upon all parties.
9.2 Other Compensation to General Partner. The incentive
compensation award prescribed in this award is to be in addition to
-5-
<PAGE> 6
such other compensation, expense reimbursement or distribution to which the
General Partner is entitled under the Limited Partnership Agreement. The award
prescribed in this agreement is intended to award the General Partner for
superior operating results. The Partnership and the General Partner will, at
an appropriate time in the future, enter into a separate sale incentive
compensation award designed to provide a special separate award to the General
Partner in the event of a sale of the Partnership's systems.
SECTION 10. MISCELLANEOUS
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures were upon
the same instrument. This Agreement shall become effective on the date when
(a) duly executed counterparts hereof have been signed by the Partnership and
the General Partner and (b) the Limited Partnership Agreement has been amended
to permit the Partnership to pay any amounts payable hereunder to the General
Partner. This Agreement shall be binding upon and inure to the benefit of the
heirs, executors, administrators, personal or legal representatives, successors
and assigns of the parties hereto. This Agreement is not in lieu of nor is it
intended to be an incentive mechanism to promote the sale of the Systems.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
JAMES CABLE PARTNERS, L.P.
By: JAMES COMMUNICATIONS
PARTNERS, its general partner and a
Michigan general partnership
By: JAMESCO, INC., a general
partner of James Communications
Partners and a Michigan
corporation
By: /s/ William R. James
------------------------------
William R. James
President of Jamesco, Inc.
-6-
<PAGE> 7
JAMES COMMUNICATIONS PARTNERS, the
general partner of James Cable
Partners, L.P. and a Michigan
general partnership
By: JAMESCO, INC., a general partner
of James Communications Partners
and a Michigan corporation
By: /s/ William R. James
------------------------------
William R. James
President of Jamesco, Inc.
-7-
<PAGE> 1
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the years in the
five-year period ended December 31, 1996 and for the six-month periods ended
June 30, 1996 and 1997 is presented below. The Company's pro forma ratio of
earnings to fixed charges is presented as if the consummation of the Refinancing
had occurred on January 1, 1996. Ratio of Earnings to Fixed Charges means the
ratio of pretax income from continuing operations (with certain adjustments
described below) to the total of: (i) interest and (ii) such portion of rental
expense as can be demonstrated to be representative of the interest factor in
the particular case.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
HISTORICAL:
EARNINGS BEFORE FIXED CHARGES:
<S> <C> <C> <C> <C> <C>
Net (Loss) Income ($19,415,953) ($11,502,923) ($8,805,280) ($6,061,759) ($1,894,244)
Add: Interest Expense 11,885,916 8,225,311 8,492,134 9,717,511 8,878,285
Interest factor in
rental expense 200,760 205,642 201,224 223,099 233,243
---------------------------------------------------------------------
EARNINGS BEFORE FIXED CHARGES ($7,329,277) ($3,071,970) ($111,922) $3,878,851 $7,217,284
=====================================================================
FIXED CHARGES:
Interest Expense $11,885,916 $8,225,311 $8,492,134 $9,717,511 $8,878,285
Interest factor in rental
expense 200,760 205,642 201,224 223,099 233,243
---------------------------------------------------------------------
TOTAL FIXED CHARGES $12,086,676 $ 8,430,953 $8,693,358 $9,940,610 $9,111,528
=====================================================================
RATIO OF EARNINGS TO FIXED
CHARGES - - - - -
DEFICIENCY IN EARNINGS AVAILABLE
TO COVER FIXED CHARGES $19,415,953 $11,502,923 $8,805,280 $6,061,759 $1,894,244
=====================================================================
ADJUSTED DATA:
EARNINGS BEFORE FIXED CHARGES:
Net (Loss) Income ($4,353,959)
Add: Interest Expense 11,338,000
Interest factor in
rental expense 233,243
------------
EARNINGS BEFORE FIXED CHARGES $ 7,217,284
============
FIXED CHARGES:
Interest Expense $11,338,000
Interest factor in rental expense 233,243
------------
$11,571,243
TOTAL FIXED CHARGES ============
RATIO OF EARNINGS TO FIXED CHARGES --
DEFICIENCY IN EARNINGS AVAILABLE TO
COVER FIXED CHARGES $ 4,353,959
============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------------
HISTORICAL: 1996 1997
EARNINGS BEFORE FIXED CHARGES: ---- ----
<S> <C> <C>
Net (Loss) Income ($1,025,414) $26,506
Add: Interest Expense 4,604,798 4,268,461
Interest factor in rental expense 115,653 123,184
-----------------------------
EARNINGS BEFORE FIXED CHARGES $3,695,037 $4,418,151
=============================
