UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
Amendment No. 1
on
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number 33-95298; 33-95298-01
GALAXY TELECOM, L.P.
GALAXY TELECOM CAPITAL CORP.
(Exact name of co-registrants as specified in their charters)
Delaware 43-1697125
43-1719476
- ---------------------------------------- ----------------------------------
(States of Other Jurisdictions of (IRS Employer Identification No.)
Incorporation or Organization)
1220 North Main
Sikeston, Missouri 63801
________________________________________ _________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (573) 472-8200
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to section 12(g) of the Act: None.
Indicate by check mark whether the co-registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days. Yes_____X_____ No__________
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the co-registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of thes Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the voting equity securities held by non-affiliates of
Galaxy Telecom, L.P.: $0
Aggregate market value of the voting equity securities held by non-affiliates of
Galaxy Telecom Capital Corp.: $1,000
Number of shares of Galaxy Telecom Capital Corp. outstanding as of March 31,
1996: 100
DOCUMENTS INCORPORATED BY REFERENCE: Not applicable.
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GALAXY TELECOM, L.P.
GALAXY TELECOM CAPITAL CORP.
Amendment No. 1 on Form 10-K/A
The undersigned co-registrants hereby amend the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, as set forth in the pages attached hereto:
Item 1. Business
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 11. Executive Compensation
Item 13. Certain Relationships and Related Transactions
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -- Signatures
- -- Exhibit Index
- -- Exhibit 10.12
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PART I
Item 1. Business.
General
Galaxy Telecom, L.P. (the "Company") owns, operates and develops classic
cable television systems (the "Systems") primarily in small communities in the
Midwest and Southeast United States. As of December 31, 1995, the Current
Systems passed approximately 265,400 homes and served approximately 162,400
subscribers in 16 states, predominantly including Mississippi, Nebraska, Kansas,
Missouri, Illinois, Kentucky, Iowa, Alabama, Georgia and Florida. The Company
was organized on December 1, 1994. Galaxy Telecom Capital Corp. ("Capital
Corp."), was incorporated on July 26, 1995 and was formed solely for the purpose
of co-issuing, with the Company, $120 million in Senior Subordinated Notes.
The Company believes there are advantages to acquiring and operating
classic cable television systems. Typically, in classic cable television
markets, cable television service is necessary in order to receive a full
complement of over-the-air television stations (including network- affiliated
stations). In addition, these markets generally offer fewer competing
entertainment alternatives than larger urban or suburban markets. As a result,
classic cable television systems usually have higher basic penetration rates and
lower churn rates than systems serving larger markets. As compared with urban
and suburban systems, classic systems have more programming flexibility for a
given channel capacity because they are generally in areas with fewer
over-the-air broadcast stations that must be carried and have fewer local
programming obligations. In addition, the Company believes that it and other
classic cable system operators have lower capital costs per subscriber than
urban and suburban operators. Based on the generally lower cost of living in its
operating areas, the Company also believes that classic systems have lower labor
and marketing costs than many urban and suburban systems.
Over 90% of the plant in the Systems have a channel capacity of 36
channels or more. This compares favorably to the industry-wide average of
approximately 70% of systems having channel capacity of 30 channels or more. In
addition, substantially all of the Systems presently have the capacity to
increase the number of channels offered to subscribers without having to
increase existing bandwidth. The Company intends to reduce the number of
headends in the Systems by more than 100 by consolidating headend locations over
the next two years. The Company believes that this consolidation will reduce
maintenance costs, increase system reliability and allow the redeployment of the
associated electronic equipment to remaining headends, thus enabling the Company
to expand the number of channels it can offer to its customers and increase
average revenue per subscriber.
The six key individuals who manage the Company's day-to-day operations
(the"Senior Managers") have developed and refined the operating strategy
utilized by the Company to efficiently and economically provide high quality
customer service to classic cable television systems spread over a wide
geographic area. The Company's existing infrastructure includes two customer
service centers which receive customer calls at any time through a toll-free
telephone number. At the service centers, customer service representatives can
address virtually any request or problem a customer may have through an online
customer support computer system utilizing advanced software. The central
computer system is integrated with the Qualcomm OmniTRACS satellite-based
dispatch system, which has been installed in all of the Company's service
vehicles. The OmniTRACS system provides the customer service representatives
with direct, real-time, two-way interactive communication with the Company's
field technicians and generates comprehensive customer service information on a
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timely basis. The integration of the OmniTRACS system with the centralized
computer system allows the Company to control costs, better manage the customer
service function and provide its customers with high quality service, generally
within a 24-hour period.
The Company believes that consistently high quality performance of its
local field technicians is important in maintaining good community relations.
The Company has an ongoing program of training its field technicians not only in
technical areas but also in customer service and sales functions. The Company
strives to have its local field technicians represent the Company in each of
their respective service areas as well-trained, responsible and respected
members of their communities.
Background
The Senior Managers, Tommy L. Gleason, Jr., James M. Gleason, J. Keith
Davidson, Ronald Voss, Terry M. Cordova and Thomas Morris, have been involved in
the construction, acquisition, ownership, management and operation of classic
cable television systems as a team for more than a decade and have collective
experience in the cable television industry exceeding 100 years. From 1987
through 1994, the Senior Managers operated over 10 classic cable television
systems for Galaxy Cablevision, L.P. ("Galaxy Cablevision"), a master limited
partnership traded on the American Stock Exchange. Prior thereto, between 1981
and 1987, the Senior Managers constructed and operated cable television systems
in Alabama, Illinois, Indiana, Tennessee and Texas through a number of related
entities.
In response to changes in the federal tax laws regarding master limited
partnerships, Galaxy Cablevision commenced in 1994 the liquidation of its cable
television holdings. Thereafter, the Senior Managers organized Galaxy Systems
Management, Inc. ("Galaxy Management") to acquire selected cable television
properties. Commencing in May, 1994, Galaxy Management entered into definitive
agreements to acquire selected cable television systems from Galaxy Cablevision,
Vantage Cable Associates, L.P. ("Vantage Cable"), Vista Communications Limited
Partnership, III ("Vista Communications") and Chartwell Cable of Colorado, Inc.
("Chartwell"). Each of these agreements were later assigned to, and assumed by,
the Company prior to the consummation of each of the transactions. To facilitate
the Company's acquisition of these Systems, TA Associates, Inc., Spectrum Equity
Investors, L.P. and Fleet Equity Partners (the "Equity Investors"), who since
the 1960's have financed numerous cable television companies at all stages of
development in urban, suburban and classic markets, and the Senior Managers,
collectively invested equity capital of approximately $30 million in the
Company. The Equity Investors in December 1995 contributed an additional $15
million to help fund the Company's acquisitions of cable system assets of
Douglas Cable Communications, Limited Partnership ("Douglas Communications"),
Friendship Cable Southeast, a division of Buford Group, Inc. ("Friendship"),
Vista-Narragansett Cable L.P. ("Vista-Narragansett"), Vista Communications
Limited Patnership I ("Vista I"), and Phoenix Country Cable, L.P. Joint Venture
("Phoenix Cable"). A summary of the acquisitions of each of the Systems is set
forth below.
Galaxy Cablevision Acquisitions. On December 23, 1994, the Company
acquired all of the operating assets comprising the 27 cable television systems,
substantially all of which were located in western Kentucky and southern
Illinois, that were owned by Galaxy Cablevision (the "Galaxy Cablevision
Systems"). The purchase price for the Galaxy Cablevision Systems was
approximately $18.5 million. Upon acquisition by the Company, the Galaxy
Cablevision Systems passed approximately 23,500 homes with 570 miles of plant,
resulting in a density of approximately 41.2 homes per mile, served
approximately 15,400 basic subscribers and had a basic penetration rate of
approximately 65.5%.
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On March 31, 1995, the Company acquired all of the operating assets
comprising Galaxy Cablevision's eight Cameron, Texas cable television systems
(the "Cameron Systems"). The Cameron Systems are located northeast of Austin,
Texas. The purchase price for the Cameron Systems was approximately $3.6
million. Upon acquisition by the Company, the Cameron Systems passed
approximately 7,730 homes with 143 miles of plant, resulting in a density of
approximately 54.1 homes per mile, served approximately 3,500 basic subscribers
and had a basic penetration rate of approximately 45.3%.