FIXED CHARGES:
Interest Expense $4,604,798 $4,268,461
Interest factor in rental expense 115,653 123,184
-----------------------------
TOTAL FIXED CHARGES $4,720,451 $4,391,645
=============================
RATIO OF EARNINGS TO FIXED CHARGES - 1.0x
DEFICIENCY IN EARNINGS AVAILABLE
TO COVER FIXED CHARGES $1,025,414 -
=============================
ADJUSTED DATA:
EARNINGS BEFORE FIXED CHARGES:
Net (Loss) Income ($1,368,798)
Add: Interest Expense 5,663,765
Interest factor in rental
expense 123,184
------------
EARNINGS BEFORE FIXED CHARGES $4,418,151
============
FIXED CHARGES:
Interest Expense $5,663,765
Interest factor in rental expense 123,184
------------
TOTAL FIXED CHARGES $5,786,949
============
RATIO OF EARNINGS TO FIXED EARNINGS --
DEFICIENCY IN EARNINGS AVAILABLE TO
COVER FIXED CHARGES $1,368,798
============
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of James Cable Partners,
L.P. and James Cable Finance Corp. on Form S-4 of our reports dated July 3,
1997, appearing in the Prospectus, which is part of this Registration
Statement, and to the references to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
Deloitte & Touche LLP
Deloitte & Touche LLP
Detroit, Michigan
September 8, 1997
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
None
(Name, address and telephone number of agent for service)
--------------------------
JAMES CABLE PARTNERS, L.P.
(Exact name of obligor as specified in its charter)
Delaware 38-2778219
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
JAMES CABLE FINANCE CORP.
(Exact name of obligor as specified in its charter)
Michigan 38-3182724
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
As to both obligors:
710 North Woodward Avenue 48304
Suite 180 (Zip code)
Bloomfield Hills, Michigan
(Address of principal executive offices)
10 3/4% Series B Senior Notes due 2004
(Title of the indenture securities)
<PAGE> 2
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
The obligor is currently not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and
15 of Form T-1 are not required under General Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the State of New
York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to Form
T-1 filed on September 15, 1995 with the Commission pursuant
to the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 3
16. List of Exhibits
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form
T-1 filed on September 15, 1995 with the Commission pursuant
to the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of August 22, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 8th of
September 1997.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: Louis P. Young
__________________________
Louis P. Young
Vice President
<PAGE> 4
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 8, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
__________________________
By: /S/Gerard F. Ganey
Senior Vice President
<PAGE> 5
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
JUNE 30, 1997
(IN THOUSANDS)
ASSETS
------
Cash and Due from Banks $ 83,529
Short-Term Investments 259,746
Securities, Available for Sale 924,165
Loans 1,437,342
Less: Allowance for Credit Losses 13,779
----------
Net Loans 1,423,563
Premises and Equipment 61,515
Other Assets 122,696
----------
TOTAL ASSETS $2,875,214
==========
LIABILITIES
-----------
Deposits:
Non-Interest Bearing $ 763,075
Interest Bearing 1,409,017
----------
Total Deposits 2,172,092
Short-Term Credit Facilities 404,212
Accounts Payable and Accrued Liabilities 132,213
----------
TOTAL LIABILITIES $2,708,517
==========
STOCKHOLDER'S EQUITY
--------------------
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 100,930
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 1,231
----------
TOTAL STOCKHOLDER'S EQUITY 166,697
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,875,214
==========
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
August 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000926283
<NAME> JAMES CABLE FINANCE CORP.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 100,813
<SECURITIES> 0
<RECEIVABLES> 3,321,742
<ALLOWANCES> 14,668
<INVENTORY> 0
<CURRENT-ASSETS> 3,623,831
<PP&E> 77,158,079
<DEPRECIATION> 69,153,781
<TOTAL-ASSETS> 32,844,132
<CURRENT-LIABILITIES> 6,696,114
<BONDS> 82,494,236
0
0
<COMMON> 0
<OTHER-SE> (56,346,218)
<TOTAL-LIABILITY-AND-EQUITY> 32,844,132
<SALES> 0
<TOTAL-REVENUES> 35,212,735
<CGS> 0
<TOTAL-COSTS> 28,001,215
<OTHER-EXPENSES> 227,479
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,878,285
<INCOME-PRETAX> (1,894,244)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,894,244)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,894,244)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
JAMES CABLE PARTNERS, L.P.
JAMES CABLE FINANCE CORP.
OFFER TO EXCHANGE
10 3/4% SERIES B SENIOR NOTES DUE 2004
FOR ANY AND ALL OF THE OUTSTANDING
10 3/4% SENIOR NOTES DUE 2004
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON , 1997
UNLESS THE OFFER IS EXTENDED
UNITED STATES TRUST COMPANY OF NEW YORK
(THE "EXCHANGE AGENT")
<TABLE>
<C> <C> <C>
By Overnight Courier: By Hand: By Registered or Certified
Mail:
UNITED STATES TRUST COMPANY UNITED STATES TRUST COMPANY UNITED STATES TRUST COMPANY
OF NEW YORK OF NEW YORK OF NEW YORK
770 BROADWAY, 13TH FLOOR 111 BROADWAY P.O. BOX 844
NEW YORK, NEW YORK 10003 LOWER LEVEL ATTN: CORPORATE TRUST
SERVICES
ATTN: CORPORATE TRUST ATTN: CORPORATE TRUST COOPER STATION
SERVICES SERVICES
NEW YORK, NEW YORK 10006 NEW YORK, NEW YORK 10276-0844
By Facsimile Transmission
(FOR ELIGIBLE INSTITUTIONS
ONLY):
(212) 420-6152
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the ones listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1997 (the "Prospectus") of James Cable Partners, L.P. and James
Cable Finance Corp. (the "Issuers") and this Letter of Transmittal, which
together constitute the Issuers' offer (the "Exchange Offer") to exchange $1,000
principal amount of their 10 3/4% Series B Senior Notes due 2004 (the "Exchange
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which the
Prospectus is a part, for each $1,000 principal amount of their outstanding
10 3/4% Senior Notes due 2004 (the "Notes"), respectively. The term "Expiration
Date" shall mean 5:00 p.m., New York City time, on , 1997, unless
the Issuers, in their reasonable judgment, extend the Exchange Offer, in which
case the term shall mean the latest date and time to which the Exchange Offer is
extended. Capitalized terms used but not defined herein have the meaning given
to them in the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
<PAGE> 2
List below the Notes to which this Letter of Transmittal relates. If the
space indicated is inadequate, the Certificate or Registration Numbers and
Principal Amounts should be listed on a separately signed schedule affixed
hereto.
<TABLE>
<CAPTION>
=====================================================================================================================
DESCRIPTION OF NOTES TENDERED HEREBY
- ---------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF CERTIFICATE AGGREGATE PRINCIPAL
REGISTERED OWNER(S) OR REGISTRATION AMOUNT REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN) NUMBERS* NOTES TENDERED**
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
TOTAL
- ---------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, the Holder will be deemed to have tendered the full aggregate principal amount
represented by such Notes. All tenders must be in integral multiples of $1,000.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be used if (i) certificates representing
Notes are to be physically delivered to the Exchange Agent herewith, (ii) tender
of Notes is to be made by book-entry transfer to an account maintained by the
Exchange Agent at The Depository Trust Company ("DTC"), pursuant to the
procedures set forth in "The Exchange Offer -- Book-Entry Transfer; ATOP" in the
Prospectus or (iii) tender of the Notes is to be made according to the
guaranteed delivery procedures described in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2.
Delivery of documents to a book-entry transfer facility does not constitute
delivery to the Exchange Agent. This Letter of Transmittal must be completed,
signed and delivered even if tender instructions are being transmitted through
the Book-Entry Transfer Facility Automated Tender Offer Program ("ATOP").
As used in this Letter of Transmittal, the term "Holder" with respect to the
Exchange Offer means any person in whose name Notes are registered on the books
of the Issuers or, with respect to interests in the Global Notes held by DTC,
any DTC participant listed in an official DTC proxy. The undersigned has
completed, executed and delivered this Letter of Transmittal to indicate the
action the undersigned desires to take with respect to the Exchange Offer.
Holders who wish to tender their Notes must complete this letter in its
entirety.