All of the Senior Managers were affiliated with Galaxy Cablevision
prior to the dates of acquisition by the Company of the Galaxy Cablevision
Systems and the Cameron Systems. Galaxy Cablevision retained a broker to sell
the systems pursuant to an auction in each of the transactions and, with respect
to the sale of the Galaxy Cablevision Systems, obtained a fairness opinion from
an independent investment adviser. The independent directors of Galaxy
Cablevision's general partner and the unitholders of Galaxy Cablevision approved
each of the transactions. For the foregoing reasons, the Senior Managers believe
that the price paid for each of such systems was negotiated on an arm's length
basis.
Vantage Cable Acquisition. On December 23, 1994, the Company acquired
all of the operating assets comprising the 109 cable television systems located
in Colorado, Iowa, Missouri, Nebraska, South Dakota and Wyoming that were owned
by Vantage Cable (the "Vantage Cable Systems"). The purchase price for the
Vantage Cable Systems was approximately $38.4 million. Upon acquisition by the
Company, the Vantage Cable Systems passed approximately 44,800 homes with 969
miles of plant, resulting in a density of approximately 46.2 homes per mile,
served approximately 30,000 basic subscribers and had a basic penetration rate
of approximately 67.0%
Vista Communications Acquisition. On December 23, 1994, the Company
acquired all of the operating assets comprising the 85 cable television systems
located in Alabama, Florida, Georgia, Louisiana and Mississippi that were owned
by Vista Communications (the "Vista Communications Systems"). The purchase price
for the Vista Communications Systems was approximately $36.6 million. Upon
acquisition by the Company, the Vista Communications Systems passed
approximately 50,700 homes with 1,420 miles of plant, resulting in a density of
approximately 35.7 homes per mile, served approximately 31,000 basic subscribers
and had a basic penetration rate of approximately 61.1%.
Chartwell Cable Acquisition. On December 23, 1994, the Company acquired
all of the operating assets comprising two cable television systems located in
Larimer and Weld Counties, Colorado and in an apartment complex in Denver,
Colorado that were owned by Chartwell Cable (the "Chartwell Systems"). The
purchase price for the Chartwell Systems was approximately $.75 million. Upon
acquisition by the Company, the Chartwell Systems passed approximately 1,500
homes with 79 miles of plant, resulting in a density of approximately 19.0 homes
per mile, served approximately 830 basic subscribers and had a basic penetration
rate of approximately 55.3%.
Douglas Communications Acquisition. On December 1, 1995, the Company
acquired all of the operating assets comprising the 226 cable television systems
located in Illinois, Missouri, Nebraska and Kansas that were owned by Douglas
Communications (the "Douglas Communications Systems"). The purchase price for
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the Douglas Communications Systems was approximately $45.797 million. Upon
acquisition by the Company, the Douglas Communications Systems passed
approximately 72,945 homes, with 1,613 miles of plant, resulting in a density of
approximately 45.2 homes per mile, served approximately 43,000 basic
subscribers, and had a basic penetration rate of approximately 59.0%.
Friendship Cable Acquisition. On December 29, 1995, the Company
acquired all of the operating assets comprising the 35 cable television systems
located in Florida, Georgia, and South Carolina that were owned by Friendship
Cable (the "Friendship Cable Systems"). The purchase price for the Friendship
Cable Systems was approximately $21 million. Upon acquisition by the Company,
the Friendship Cable Systems passed approximately 35,637 homes, with 1,676 miles
of plant, for a density of 21.3 homes per mile, served approximately 17,500
basic subscribers and had a basic penetration rate of approximately 49.1%.
Vista-Narragansett Acquisition. On December 29, 1995, the Company
acquired all of the operating assets comprising the 18 cable television systems
located in Mississippi, Alabama, Louisiana and Tennessee (the
"Vista-Narragansett Systems"). The purchase price for the Vista-Narragansett
systems, net of systems sold, was approximately $13.715 million. Upon
acquisition by the Company, the Vista-Narragansett systems passed approximately
16,155 homes, with 433 miles of plant, resulting in a density of approximately
37.3 homes per mile, served approximately 11,000 basic subscribers and had a
basic penetration rate of approximately 68.1%.
Vista I Acquisition. On December 29, 1995, the Company acquired all of
the operating assets comprising the 18 cable television systems located in
Mississippi and Alabama of Vista I (the "Vista I Systems"). The purchase price
for the Vista I Systems was approximately $7.61 million. Upon acquisition by the
Company, the Vista I Systems passed approximately 9,073 homes, with 323 miles of
plant, resulting in a density of 28.1 homes per mile, served approximately 6,100
basic subscribers and had a basic penetration rate of approximately 67.2%.
Phoenix Cable Acquisition. On November 2, 1995, the Company acquired
all of the operating assets comprising the 3 cable television systems located in
Mississippi that were owned by Phoenix Cable (the "Phoenix Cable Systems"). The
purchase price for the Phoenix Cable Systems was approximately $0.55 million.
Upon acquisition by the Company, the Phoenix Cable Systems passed approximately
1,115 homes with 71 miles of plant, resulting in a density of approximately 15.7
homes per mile, served approximately 600 basic subscribers and had a penetration
rate of approximately 53.8%.
Pending Acquisitions and Trades
Consistent with its business strategy, the Company has entered into
purchase agreements to purchase or acquire through the trade of certain of its
Systems certain cable television system assets described below (the "Pending
Acquisitions"). The systems to be acquired in the Pending Acquisitions (the
"Pending Systems") will have a net effect of increasing the Company's homes
passed by 24,500 and its basic subscribers by 15,400. The following is a summary
of each of the Pending Acquisitions.
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Cablevision of Texas Systems
On March 29, 1996, the Company entered into a definitive agreement to purchase
certain assets comprising 30 cable television systems of Cablevision of Texas
III, Empire Communications, and Empire Cable of Kansas (the "Cablevision of
Texas Systems") for a purchase price of $10.62 million which is subject to
reduction in the event fewer than 9,100 basic subscribers exist at closing. As
of December 31, 1995, the Cablevision of Texas Systems passed 11,771 homes
located in Kansas, with 347 miles of plant, for a density of 33.9 homes per
mile. The Cablevision of Texas Systems served approximately 8,756 basic
subscribers and had a basic penetration rate of 74.4% as of December 31, 1995.
High Plains Systems
On March 29, 1996, the Company entered into a definitive agreement to purchase
certain systems comprising 8 cable television systems of High Plains Cable (the
"High Plains Systems") for a purchase price of $0.35 million which is subject to
reduction in the event fewer than 377 basic subscribers exist at closing. As of
December 31, 1995, the High Plains Systems passed 580 homes located in Kansas,
with 20 miles of plant, for a density of 29 homes per mile. The High Plains
Systems served approximately 323 basic subscribers and had a basic penetration
rate of approximately 55.7% as of December 31, 1995.
Midcontinent Systems
On January 12, 1996, the Company entered into a definitive agreement to purchase
certain assets comprising 6 cable television systems of Midcontinent Cable
Systems (the "Midcontinent Systems") for a purchase price of $1.4 million which
is subject to reduction in the event fewer than 1,300 basic subscribers exist at
closing. As of December 31, 1995, the Midcontinent Systems passed 1,853 homes
located in Nebraska, with 32 miles of plant, for a density of 57.9 homes per
mile. The Midcontinent Systems served approximately 1,326 basic subscribers and
had a basic penetration rate of approximately 71.6% as of December 31, 1995.
Five Rivers Systems
On August 16, 1995, the Company signed a letter of intent to purchase certain
assets comprising a cable television system of Five Rivers Cable Company (the
"Five Rivers System") for a purchase price of $.5 million which is subject to
reduction in the event fewer than 588 basic subscribers exist at closing. As of
December 31, 1995, the Five Rivers System passed approximately 730 homes located
in Tennessee, with 24 miles of plant, for a density of 30.4 homes per mile. The
Five Rivers System served approximately 600 basic subscribers and had a basic
penetration rate of approximately 82.2% as of December 31, 1995.
Hurst Communications Systems
On February 15, 1996, the Company entered into a definitive agreement to
purchase certain assets comprising 8 cable television systems of Hurst
Communications (the "Hurst Systems") for a purchase price of $1.05 million,
which is subject to reduction in the event fewer than 1,370 basic subscribers
exist at closing. As of December 31, 1995, the Hurst Systems passed
approximately 1,830 homes located in Kansas, with 50 miles of plant, for a
density of 36.6 homes per mile. The Hurst Systems served approximately 1,406
basic subscribers and had a basic penetration rate of 76.8% as of December 31,
1995.
TCI Systems
On March 14, 1996, the Company entered into a definitive agreement to trade
certain of its assets located in Shawnee County and Jefferson County, Kansas
(the "Shawnee County System") for certain assets comprising approximately 7
cable television systems of TCI (the "TCI Systems") located in northern
Mississippi. As of December 31, 1995, the Company's Shawnee County System passed
9,143 homes, with 315 miles of plant, resulting in a density of 29.0 homes per
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mile. The Shawnee County System served approximately 7,200 basic subscribers and
had a basic penetration rate of approximately 78.7% as of December 31, 1995. As
of December 31, 1995, the TCI Systems passed 16,897 homes, with 445 miles of
plant, resulting in a density of 38.0 homes per mile. The TCI System served
approximately 10,275 basic subscribers and had a basic penetration rate of
approximately 60.8% as of December 31, 1995.
General Terms of Pending Acquisitions. The terms of the agreements for
each of the Pending Acquisitions (collectively, the "Purchase Agreements")
similarly provide for the cash purchase by the Company of assets used in
connection with the Pending Systems, including, without limitation, rights of
the respective sellers under all subscription contracts with subscribers,
franchises and other appropriate agreements, consents, licenses and permits,
headend and associated electronic equipment, cable plant, owned and leased real
property, and various other related assets. The Purchase Agreements provide for
the placement of a portion of the purchase price in escrow, which funds
generally may be used to reduce the purchase price in the event of certain
misrepresentations and breaches of warranties, covenants or agreement by the
respective sellers or to resolve outstanding claims or contingencies. The
purchase price is also subject to downward adjustment at closing depending upon
the difference between the number of subscribers served by the acquired systems
at the time of closing and a number expressly set forth in the Purchase
Agreement. The dollar amount of adjustment is based on such difference
multiplied by a specific dollar amount per subscriber.
The Purchase Agreements contain certain customary representations and
warranties by, and covenants of, the Company and the respective sellers. The
completion of each of the Pending Acquisitions is subject to certain customary
conditions, including among others (i) the parties obtaining certain third-party
consents and governmental approvals and (ii) the absence of any materially
adverse change in the condition of the assets or systems to be acquired or the
business of the seller. The Purchase Agreements also contain customary rights to
indemnification against certain damages or losses. Each of the Purchase
Agreements is independent of all other Purchase Agreements, and the consummation
of any of the Pending Acquisitions is not conditioned upon the consummation of
any other Pending Acquisition.
Service, Installation and Repair
The Company believes that providing high quality customer service is a
critical element in maximizing the value of services provided to customers of
the Systems. Centralizing the customer service function enables the Company to
employ a smaller number of highly trained customer service representatives than
in a more decentralized operational structure. Accordingly, the Company invests
significant resources in providing its customer service representatives with
ongoing telephone, computer and sales training to assure that the customer
receives a consistently high level of service.
The Company utilizes advanced software systems to facilitate effective
interaction with its customers. A potential or existing customer can call at any
time the Company's toll-free telephone number for installation, repairs or other
services. The call is automatically routed to one of the Company's two customer
service centers. At the service centers, customer service representatives who
receive the calls can address virtually any request or problem a customer may
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have through access to an online customer support computer system utilizing
advanced software. If a customer is reporting a service problem, the customer
service representative will enter a service call request into the central
computer system, which prioritizes and schedules the service call. The computer
system automatically prioritizes the call based upon the severity of the problem
reported. If, for example, the customer is experiencing a complete disruption of
service, the call is given the highest priority and is dispatched immediately to
the local field technician. If the customer requests new or additional services,
the customer service representative will enter a work order into the computer
system which automatically assigns and schedules the order for the appropriate
field technician.
All of the Company's service vehicles are equipped with the Qualcomm
OmniTRACS satellite-based dispatch system, and the Company intends to install
the OmniTRACS system in all service vehicles of acquired systems. Through
direct, real-time access to the field technician and his work schedule via the
OmniTRACS system, the customer service representative transmits the service call
request or the work order directly to the field technician's service vehicle.
This interactive system helps the Company control its costs and improve its
service by avoiding the inefficiencies and costs associated with printing
service calls or work orders and using pagers, facsimile machines, two-way
radios and cellular phones to communicate with its field technicians. The
OmniTRACS system also provides regional managers the ability to determine the
exact location of all service vehicles at any time and keeps a record of all
movements of service vehicles.
Marketing, Rates and Collections
The company markets and promotes its cable television systems with the
objective of increasing penetration and average revenue per subscriber. The
Company markets the basic and premium programming of the Systems primarily
through door-to-door selling efforts and telemarketing, and, to a lesser degree,
through media advertising and direct mail. Each of the Company's customer
service centers has a Marketing Director who coordinates direct door-to-door
campaigns throughout the geographic areas of the Systems and is responsible for
internal incentives for the customer service and technical staffs. Customer
service representatives are also trained to market upgrades in service to
existing customers. Each service center has a Director of Training, who works
closely with the Marketing Department to ensure that all employees are informed
of current rates, programming packages and promotions.
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The Company's current monthly rates for full basic service range from
$19.95 to $26.95 and rates for premium services generally range from $6.95 to
$12.95 per service. The Company's marketing strategy calls for the continued
rollout of The Disney Channel as part of its basic service, as well as selected
channel additions, with corresponding rate increases. Because the Systems have
been owned and operated by various other cable television operators, differing
strategies with regard to channel lineups, pricing and security for premium
services have been employed. It is the Company's goal to attempt to standardize
its programming, rates and premium security over all of the Systems within the
next few years.
The Company utilizes a on an IBM AS/400 using software written
specifically for the cable television industry. The Company operates the billing
system "in house" and produces statements for customers on a monthly basis.
In addition to monthly and installation fees, additional potential
sources of revenue for cable operators are the sale of local spot advertising
time on locally originated and satellite-delivered programming. Cable systems
also generate revenue through sales of products offered through home shopping
programming and purchased from the systems' respective service areas. Other
potential sources of revenue for cable television systems include the sale of
programming featuring movies and special events (such as concerts, sports
programming and other entertainment features) to customers on a pay-per-view
basis. The Company would need to invest in addressable converter equipment to
provide pay-per-view services on its systems. The Company currently does not
generate significant revenues from any of these areas but believes that certain
of these areas could become possible sources of revenue in the future.
Programming
The Systems typically offer two tiers of basic cable television
programming service: a broadcast basic programming tier (consisting generally of
network and public television signals available over-the-air in the franchise
community and superstation signals) and a satellite programming tier (consisting
primarily of satellite-delivered programming such as CNN, USA, ESPN and TNT).
Substantially all of the customers of the Systems subscribed to both tiers of
basic service as of December 31, 1995. To enhance value for its customers, the
Company analyzes and selectively modernizes its cable plant to increase the
number of channel offerings and to improve the quality of the signal delivered
to its systems. The Company regularly evaluates the programming offered by its
systems and continuously seeks to provide innovative packages of premium service
in order to assure customer satisfaction. As an example, the Company provides
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the Disney Channel as part of the basic subscription service without charging a
separate fee. From time to time, the Company enhances the value of its basic
service by adding additional programming to its basic tier.
The Systems offer premium programming services, both on a per-channel,
or a la carte, basis and as part of a variety of premium programming packages
designed to be attractive to customers while, at the same time, enabling the
Company to enjoy the benefits of programming agreements which offer the Company
financial incentives based upon premium service unit growth. Premium channels
such as HBO, Cinemax, Showtime, The Movie Channel and Encore are offered
individually or in value packages designed to increase premium penetration.
These packages offer two or more premium services for a discounted price as
compared to the a la carte pricing of individual services, and in some cases
offer a "mini-pay," such as Encore or Flix, at no additional charge if the
customer subscribes to two or more services.
The Company generally plans to upgrade the channel offerings of
recently acquired systems. The Company believes that many of the Systems present
opportunities to improve basic and premium penetration levels and average
revenues per subscriber. The Company believes it has an opportunity to
restructure the programming of the Systems, including launching The Disney
Channel on the basic service and repackaging premium channels. The Company
intends to utilize aggressive marketing efforts and its focus on high quality
customer service to enable it to increase penetration of and overall customer
satisfaction with the Systems.
The Company has various contracts to obtain basic and premium
programming from program suppliers whose compensation is typically based on a
fixed fee per subscriber. The Company has negotiated programming agreements with
premium service suppliers that offer cost incentives to the Company under which
premium unit prices decline as certain premium service growth thresholds are
met. In addition to volume pricing discounts, some program suppliers offer
marketing support to the Company in the form of advertising funds, promotional
material, rebates and other incentives. The Company's programming contracts are
generally for a fixed period of time, typically three to five years, and are
subject to negotiated renewal.