Holders of Notes that are tendering by book-entry transfer to the Exchange
Agent's account at DTC can execute the tender through ATOP, for which the
transaction will be eligible. DTC participants that are accepting the Exchange
Offer must transmit their acceptances to DTC, which will verify the acceptance
and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC
will then send an Agent's Message to the Exchange Agent for its acceptance. Each
DTC participant transmitting an acceptance of the Exchange Offer through the
ATOP procedures will be deemed to have agreed to be bound by the terms of this
Letter of Transmittal. Nevertheless, in order for such acceptance to constitute
a valid tender of the DTC participant's Notes, such participant must complete
and sign a Letter of Transmittal and deliver it to the Exchange Agent before the
Expiration Date.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
NAME OF TENDERING INSTITUTION
--------------------------------------------
ACCOUNT NUMBER
-----------------------------------------------------------
TRANSACTION CODE NUMBER
--------------------------------------------------
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date must tender their Notes according to the guaranteed
delivery procedure set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2.
<PAGE> 3
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
NAME OF REGISTERED HOLDER(S)
NAME OF ELIGIBLE INSTITUTION THAT GUARANTEED DELIVERY
---------------------------------------------------------------------------
IF DELIVERY BY BOOK-ENTRY TRANSFER:
ACCOUNT NUMBER
TRANSACTION CODE NUMBER
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
NAME
ADDRESS
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuers the principal amount of the Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
such Notes tendered hereby, the undersigned hereby exchanges, assigns and
transfers to, or upon the order, of, the Issuers all right, title and interest
in and to such Notes as are being tendered hereby, including all rights to
accrued and unpaid interest thereon as of the Expiration Date. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent the true and
lawful agent and attorney-in-fact of the undersigned (with full knowledge that
said Exchange Agent acts as the agent of the Issuers in connection with the
Exchange Offer) to cause the Notes to be assigned, transferred and exchanged.
The undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that when the same are
accepted for exchange, the Issuers will acquire good and unencumbered title to
the tendered Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim.
The undersigned represents to the Issuers that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, and (ii) neither the undersigned nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. If the undersigned or the person
receiving the Exchange Notes covered hereby is a broker-dealer that is receiving
the Exchange Notes for its own account in exchange for Notes that were acquired
as a result of market-making activities or other trading activities, the
undersigned acknowledges that it or such other person will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. The undersigned and any
such other person acknowledge that, if they are participating in the Exchange
Offer for the purpose of distributing the Exchange Notes, (i) they cannot rely
on the position of the staff of the Securities and Exchange Commission
enunciated in Exxon Capital Holdings Corporation (April 13, 1988), Morgan
Stanley & Co., Inc. (June 5, 1991) or similar no-action letters and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with the
resale transaction and (ii) failure to comply with such requirements in such
instance could result in the undersigned or any such other person incurring
liability under the Securities Act for which such persons are not indemnified by
the Issuers. If the undersigned or the person receiving the Exchange Notes
covered by this letter is an affiliate (as defined under Rule 405 of the
Securities Act) of the Issuers, the undersigned represents to the Issuers that
the undersigned understands and acknowledges that such Exchange Notes may not be
offered for resale, resold or otherwise transferred by the undersigned or such
other person without registration under the Securities Act or an exemption
therefrom.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Issuers to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Notes or transfer ownership of such Notes on the account books
maintained by a book-entry transfer facility. The undersigned further agrees
that acceptance of any tendered Notes by the Issuer and the issuance of Exchange
Notes in exchange therefor shall constitute performance in full by the Issuers
of their obligations under the Registration Rights Agreement and that the
Issuers shall have no further obligations or liabilities thereunder for the
registration of the Notes or the Exchange Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Issuers), as more particularly set forth in the Prospectus,
the Issuers may not be required to exchange any of the Notes tendered hereby
and, in such event, the Notes not exchanged will be returned to the undersigned
at the address shown below the signature of the undersigned.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal
<PAGE> 5
representatives, successors and assigns of the undersigned. Tendered Notes may
be withdrawn at any time prior to the Expiration Date.
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered Notes, and any Notes delivered herewith but not exchanged, will be
registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If an
Exchange Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the Exchange Note is to be mailed to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal at an address different than the address
shown on this Letter of Transmittal, the appropriate boxes of this Letter of
Transmittal should be completed. If Notes are surrendered by Holder(s) that have
completed either the box entitled "Special Registration Instructions" or the box
entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (defined in Instruction 2).