The Company is also a member of the National Cable Television
Cooperative (the "NCTC"), a purchasing cooperative that negotiates volume
discounts on behalf of its members, which serve in the aggregate nearly three
million cable subscribers. As an NCTC member, the Company is able to obtain
programming and cable system hardware discounts available to all members.
The Company has various retransmission consents with several commercial
broadcast stations. None of these consents require direct payment of fees for
carriage; however, in some cases the Company has entered into agreements with
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certain stations to carry satellite-delivered cable programming which is
affiliated with the network carried by such stations. In some cases, the Company
agreed to spend actual dollars on advertising with the station on an annual
basis over the three-year term of the agreement. These agreements are required
to be renewed before December 31, 1996. There can be no assurance that such
agreements can or will be renewed under similar terms. See "--Legislation and
Regulation - General."
The Company's cable programming costs have increased in recent years
and are expected to continue to increase due to additional programming being
provided to customers, increased costs to produce or purchase cable programming
and other factors. The Company believes it will continue to have access to cable
programming services at reasonable price levels, although there can be no
assurances with respect thereto. The Company believes that a significant amount
of new cable television programming is becoming available and that the Company
will be able to identify and take advantage of available incentives associated
with channel position and additional channels to selectively accommodate such
expanding programming. The Company expects it will be able to recoup programming
cost increases through rate increases.
Technology and Engineering
Over 90% of the plant in the Systems have a channel capacity of 36 channels
or more. Substantially all of the Systems presently have the capability to
increase the number of channels offered to subscribers without having to
increase existing bandwidth. At December 31, 1995, the Company maintained over
7,500 miles of coaxial plant that passed more than 265,400 homes. The following
table sets forth certain information with regard to the channel capacities of
the Systems as of December 31, 1995.
Up to 29 30 to 53 54 or more
Channels Channels Channels Totals
Current Systems:
Number of systems ................. 23 426 71 520
Percent of total Current Systems .. 4.4% 81.9% 13.7% 100.0%
Miles of plant .................... 127 5,818 1,571 7,516
Percent of total plant miles ...... 1.7% 77.4% 20.9% 100.0%
The Company continually monitors and evaluates new technological
developments to make optimal use of its existing assets and to anticipate the
introduction of new services and program delivery capabilities. The use of fiber
optic cable as a transportation medium is playing a major role in enhancing
channel capacity and improving the performance and reliability of cable
television systems. To date, the Company has implemented fiber optic
technology and, to a lesser degree, microwave technology to interconnect
headends throughout its Current Systems by interconnecting headends of adjacent
systems with one master headend facility, the Company can reduce the number of
headends, lower maintenance costs and add new channels more efficiently. The
Company generally plans to continue to reduce the number of headends through
consolidation to take advantage of these efficiencies, including reducing the
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number of headends used in the Systems by more than 100 (from a Company-wide
total of 520 for the Systems) over the next two years. Such reduction in the
number of headends is expected to reduce maintenance costs, increase system
reliability and allow the redeployment of the associated electronic equipment to
remaining headends, thus enabling the Company to expand the number of channels
offered on the Systems to its customers and increase average revenue per
subscriber.
The Company intends to deliver distance learning and teacher in-service
type training video to Kindergarten through Grade 12 schools primarily in those
areas where the Company has implemented fiber optics to interconnect adjacent
headend facilities from one master facility. The distance learning will enable
classrooms of students at several adjacent school districts to receive
real-time, interactive lectures via the fiber optic network from one lecturer's
classroom. The in-service teacher's training utilizes the same concept of
distance learning except its programming comes from one in-service training
facility. The company is also continuing to explore the possibility of being the
Internet provider to those schools, and to its subscribers in those areas where
fiber interconnects will be in place.
Additionally, the Company is exploring the business opportunities that may
be available by using its extensive fiber network as a source of transport of
voice and high speed data for both long distance and local exchange carriers.
The Company currently is in discussions with several telephone companies
concerning the use of the redundant facilities.
The Company intends to explore the use of digital compression
technology to enhance the current channel capacities of the Company's cable
systems. This technology is expected to allow up to 10 channels to be carried in
the space of one analog channel. Digital signals not only offer the potential
for allowing cable television systems to carry more programming but also for
improving the quality and reliability of the television signals carried. This
technology may also allow cable systems to offer additional products and
services, including video games (such as SEGA). Although the Company believes
that the use of digital technology in the future offers the potential for the
Company to increase channel capacity in a more cost efficient manner than
rebuilding such systems with high capacity distribution plant, digital
compression technology is still in the developmental stage and is not yet widely
implemented by cable system operators. There can be no assurance as to whether
or when such technology can or will be implemented by the Company and, if it can
be implemented, whether such technology will result in significant cost savings
over alternative methods of expanding channel capacities of the Company's
systems.
Community Relations
The Company is dedicated to developing strong community relations in the
locations served by its cable television systems and believes that good
relations with its local franchising authorities are primarily a result of
effective communications by the Company's field management with local
authorities. A customer service representative is assigned to each municipality
in which the Systems operate. The same customer service representative is
responsible for contacting mayor, city clerk or city manager by telephone once
each month to determine if any problems have arisen or if any customers have
complained to municipal officials about their cable service. The Company
addresses any problems discovered during these contacts. Regional managers also
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contact the state or local franchising authorities, and the Company prepares a
newsletter highlighting any changes in operations or new programming offerings
and introducing any new employees which it send semiannually to each of its
franchising authorities.
Centralized Management Functions
Management functions such as billing, payments processing, accounting,
engineering and marketing are centralized at the Company's headquarters and
regional customer service centers. Upon acquiring a system, the Company will
also consolidate certain management functions at its headquarters and regional
customer service centers at minimal incremental costs.
The Company is able to process hundreds of customer service calls per day
through the use of the IBM AS/400 computer system, which is centrally based at
the Company's headquarters in Sikeston, Missouri. The computer operates with
software which provides online access to up-to-date subscriber, marketing and
accounting information. The computer system also manages information flow to and
from the field technician staff via the OmniTRACS system.
The central computer system allows both the Senior Managers and the
regional managers to access subscriber information as soon as it is entered from
the customer service centers or the field technicians. The centralized nature of
the system allows each of the Company's customer service centers to back up the
other if there is an interruption of telephone service to such center. The
customer service centers also can utilize the centralized computer system to
communicate with local payment offices, headquarters, the other customer service
center and the field technicians, all of which have online access through the
central platform. Finally, the system provides a centralized reporting location
for all subscriber billing information which enables the accounting staff to
prepare timely and accurate financial information. These features of the central
computer system, along with the system's integration with the OmniTRACS system,
allow the Company to consolidate many of the management functions for newly
acquired systems.
Franchises
Cable television systems are generally constructed and operated under
non-exclusive franchises granted by local governmental authorities. These
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franchises typically contain many conditions, such as time limitations on
commencement and completion of construction; conditions of service, including
number of channels, types of programming and provision of free service to
schools and certain other public institutions; and maintenance of insurance and
indemnity bonds. The provisions of local franchises are subject to federal
regulation under the 1984 Cable Act, the 1992 Cable Act, and the 1996 Cable Act.
See "--Legislation and Regulation - General."
As of December 31, 1995, the Company held approximately 586 franchises.
The non-exclusive franchises provide for the payment of fees to the issuing
authority. The 1984 Cable Act prohibits franchising authorities from imposing
franchise fees in excess of 5.0% of gross revenues and also permits the cable
system operator to seek renegotiation and modification of franchise requirements
if warranted by changed circumstances. See "--Legislation and Regulation -
General."
The table below illustrates the grouping of the franchises of the
Systems by date of expiration.
Year of Percentages
Franchise Number of of Total
Expiration Franchises Franchises
- ---------- ---------- ----------
1996-1998 168 28.7%
1999-2001 70 11.9%
After 2001 348 59.4%
--- -----
Total 586 100.0%
=== =====
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 withheld, the franchise authority must pay the
operator the "fair market value" for the system covered by such franchise. In
addition, the 1984 Cable Act establishes comprehensive renewal procedures that
require that an incumbent franchisee's renewal application be assessed on its
own merit and not as part of a comparative process with competing applications.
See "--Legislation and Regulation - General."
The Company believes that it generally has good relationships with its
franchising communities. As of December 31, 1995, no franchise of the Company
represented more than 5.0% of total subscribers of the Systems. The Company has
a minimal amount of seasonal subscribers, the vast majority of which are located
around Kentucky Lake and Central Florida. As the Kentucky seasonal subscribers
are disconnecting about the same time the Florida subscribers are connecting,
the effect on the Company's monthly total subscriber count is minimal.
Competition
Cable television competes for customers in local markets with other
providers of entertainment, news and information. The competitors in these
markets include broadcast television and radio, newspapers, magazines and other
printed sources of information and entertainment, as well as satellite and
wireless video distribution systems and directly competitive cable television
operations. Federal law prohibits cities from granting exclusive cable
franchises and from unreasonably refusing to grant additional, competitive
franchises. In addition, an increasing number of cities are exploring the
feasibility of owning their own cable systems in a manner similar to city-
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provided utility services. The enactment of the Telecommunications Act of 1996
(the "1996 Telecom Act") may initiate more competition with cable service,
because it allows local exchange carriers to provide video services in their
local service areas, in direct competition with local cable companies.
The Company has no basis upon which to estimate the number of cable
television companies and other entities with which it competes or may
potentially compete. There are a large number of individual and multiple system
cable television operators in the United States. The full extent to which other
media or home delivery services will compete with cable television systems may
not be known for some time, and there can be no assurances that existing,
proposed or as yet undeveloped technologies will not become dominant in the
future.
There are alternative methods of distributing the same or similar video
programming offered by cable television systems, although cable television
systems currently account for over 91% of total subscribership to multichannel
video programming distributors ("MVPDs"). Further, these technologies have been
encouraged by Congress and the FCC to offer services in direct competition with
existing cable systems. In addition to broadcast television stations, the
Company competes in a variety of areas with other multichannel programming
service providers on a direct over-the-air basis. Multichannel programming
services are distributed by communications satellites directly to home satellite
dishes ("HSDs") serving residences, private businesses and various nonprofit
organizations. Cable programmers have developed marketing efforts directed to
HSD owners. The Company estimates that there are currently between 3.5 million
and 4 million HSDs in the United States, most of which are in the 4 to 8 foot
range.
A more significant competitive impact is expected from medium power and
higher power communications ("DBS') satellites that transmit signals that can be
received by dish antennas much smaller in size. DirecTV, Inc., a subsidiary of
GM Hughes Electronics, and United States Satellite Broadcasting Company, Inc., a
subsidiary of Hubbard Broadcasting, Inc., began offering multichannel
programming services in 1994 via high power communications satellites that
require a dish antenna of only approximately 18 inches. They served an estimated
900,000 subscribers in September 1995, but their reach has been increasing
rapidly and they expected subscribership to increase to 1.5 million by the end
of 1995. PrimeStar Partners, L.P., a joint venture of five cable multiple
systems operators and GE American Communications, Inc., began offering a medium
power direct-to-home service in 1994 that requires a dish antenna of 36 to 40
inches. It served approximately 775,000 subscribers in September 1995. EchoStar
Communications, Inc. and its affiliate, Directsat Inc., launched their first DBS
satellite in late 1995, and plan to offer multichannel programming services
beginning in early 1996 via high power communications satellites that also
require an 18-inch dish. AlphaStar, a Canadian DBS provider, has leased space on
a medium power satellite and intends to offer direct-to- home service in early
1996 that requires a 24-inch dish for reception. Such DBS services could become
substantial as developments in technology continue to increase satellite
transmitter power and decrease the cost and size of equipment needed to receive
these transmissions.
DBS has advantages and disadvantages as an alternative means of
distributing video signals to the home. Among the advantages are that the
capital investment (although initially high) for the satellite and uplinking
segment of a DBS system is fixed and does not increase with the number of
subscribers receiving satellite transmission; that DBS is not currently subject
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to local regulation of service or required to pay franchise fees; and that the
capital costs for the ground segment of a DBS system (the reception equipment)
are directly related to and limited by the number of service subscribers. DBS's
disadvantages presently include limited ability to tailor the programming
package to the interests of different geographic markets, such as providing
local news, other local origination services and local broadcast stations;
signal reception being subject to line of sight angles; and intermittent
interference from atmospheric conditions and terrestrially generated radio
frequency noise. The effect of competition from these services cannot be
predicted. The Company nonetheless assumes that such competition could be
substantial in the near future.
Prior to enactment of the 1996 Telecom Act, local exchange carriers
("LECs") were prohibited from offering video programming directly to subscribers
in their telephone service areas (except in limited circumstances in rural areas
or as "video-dialtone" providers, which could deliver video services to the home
over telephone-provided circuits without a local franchise). Elimination of the
former restrictions on LECs means that the Company may face increased
competition from local telephone companies which, in most cases, have greater
financial resources than the Company. All major LECs have announced plans to
acquire cable television systems or provide video services to the home through
fiber optic technology.
The 1996 Telecom Act eliminates the FCC's video-dialtone rules, except
where a video- dialtone service is currently in operation. In place of the
video-dialtone model, the 1996 Telecom Act provides LECs with four options for
providing video programming directly to customers in their local exchange areas.
Telephone companies may provide video programming by radio-based systems, common
carrier systems, "open video" systems, or "cable systems." LECs that elect to
provide "open video" systems must allow others to use up to two-thirds of their
activated channel capacity. They will be relived of regulation as "common
carriers," and are not required to obtained local franchises, but are still
subject to many other regulations applicable to cable systems. LECs operating as
"cable systems" are subject to all rules governing cable systems, including
franchising requirements. It is unclear which model LECs will ultimately choose,
but the video distribution services developed by local telephone companies could
to represent a direct competitive threat to the Company.
The ability of local telephone companies to compete with the Company by
acquiring an existing cable system however, is limited. The 1996 Telecom Act
prohibits a LEC or its affiliate from acquiring more than a 10 percent financial
or management interest in any cable operator providing cable service in its
telephone service area. It further prohibits a cable operator or its affiliate
from acquiring more than a 10 percent financial or management interest in any
LEC providing telephone exchange service in its franchise area. A LEC and cable
operator that have a telephone service area and cable franchise area in the same
market may not enter into a joint venture to provide telecommunications services
or video programming. There are exceptions to these limitations for rural
facilities, very small cable systems, and small LECs in non-urban areas.
Another alternative method of video distribution is through the use of
multichannel multipoint distribution systems ("MMDS"), which deliver programming
services over microwave channels received by subscribers with a special antenna.
MMDS systems are less capital intensive, are not required to obtain local
franchises or pay franchise fees, and are subject to fewer regulatory
requirements than cable television systems. Although there are relatively few
MMDS systems in the United States that are currently in operation or under
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construction, many markets have been licensed or tentatively licensed. The FCC
has taken a series of actions intended to facilitate the development of these
"wireless cable systems" as alternative means of distributing video programming,
including reallocating the use of certain frequencies to these services and
expanding the permissible use of certain channels reserved for educational
purposes. The FCC's actions enable a single entity to develop an MMDS system
with a potential of up to 35 channels, and thus compete more effectively with
cable television. Developments in compression technology have significantly
increased the number of channels that can be made available from other
over-the-air technologies. Even though limited by line of sight and distance,
Subscribership to MMDS services is projected to continue over the next several
years.
The Company also competes with master antenna television ("MATV")
systems and satellite master antenna television ("SMATV") systems, which provide
multichannel program services directly to hotel, motel, apartment, condominium
and similar multiunit complexes within a cable television system's franchise
area, generally free of any regulation by state and local governmental
authorities. The 1996 Telecom Act changes the definition of a "cable system" to
include only systems that cross public rights-of-way. Therefore, SMATV systems
that serve buildings that are not commonly owned or managed, but which do not
cross public rights of way, are no longer considered "cable systems" and no
longer require a franchise to operate.
Legislation and Regulation-General
The cable television industry currently is regulated by the FCC, some
state governments and most local governments. In addition, legislative and
regulatory proposals under consideration by the Congress and federal agencies
may materially affect the cable television industry. The following is a summary
of federal laws and regulations affecting the growth and operation of the cable
television industry and a description of certain state and local laws.
Cable Communications Policy Act of 1984. The Cable Communications
Policy Act of 1984 ("the 1984 Cable Act"), which amended the Communications Act
of 1934 (the "Communications Act"), established comprehensive national standards
and guidelines for the regulation of cable television systems and identified the
boundaries of permissible federal, state and local government regulation. The
FCC was charged with responsibility for adopting rules to implement the 1984
Cable Act. Among other things, the 1984 Cable Act affirmed the right of
franchising authorities (state or local, depending on the practice in individual
states) to award one or more franchises within their jurisdictions. It also
prohibited non-grandfathered cable television systems from operating without a
franchise in such jurisdictions. The 1984 Cable Act provides that in granting or
renewing franchises, franchising authorities may establish requirements for
cable-related facilities and equipment, but may not establish or enforce
requirements for video programming or information services other than in broad
categories.