<PAGE> 6
==========================================================
SPECIAL REGISTRATION INSTRUCTIONS
To be completed ONLY if the
Exchange Notes are to be issued in
the name of someone other than the
undersigned.
Name:
-------------------------------------------------------------------------
Address:
----------------------------------------------------------------------
Book-Entry Transfer Facility Account:
------------------------------------------------------------------------------
Employee Identification or Social Security Number:
------------------------------------------------------------------------------
(Please print or type)
==========================================================
SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY if the Exchange
Notes are to be sent to someone other
than the undersigned, or to the
undersigned at an address other than
that shown under "Description of
Notes Tendered Hereby."
Name:
-------------------------------------------------------------------------
Address:
----------------------------------------------------------------------
------------------------------------------------------------------------------
(Please print or type)
REGISTERED HOLDER(S) OF NOTES OR DTC PARTICIPANT(S) SIGN HERE
(In addition, complete Substitute Form W-9 below)
X
--------------------------------------------------------------------------
X
--------------------------------------------------------------------------
(Signature(s) of Registered Holder(s) or DTC Participant(s))
Must be signed by registered holder(s) or DTC participant(s) exactly
as name(s) appear(s) on the Notes or on a security position listing as the
owner of the Notes or by person(s) authorized to become registered
holder(s) by properly completed bond powers transmitted herewith. If
signature is by attorney-in-fact, trustee, executor, administrator,
guardian, officer of a corporation or other person acting in a fiduciary
capacity, please provide the following information. (Please print or
type):
Name and Capacity (full title):
---------------------------------------------
Address (including zip code):
-----------------------------------------------
Area Code and Telephone Number:
---------------------------------------------
Taxpayer Identification or Social Security No.:
-----------------------------
Dated:
-----------
SIGNATURE GUARANTEE
(If Required -- See Instruction 5)
Authorized Signature:
-------------------------------------------------------
(Signature of Representative of Signature Guarantor)
Name and Title:
-------------------------------------------------------------
Name of Plan:
---------------------------------------------------------------
Area Code and Telephone Number:
---------------------------------------------
(Please print or type)
Dated:
--------------
- --------------------------------------------------------------------------------
<PAGE> 7
PAYOR'S NAME: JAMES CABLE PARTNER, L.P.
THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED
PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION
NUMBER ON THE FOLLOWING SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE NOT
SUBJECT TO BACKUP WITHHOLDING.
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT ______________________________
SUBSTITUTE RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number
FORM W-9 PART 2--Check the box if you are not subject to
DEPARTMENT OF backup withholding under the provisions of Section OR_____________________________
THE TREASURY 3406(A)(1)(C) of the Internal Revenue Code because Employer Identification Number
INTERNAL REVENUE SERVICE (1) you are exempt from backup withholding, (2)
you have not been notified that you are subject to
backup withholding as a result of failure to
report all interest or dividends or (3) the
Internal Revenue Service has notified you that you
are no longer subject to backup withholding. [ ]
-------------------------------------------------------------------------------------
PAYOR'S REQUEST FOR CERTIFICATION: Under penalties of perjury, I PART 3--
TAXPAYER IDENTIFICATION certify that the information provided on this form Awaiting TIN [ ]
NUMBER (TIN) is true, correct and complete.
Signature:_________________________________________
Date:______________________________________________
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY CASH PAYMENTS IN EXCESS OF $10.00 MADE TO YOU.
NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Officer or (b) I intend to mail
or deliver such an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.
SIGNATURE_______________________________________________ DATE ________________
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
All physically delivered Notes or confirmation of any book-entry transfer
to the Exchange Agent's account at a book-entry transfer facility of Notes
tendered by book-entry transfer, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date (as defined in the Prospectus). The method of delivery of this
Letter of Transmittal, the Notes and any other required documents is at the
election and risk of the Holder, and except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
If such delivery is by mail, it is suggested that registered mail with return
receipt requested, properly insured, be used.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their Notes, but whose Notes are not immediately
available and thus cannot deliver their Notes, the Letter of Transmittal or any
other required documents to the Exchange Agent (or comply with the procedures
for book-entry transfer) prior to the Expiration Date, may effect a tender if:
(a) the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the registration
number(s) of such Notes and the principal amount of Notes tendered,
stating that the tender is being made thereby and guaranteeing that,
within three New York Stock Exchange trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof), together with
the Notes (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at DTC) and any other documents required
by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at DTC) and all other documents required
by the Letter of Transmittal, are received by the Exchange Agent within
three New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above. Any Holder who wishes to tender Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery relating to such
Notes prior to the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the
<PAGE> 9
validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by a Holder who attempted to use the guaranteed delivery
procedures.