Cable Television Consumer Protection and Competition Act of 1992. In
October 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 ("the 1992 Cable Act"). The 1992 Cable Act permitted a
greater degree of regulation of the cable industry with respect to, among other
things; (i) cable system rates for both basic and certain cable programming
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)
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customer and service requirements; (vii) television broadcast signal carriage
and retransmission consent; (viii) technical standards; and (ix) cable equipment
compatibility. Additionally, the legislation encouraged competition with
existing cable television systems by allowing municipalities to own and operate
their own cable television systems without a franchise, preventing franchising
authorities from granting exclusive franchises or unreasonably refusing to award
additional franchises covering an existing cable system's service area, and
prohibiting the common ownership of cable systems and co-located MMDS or SMATV
systems. The 1992 Cable Act also precluded video programmers affiliated with
cable television companies from favoring cable operators over competitors and
required such programmers to sell their programming to other multichannel video
distributors. The legislation required the FCC to initiate a number of
rulemaking proceedings to implement various provisions of the statute, the
majority of which have been completed.
Various cable operators have challenged the constitutionality of
several sections of the 1992 Cable Act, although the courts have disposed of
most of these challenges. In April 1993, a three- judge panel of the United
States District Court for the District of Columbia upheld the constitutional
validity of the must-carry provisions of the 1992 Cable Act. That decision was
appealed directly to the United States Supreme Court, which vacated the decision
in June 1994 and remanded it to the three-judge panel to determine whether the
must-carry rules were necessary to preserve the economic health of the
broadcasting industry. The three-judge panel found in December 1995 that the
must- carry rules were necessary to preserve the economic health of the
broadcasting industry, and upheld the must-carry rules. In February 1996, the
United States Supreme Court agreed to review the District Court's decision. The
must-carry rules will remain in place during the pendency of the proceedings
before the United States Supreme Court.
In June 1995, the United States Court of Appeals for the District of
Columbia Circuit determined that the provision of the 1992 Cable Act which
allows cable television operators to prohibit indecent or obscene programming on
leased access channels and public, educational, and governmental access channels
does not violate the First Amendment. The United States Supreme Court granted
certiorari and heard oral arguments in February 1996. The Court will issue an
opinion by the summer of 1996.
Telecommunications Act of 1996. On February 8, 1996, the
Telecommunications Act of 1996 ("the 1996 Telecom Act") was enacted. Some of the
provisions of the 1996 Telecom Act became effective immediately, but other
provisions will not take effect until they are implemented by the FCC. This
legislation reverses much of the cable rate regulation established by the 1992
Cable Act over a three-year period. The rates for cable programming service
("CPS " or "non-basic") tiers offered by small cable operators in small cable
systems are deregulated immediately. The FCC's authority to regulate the CPS
tier rates of all other cable operators will expire on March 31, 1999. The
legislation also (i) eliminates the uniform rate requirements of the 1992 Cable
Act where effective competition exists; (ii) repeals the anti-trafficking
provisions of the 1992 Cable Act; (iii) limits the rights of franchising
authorities to require certain technology and prohibit or condition the
provision of telecommunications services by the cable operator; (iv) requires
cable operators to fully block or scramble both the audio and video on
sexually-explicit or indecent programming or channels primarily dedicated to
sexually-oriented programming; (v) allows cable operators to refuse to carry
access programs containing "obscenity, indecency or nudity"; (vi) adjusts the
pole attachment laws; and (vii) allows cable operators to enter
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telecommunications markets which historically have been closed to them, while
also allowing some telecommunications providers to begin providing competitive
cable service in their local service areas.
Cable programmers have challenged the constitutionality of the
provision of the 1996 Telecom Act requiring cable operators to scramble
sexually-explicit or indecent adult programming in the United States District
Court of the District of Delaware. On March 7, 1996, the Court issued a
temporary restraining order against enforcement of the provisions until the
challenge can be heard by a three-judge court.
Federal Regulation
The FCC is the principal federal regulatory agency with jurisdiction
over cable television. The FCC has promulgated regulations covering a broad
variety of areas, and is required to adopt additional regulations or repeal or
modify existing regulations to implement the 1996 Telecom Act. The FCC may
enforce its regulations through the imposition of 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 often used in connection with cable operations. A brief summary of
certain federal regulations follows.
Rate Regulation. Prior to implementation of the 1992 Cable Act, most
cable systems were largely free to adjust cable service rates without
governmental approval. The 1992 Cable Act authorized rate regulation for certain
cable communications services and equipment in communities that are not subject
to "effective competition." The 1992 Cable Act requires the FCC to resolve
complaints about rates for non-basic cable programming services and to reduce
any such rates found to be unreasonable. It also limits the ability of many
cable systems to raise rates for basic and certain non-basic cable programming
services (collectively, the "Regulated Services"). Cable services offered on a
per channel or on a per program basis are not subject to rate regulation by
either franchising authorities or the FCC. Notwithstanding the above, the 1996
Telecom Act immediately deregulates the CPS rates of "small cable operators" and
will deregulate the CPS rates of all other cable operators by March 31, 1999.
The 1992 Cable Act requires communities to certify with the FCC before
regulating basic cable rates. Upon certification, the local community obtains
the right to approve basic rates. Certified franchising authorities are also
empowered to regulate rates charged for additional outlets and for the
installation, lease, and sale of equipment used by customers to receive the
basic service tier, such as converter boxes and remote control units. These
equipment rates must be based on actual cost plus a reasonable profit, as
defined by the FCC. Cable operators may be required to refund overcharges with
interest. The 1992 Cable Act permits communities to certify at any time, so it
is possible that the Company's franchising authorities may choose in the future
to certify to regulate the Company's basic rates. FCC review of CPS rates is
triggered by franchising authority complaints filed within 45 days of a rate
increase.
The FCC's rate regulations do not apply where a cable operator
demonstrates that it is subject to "effective competition." Under the 1992 Cable
Act, a system is subject to effective competition where (i) fewer than 30% of
the households in the franchise area subscribe to the cable service of a cable
system; (ii) the franchise area is served by at least two unaffiliated
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multichannel video programming distributors ("MVPDs") each of which offers
comparable video programming to at least 50% of the households in the franchise
area and the number of households subscribing to programming services offered by
the MVPDs other than the largest MVPDs exceeds 15% of the households in the
franchise area; or (iii) a MVPD operated by the franchising authority offers
video programming to at least 50% of the households in the franchise area. The
1996 Telecom Act also provides that effective competition exists if a local
exchange carrier provides video programming in the franchise area.
In implementing the 1992 Cable Act, the FCC adopted a benchmark
methodology as the principal method of regulating rates for Regulated Services.
Cable operators with rates above the allowable level under the FCC's benchmark
methodology may attempt to justify such rates using a cost-of-service
methodology. The FCC has instituted rate relief for small cable operators. Cable
operators with fewer than 400,000 nationwide subscribers are eligible to file a
streamlined cost-of- service analysis to justify their per-channel rates in
those systems serving 15,000 or fewer subscribers. Per-channel rates that fall
below a prescribed benchmark are presumed reasonable.
The 1992 Cable Act also requires cable systems to permit customers to
purchase video programming offered by the operator on a per channel or a per
program basis without the necessity of subscribing to any tier of service, other
than the basic service tier, unless the system's lack of addressable converter
boxes or other technological limitations does not permit it to do so. The
statutory exemption for cable systems that do not have the technological
capability to offer programming in the manner required by the statute is
available until a system obtains such capability, but not later than December
2002. Systems facing effective competition are not subject to the tier
buy-through prohibition.
The 1996 Telecom Act deregulates immediately CPS rates for small cable
operators that have less than 50,000 subscribers in the franchise area. A "small
operator" is an operator that, with its affiliates, serves less than 1% of all
subscribers in the United States (about 600,000 subscribers) and is not
affiliated with entities with annual aggregate gross revenues of more than $250
million. Rates for basic service continue to be regulated, however, unless the
system had a single regulated tier as of December 31, 1994. For all other cable
systems, the FCC's rate regulation authority for CPS tiers expires March 31,
1999. Rates for basic tiers will continue to be subject to regulation.
The 1996 Telecom Act allows cable operators to pass through franchise
fees and regulatory fees to subscribers without any prior notice. Notices of
other rate changes may be given by any reasonable written means, at the cable
operator's "sole discretion." Bulk discounts for multi-dwelling units no longer
must meet any uniform rate requirement. A cable operator need not maintain
uniform rates throughout a franchise area where there is effective competition.