3. BENEFICIAL OWNER INSTRUCTIONS.
Only a Holder of Notes (i.e., a person in whose name Notes are registered
on the books of the registrar or, with respect to interests in the Global Notes
held by DTC, a DTC participant listed in an official DTC proxy), or the legal
representative or attorney-in-fact of a Holder, may execute and deliver this
Letter of Transmittal. Any beneficial owner of Notes who wishes to accept the
Exchange Offer must arrange promptly for the appropriate Holder to execute and
deliver this Letter of Transmittal on his or her behalf through the execution
and delivery to the appropriate Holder of the Instructions to Registered Holder
and/or DTC Participant from Beneficial Owner form accompanying this Letter of
Transmittal.
4. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Notes evidenced by a submitted
certificate is tendered, the tendering Holder should fill in the principal
amount tendered in the column entitled "Principal Amount Tendered" of the box
entitled "Description of Notes Tendered Hereby." A newly issued Note for the
principal amount of Notes submitted but not tendered will be sent to such Holder
as soon as practicable after the Expiration Date. All Notes delivered to the
Exchange Agent will be deemed to have been tendered in full unless otherwise
indicated.
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date, after which tenders of Notes are irrevocable. To
be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Notes to
be withdrawn (the "Depositor"), (ii) identify the Notes to be withdrawn
(including the registration number(s) and principal amount of such Notes, or, in
the case of Notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited), (iii) be signed by the Holder in the same manner
as the original signature on this Letter of Transmittal (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Notes register the transfer of such Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Issuers, whose
determination shall be final and binding on all parties. Any Notes so withdrawn
will be deemed not to have been validly tendered for purposes of the Exchange
Offer and no Exchange Notes will be issued with respect thereto unless the Notes
so withdrawn are validly retendered. Any Notes which have been tendered but
which are not accepted for exchange will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal, rejection
of tender or termination of Exchange Offer.
5. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered Holder(s) of the
Notes tendered hereby, the signature must correspond with the name(s) as written
on the face of the certificates without alteration or enlargement or any change
whatsoever. If this Letter of Transmittal is signed by a participant in DTC, the
signature must correspond with the name as it appears on the security position
listing as the owner of the Notes.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names are tendered, it will be
necessary to complete, sign and submit as many separate copies of this Letter of
Transmittal as there are different registrations of Notes.
<PAGE> 10
Signatures of this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Notes
tendered hereby are tendered (i) by a registered Holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If this Letter of Transmittal is signed by the registered Holder or Holders
of Notes (which term, for the purposes described herein, shall include a
participant in DTC whose name appears on a security listing as the owner of the
Notes) listed and tendered hereby, no endorsements of the tendered Notes or
separate written instruments of transfer or exchange are required. In any other
case, the registered Holder (or acting Holder) must either properly endorse the
Notes or transmit properly completed bond powers with this Letter of Transmittal
(in either case, executed exactly as the name(s) of the registered Holder(s)
appear(s) on the Notes, and, with respect to a participant in DTC whose name
appears on a security position listing as the owner of Notes, exactly as the
name of the participant appears on such security position listing), with the
signature on the Notes or bond power guaranteed by an Eligible Institution
(except where the Notes are tendered for the account of an Eligible
Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Issuers, proper evidence
satisfactory to the Issuers of their authority so to act must be submitted.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at DTC) in which the Exchange Notes or substitute Notes for
principal amounts not tendered or not accepted for exchange are to be issued (or
deposited), if different from the names and addresses or accounts of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the employer identification number or social security number of the person named
must also be indicated and the tendering Holder should complete the applicable
box.
If no instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the acting
Holder of the Notes or deposited at such Holder's account at DTC.
7. TRANSFER TAXES.
The Issuers shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Notes to them or their order pursuant to the Exchange
Offer. If a transfer tax is imposed for any other reason other than the transfer
and exchange of Notes to the Issuers, or their order pursuant to the Exchange
Offer, the amount of any such transfer taxes (whether imposed on the registered
Holder or any other person) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exception therefrom is not
submitted herewith, the amount of such transfer taxes will be collected from the
tendering Holder by the Exchange Agent.
Except as provided in this Instruction 7, it will not be necessary for
transfer stamps to be affixed to the Notes listed in this Letter of Transmittal.
8. WAIVER OF CONDITIONS.
The Issuers reserve the right, in their reasonable judgment, to waive, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
9. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any Holder whose Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
<PAGE> 11
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number(s) set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to James Cable Partners, L.P., 710 North
Woodward Avenue, Suite 180, Bloomfield Hills, Michigan 48304, telephone (248)
647-1080.
11. VALIDITY AND FORM.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Issuers in their sole discretion, which determination will be
final and binding. The Issuers reserve the absolute right to reject any and all
Notes not properly tendered or any Notes the Issuers' acceptance of which would,
in the opinion of counsel for the Issuers, be unlawful. The Issuers also reserve
the right, in their reasonable judgment, to waive any defects, irregularities or
conditions of tender as to particular Notes. The Issuers' interpretation of the
terms and conditions of the Exchange Offer (including the instructions in this
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Notes must be cured
within such time as the Issuers shall determine. Although the Issuers intend to
notify Holders of defects or irregularities with respect to tenders of Notes,
neither the Issuers, the Exchange Agent nor any other person shall incur any
liability for failure to give such notification. Tenders of notes will not be
deemed to have been made until such defects or irregularities have been cured or
waived. Any Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering Holder as soon as practicable
following the Expiration Date.
<PAGE> 12
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Notes is required to
provide the Exchange Agent with such Holder's correct TIN on Substitute Form W-9
above. If such Holder is an individual, the TIN is the Holder's social security
number. The Certificate of Awaiting Taxpayer Identification Number should be
completed if the tendering Holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future. If the Exchange
Agent is not provided with the correct TIN, the Holder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that are
made to such Holder with respect to tendered Notes may be subject to backup
withholding.
Certain Holders (including, among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a Holder, who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9 should
execute the certification following such Part 2. In order for a foreign Holder
to qualify as an exempt recipient, that Holder must submit to the Exchange Agent
a properly completed Internal Revenue Service Form W-9, signed under penalties
of perjury, attesting to that Holder's exempt status. Such forms can be obtained
from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the Holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a Holder with
respect to Notes tendered for exchange, the Holder is required to notify the
Exchange Agent of his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
Holder is awaiting a TIN) and that (i) each Holder is exempt, (ii) such Holder
has not been notified by the Internal Revenue Service that he or she is subject
to backup withholding as a result of failure to report all interest or dividends
or (iii) the Internal Revenue Service has notified such Holder that he or she is
no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the Notes.
If Notes are in more than one name or are not in the name of the actual Holder,
consult the instructions on Internal Revenue Service Form W-9, which may be
obtained from the Exchange Agent, for additional guidance on which number to
report.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
If the tendering Holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN or Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS)
OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR
PRIOR TO THE EXPIRATION DATE.
<PAGE> 13
INSTRUCTIONS
TO REGISTERED HOLDER AND/OR
DTC PARTICIPANT FROM BENEFICIAL OWNER
OF
JAMES CABLE PARTNERS, L.P.
JAMES CABLE FINANCE CORP.
10 3/4% SENIOR NOTES DUE 2004
To Registered Holder and/or Participant in DTC.
The undersigned hereby acknowledges receipt of the Prospectus, dated
(the "Prospectus") of James Cable Partners, L.P., a Delaware limited
partnership, and James Cable Finance Corp., a Michigan corporation (the
"Issuers"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Issuers' offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or DTC participant, as to
action to be taken by you relating to the Exchange Offer with respect to the
10 3/4% Senior Notes due 2004 (the "Notes") held by you for the account of the
undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (fill in amount):
$ of the 10 3/4% Senior Notes due 2004
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY):
$
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are: (a) to make, on
behalf of the undersigned (and the undersigned, by its signature below, hereby
makes to you), the representations and warranties contained in the Latter of
Transmittal that are to be made with respect to the undersigned as a beneficial
owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN THE NAME OF THE
STATE) , (ii) the undersigned is acquiring the Exchange
Notes in the ordinary course of business of the undersigned, (iii) the
undersigned is not participating, does not participate, and has no arrangement
or understanding with any person to participate in the distribution of the
Exchange Notes, (iv) the undersigned acknowledges that any person participating
in the Exchange Offer for the purpose of distributing the Exchange Notes must
comply with the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Act"), in connection with a secondary
resale transaction of the Exchange Notes acquired by such person and cannot rely
on the position of the Staff of the Securities and Exchange Commission set forth
in no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer -- Resale of Exchange Notes," and (v) the
undersigned is not an "affiliate," as defined in Rule 405 under the Act, of the
Issuers; (b) to agree, on behalf of the undersigned, as set forth in the Letter
of Transmittal; and (c) to take such other actions as necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of such
Notes.