In addition, franchising authorities may not file complaints with the FCC unless
they have actually received subscriber complaints.
Carriage of Broadcast Television Signals. The 1992 Cable Act
established new signal carriage requirements. These requirements allow
commercial television broadcast stations which are "local" to a cable system, to
elect every three years whether to require the cable system to carry the
station, subject to certain exceptions, or whether to require the cable system
to negotiate for "retransmission consent" to carry the station. The first
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must-carry/retransmission consent elections were made in June 1993. The next
elections will be made in October 1996. Stations are generally considered local
to a cable system where the system is located in the station's Area of Dominant
Influence ("ADI"), as determined by Arbitron. This method for determining
whether a station is local to a cable system may change because Arbitron no
longer updates ADIs and the 1996 Telecom Act requires the FCC to use commercial
publications which delineate markets based on viewing patterns. Cable systems
must obtain retransmission consent for the carriage of all "distant" commercial
broadcast stations, except for certain "superstations" (i.e., commercial
satellite-delivered independent stations such as WTBS). All commercial stations
entitled to carriage were to have been carried by June 1993, and any
non-must-carry stations (other than superstations) for which retransmission
consent had not been obtained could no longer be carried after October 5, 1993.
The Company carries some stations pursuant to must-carry and others pursuant to
retransmission consent agreements. In some cases, the Company agreed to carry
additional services, like FX, pursuant to retransmission consent agreements.
Local non-commercial television stations are also given mandatory
carriage rights, subject to certain exceptions, within the larger of (i) a
50-mile radius of the station's city of license; or (ii) the station's Grade B
contour (a measure of signal strength). Non-commercial stations are not given
the option to negotiate for retransmission consent. All non-commercial stations
entitled to carriage were to have been carried by December 1992.
Nonduplication of Network Programming. Cable television systems that
have 1,000 or more customers must, upon the appropriate request of a local
television station, delete or "black out" the simultaneous or nonsimultaneous
network programming of a distant station when the local station also has
contracted for such programming on an exclusive basis.
Deletion of Syndicated Programming. Cable television systems that have
1,000 or more subscribers must, upon the appropriate request of a local
television station, delete or "black out" the simultaneous or nonsimultaneous
syndicated programming of a distant station when the local station also has
contracted for such programming on an exclusive basis.
Registration Procedures and Reporting Requirements. Prior to commencing
operation in a particular community, all cable television systems must file a
registration statement with the FCC listing the broadcast signals they will
carry and certain other information. Additionally, cable operators periodically
are required to file various informational reports with the FCC. Cable operators
that operate in certain frequency bands are required on an annual basis to file
the results of their periodic cumulative leakage testing measurements. Operators
that fail to make this filing or who exceed the FCC's allowable cumulative
leakage index risk being prohibited from operating in those frequency bands in
addition to other sanctions.
Technical Requirements. Historically, the FCC has imposed technical
standards applicable to the cable channels on which broadcast stations are
carried, and has prohibited franchising authorities from adopting standards
which were in conflict with or more restrictive than those established by the
FCC. The FCC has applied its standards to all classes of channels which carry
downstream National Television System Committee ("NTSC") video programming. The
FCC also has adopted standards applicable to cable television systems using
frequencies in the 108-137 MHZ and 225-400 MHZ bands in order to prevent harmful
interference with cable system signal leakage.
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The 1992 Cable Act requires the FCC to update periodically its technical
standards. The 1996 Telecom Act requires that minimal regulations to assure
compatibility among televisions, VCRs and cable systems, leaving all features,
functions, protocols and other product and service options for selection through
open competition in the market. The 1996 Telecom Act also prohibits States or
franchising authorities from prohibiting, conditioning or restricting a cable
system's use of any type of subscriber equipment or transmission technology.
Franchise Authority. The 1984 Cable Act affirmed the right of
franchising authorities (the cities in which the Company provides cable service)
to award one or more franchises within their jurisdictions and prohibited
non-grandfathered cable systems from operating without a franchise in such
jurisdictions. The Company's affiliates hold cable franchises in all areas in
which they provide service where cable franchises are required. The 1992 Cable
Act encouraged competition with existing cable systems by (i) allowing
municipalities to operate their own cable systems without franchises; (ii)
preventing franchising authorities from granting exclusive franchises or from
unreasonably refusing to award additional franchises covering an existing cable
system's service area; and (iii) prohibiting (with limited exceptions) the
common ownership of cable systems and co-located multichannel multipoint
distribution service ("MMDS") or satellite master antenna television ("SMATV")
systems (a prohibition which is limited by the 1996 Telecom Act to cases in
which the cable operator is not subject to effective competition).
The 1996 Telecom Act exempts from franchise requirements those
telecommunications services provided by a cable operator or its affiliate.
Franchise authorities may not require a cable operator to provide
telecommunications service or facilities, other than institutional networks, as
a condition of franchise grant, renewal, or transfer. Similarly, franchise
authorities may not impose any conditions on the provision of such service.
Franchise Fees. Although franchising authorities may impose franchise
fees under the 1984 Cable Act, as modified by the 1996 Telecom Act, such
payments cannot exceed 5% of a cable system's annual gross revenues derived from
the operation of the cable system to provide cable services. Franchise fees
apply only to revenues for cable services. Franchising authorities are permitted
to charge a fee for any telecommunications providers' use of public right-of-way
"on a competitively neutral and nondiscriminatory basis."
Franchise Renewal. The 1984 Cable Act established renewal procedures
and criteria designed to protect incumbent franchises against arbitrary denials
of renewal. These formal procedures are mandatory only if timely invoked by
either the cable operator or the franchising authority. Even after the formal
renewal procedures are invoked, franchising authorities and cable operators
remain free to negotiate a renewal outside the formal process. Although the
procedures provide substantial protection to incumbent franchisees, renewal is
by no means assured, as the franchisee must meet certain statutory standards.
Even if a franchise is renewed, a franchising authority may impose new and more
onerous requirements such as upgrading facilities and equipment, although the
municipality must take into account the cost of meeting such requirements.
The 1992 Cable Act made several changes to the process which may make
it easier in some cases for a franchising authority to deny renewal. The cable
operator's timely request to commence renewal proceedings must be in writing and
23
<PAGE>
the franchising authority must commence renewal proceedings not later than six
months after receipt of such notice. Within a four-month period beginning with
the submission of the renewal proposal the franchising authority must grant or
deny the renewal. Franchising authorities may consider the "level" of
programming service provided by a cable operator in deciding whether to renew.
Franchising authorities are no longer precluded from denying renewal based on
failure to substantially comply with the material terms of the franchise where
the franchising authority has "effectively acquiesced" to such past violations.
Rather, the franchising authority is estopped only if, after giving the cable
operator notice and opportunity to cure, the authority fails to respond to a
written notice from the cable operator of its failure or inability to cure.
Courts may not reverse a denial of renewal based on procedural violations found
to be "harmless error."
Channel Set-Asides. The 1984 Cable Act permits local franchising
authorities to require cable operators to set aside certain channels for public,
educational and governmental access programming. The 1984 Cable Act further
requires cable television systems with 36 or more activated channels to
designate a portion of their channel capacity for commercial leased access by
unaffiliated third parties. The 1992 Cable Act requires leased access rates to
be set according to an FCC-prescribed formula. The 1996 Telecom Act explicitly
gives cable operators the right to refuse to carry any public access or leased
access program containing "obscenity, indecency, or nudity."
Ownership. The 1996 Telecom Act eliminates the 1984 Cable Act
provisions prohibiting local exchange carriers ("LECs") from providing video
programming directly to customers within their local exchange telephone service
areas, except in rural areas or by specific waiver. Under the 1996 Telecom Act,
LECs may provide video programming by radio-based systems, common carrier
systems, "open video" systems, or "cable systems." LECs that elect to provide
"open video" systems must allow others to use up to two-thirds of their
activated channel capacity. These LECs are relieved of regulation as "common
carriers," and are not required to obtain local franchises, but are still
subject to many other regulations applicable to cable systems. LECs operating as
"cable systems" are subject to all rules governing cable systems, including
franchising requirements.
The 1996 Telecom Act prohibits a LEC or its affiliate from acquiring
more than a 10 percent financial or management interest in any cable operator
providing cable service in its telephone service area. It also prohibits a cable
operator or its affiliate from acquiring more than a 10 percent financial or
management interest in any LEC providing telephone exchange service in its
franchise area. A LEC and cable operator whose telephone service area and cable
franchise area are in the same market may not enter into a joint venture to
provide telecommunications services or video programming. There are exceptions
to these limitations for rural facilities, very small cable systems, and small
LECs in non-urban areas.