[ ] Check this box if the beneficial owner of the Notes is a broker-dealer
and such broker-dealer acquired the Notes for its own account as a result of
market-making activities or other trading activities.
<PAGE> 14
SIGN HERE
Name of beneficial owner(s):
----------------------------------------------------
Signature(s):
-------------------------------------------------------------------
Name (please print):
------------------------------------------------------------
Address:
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Telephone number:
---------------------------------------------------------------
Taxpayer Identification or Social Security Number:
------------------------------
Date:
---------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
10 3/4% SENIOR NOTES DUE 2004
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
JAMES CABLE PARTNERS, L.P.
JAMES CABLE FINANCE CORP.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of James Cable Partners, L.P. and James Cable Finance Corp. (the
"Issuers") made pursuant to the Prospectus dated , 1997 (the
"Prospectus") if certificates for the outstanding 10 3/4% Senior Notes due 2004
of the Issuers (the "Notes") are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent prior to 5:00 p.m.,
New York time, on the Expiration Date of the Exchange Offer. Such form may be
delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to United States Trust Company of New York (the "Exchange Agent")
as set forth below. In addition, in order to utilize the guaranteed delivery
procedure to tender Notes pursuant to the Exchange Offer, a completed, signed
and dated Letter of Transmittal (or facsimile thereof) must also be received by
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date. Capitalized terms not defined herein are defined in the Prospectus.
UNITED STATES TRUST COMPANY OF NEW YORK, EXCHANGE AGENT
<TABLE>
<CAPTION>
By Overnight Courier: By Hand: By Registered or Certified Mail:
<C> <C> <C>
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway P.O. Box 844
New York, New York 10003 Lower Level Attn: Corporate Trust Services
Attn: Corporate Trust Services Attn: Corporate Trust Services Cooper Station
New York, New York 10006 New York, New York 10276-0844
</TABLE>
By Facsimile Transmission
(For Eligible institutions Only):
(212) 420-6152
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Issuers the principal amount of Notes set forth below pursuant to the guaranteed
delivery procedure described in "The Exchange Offer -- Guaranteed Delivery
Procedures" section of the Prospectus.
Principal Amount of Notes Tendered.*
$
- ------------------------------------------
Certificate No(s). (if available):
- ------------------------------------------
Total Principal Amount Represented by Certificate(s):
- ------------------------------------------
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE> 2
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
<TABLE>
<S> <C>
X
--------------------------------------------------------- ------------------------------------
X
--------------------------------------------------------- ------------------------------------
Signature(s) of Owner(s)
or Authorized Signatory
Area Code and Telephone Number:
------------------------------------
</TABLE>
Must be signed by the holder(s) of Notes as their name(s) appear on
certificates for Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person
must set forth his or her full title below. If Notes will be delivered by
book-entry transfer to The Depository Trust Company, provide account
number.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Capacity:
-----------------------------------------------------------------
--------------------------------------------------------------------------
Address(es):
--------------------------------------------------------------
--------------------------------------------------------------------------
Account Number:
-----------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the Notes being tendered hereby or confirmation of book-entry
transfer of such Notes into the Exchange Agent's account at The Depository Trust
Company, in proper form for transfer, together with any other documents required
by the Letter of Transmittal, within three New York Stock Exchange trading days
after the Expiration Date.
Name of Firm
-------------------------------------------------------------------
Address
-----------------------------------------------------------------------
Area Code & Telephone No.
------------------------------------------------------
Authorized Signature
----------------------------------------------------------
Name
--------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Title
--------------------------------------------------------------------------
Date
---------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES REPRESENTING NOTES WITH THIS FORM. CERTIFICATES
REPRESENTING NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY
EXECUTED LETTER OF TRANSMITTAL.