The 1984 Cable Act and the FCC's rules prohibit the common ownership,
operation, control or interest in a cable system and a local television
broadcast station whose predicted Grade B contour covers any portion of the
community served by the cable system. The 1996 Telecom Act repeals this
statutory restriction on broadcast-cable cross-ownership, but does not require
the FCC to repeal its cross-ownership rule. Nevertheless, the FCC intends to
review this rule by the end of the fourth quarter of 1996. The 1996 Telecom Act
also eliminates the FCC's restriction against the ownership or control of both a
broadcast network and cable system, but it authorizes the FCC to adopt
regulations which will ensure carriage, channel positioning and
nondiscriminatory treatment of non-affiliated broadcast stations by cable
systems which are owned by a broadcast network.
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<PAGE>
The 1992 Cable Act prohibits the common ownership, affiliation, control
or interest in cable television systems and MMDS facilities or SMATV systems
with overlapping service areas. However, a cable system may acquire a co-located
SMATV system if it provides cable service to the SMATV system in accordance with
the terms of its cable television franchise. The 1996 Telecom Act provides that
these rules shall not apply where the cable operator is subject to effective
competition.
Pursuant to the 1992 Cable Act, the FCC has imposed limits on the
number of cable systems a single cable operator may own. In general, no cable
operator may hold an attributable interest in cable systems which pass more than
30% of all homes nationwide. Attributable interests for these purposes include
voting interests of 5% or more (unless there is another single holder of more
than 50% of the voting stock), officerships, directorships and general
partnership interests.
Equal Employment Opportunity. The 1984 Cable Act includes provisions to
ensure that minorities and women are provided Equal Employment Opportunities
("EEO") within the cable television industry. The FCC has adopted reporting and
certification rules that apply to all cable system operators with more than five
full-time employees. Failure to comply with the EEO requirements can result in
the imposition of fines and/or other administrative sanctions, or may, in
certain circumstances, be cited by a franchising authority as a reason for
denying a franchisee's renewal request.
Privacy. The 1984 Cable Act imposes a number of restrictions on the
manner in which cable system operators can collect and disclose data about
individual system customers. The statute also requires that the system operator
periodically provide all customers with written information about its policies
regarding the collection and handling of data about customers, their privacy
rights under federal law and their enforcement rights. In the event that a cable
operator is found to have violated the customer privacy provisions of the 1984
Cable Act, it could be required to pay damages, attorneys' fees and other costs.
Under the 1992 Cable Act, the privacy requirements are strengthened to require
that cable operators take such actions as are necessary to prevent unauthorized
access to personally identifiable information.
Anti-Trafficking. The 1996 Telecom Act repeals most of the
anti-trafficking restrictions imposed by the 1992 Cable Act, which prevented a
cable operator from selling or transferring ownership of a cable system within
36 months of acquisition. However, a local franchise may still require prior
approval of a transfer or sale. The 1992 Cable Act requires franchising
authorities to act on a franchise transfer request within 120 days after receipt
of all information required by FCC regulations and the franchising authority.
Approval is deemed granted if the franchising authority fails to act within such
period.
Copyright. Cable television systems are subject to federal copyright
licensing covering carriage of broadcast signals. In exchange for making
semi-annual payments to a federal copyright royalty pool and meeting certain
other obligations, cable operators obtain a statutory license to retransmit
broadcast signals. The amount of the royalty payment varies, depending on the
amount of system revenues from certain sources, the number of distant signals
25
<PAGE>
carried, and the location of the cable system with respect to over-the-air
television stations. Cable operators are liable for interest on underpaid and
unpaid royalty fees, but are not entitled to collect interest on refunds
received for overpayment of copyright fees. Adjustments in copyright royalty
rates are now made through an arbitration process supervised by the U.S.
Copyright Office.
Various bills have been introduced in Congress in the past several
years that would eliminate or modify the cable television compulsory license.
Without the compulsory license, cable operators might need to negotiate rights
from the copyright owners for each program carried on each broadcast station in
the channel line-up.
Copyright music performed in programming supplied to cable television
systems by pay cable networks (such as HBO) and cable programming networks (such
as USA Network) has generally been licensed by the networks through private
agreements with the American Society of Composers and Publishers ("ASCAP") and
BMI, Inc. ("BMI"), the two major performing rights organizations in the United
States. ASCAP and BMI offer "through to the viewer" licenses to the cable
networks which cover the retransmission of the cable networks' programming by
cable television systems to their subscribers.
Regulatory Fees and Other Matters. The FCC requires payment of annual
"regulatory fees" by the various industries it regulates, including the cable
television industry. In 1995, cable television systems were required to pay
regulatory fees of $0.49 per subscriber. Per-subscriber regulatory fees may be
passed on to subscribers as "external cost" adjustments to rates for basic cable
service. Fees are also assessed for other FCC licenses, including licenses for
business radio, cable television relay systems ("CARS") and earth stations.
These fees, however, may not be collected directly from subscribers as long as
the FCC's rate regulations remain applicable to the cable system.
In December 1994, the FCC adopted new cable television and broadcast
technical standards to support a new Emergency Alert System. Cable operators
must install and activate equipment necessary to implement the new Emergency
Broadcast System by July 1, 1997.
FCC regulations also address the carriage of local sports programming;
restrictions on origination and cablecasting by cable system operators;
application of the rules governing political broadcasts; customer service
standards; home wiring and limitations on advertising contained in nonbroadcast
children's programming.
Telecommunications Regulation. The 1996 Telecom Act has substantially
revised communications regulation in the United States. The legislation is
intended to allow providers to enter communications markets that have
historically been closed to them as a result of legal restrictions, as well as
practical and economic considerations. At the same time, implementation of the
1996 Telecom Act may leave incumbent providers in previously closed markets
sufficiently free from regulation that they will be able to defend their markets
aggressively. The Company is unable to predict the outcome of the proceedings
that will implement the legislation.
For example, the 1996 Telecom Act establishes local exchange
competition as a national policy by preempting laws that prohibit competition in
the local exchange and by establishing uniform requirements and standards for
26
<PAGE>
interconnection, unbundling and resale. These standards will be developed and
implemented by the FCC in conjunction with the states in numerous proceedings
and through a process of negotiation and arbitration. By establishing national
standards for interconnection, unbundling, and resale of competitive local
exchange services, the 1996 Telecom Act significantly enhances the Company's
opportunity to enter this market.
At the same time, the Company's ability to compete in offering certain
services may be adversely affected, depending on the degree and form of
regulatory flexibility ultimately afforded LECs by the FCC and the states, as
well as on the pricing scope and applicability of these interconnection
requirements. In addition, if the Company offers local exchange services within
the meaning of the 1996 Telecom Act, other service providers may take advantage
of the interconnection duty to require the Company to use its local exchange
facilities to carry their customer traffic.
The 1996 Telecom Act also opens the way for Bell operating companies
("BOCs") and their affiliates to provide long distance telecommunications
services between a local access and transport area and points outside that area.
Prior to the Act, BOCs were generally prohibited from offering such "interLATA"
services. Under the 1996 Telecom Act such services may be offered outside of a
BOC's local exchange service states immediately. BOCs may offer interLATA
services inside such states (in-region) when the FCC determines either that the
BOC is providing access and interconnection to a competent exchange service
provider under a state-approved agreement or that no such provider has requested
such access and interconnection within ten months after enactment, and the state
has approved the BOC's general terms for providing such access and
interconnection. In either case, the FCC also must conclude that the BOC has
satisfied a "competitive checklist" of interconnection and other requirements
specified in the 1996 Telecom Act. If the Company decides itself to provide
interLATA service, it will likely face vigorous competition from BOC entrants,
as well as from existing long distance carriers.
Telecommunications common carriers subject to the jurisdiction of the
FCC generally must file tariffs detailing the prices, terms and conditions of
services whether the terms offered by the carrier are just, reasonable, and
nondiscriminatory. The 1996 Telecom Act provides that the FCC, in response to a
petition from a carrier, shall forbear from enforcing regulations, including
those requiring tariffs, if the FCC determines that (1) enforcement of the
regulations is not necessary to ensure that carriers' terms are reasonable and
nondiscriminatory; (2) enforcement of the regulations is not necessary for the
protection of consumers; and (3) forbearance from applying the regulations is
consistent with the public interest and, in particular, that such forbearance
would promote competition. The FCC may take action under these provisions of the
Act to reduce or eliminate tariff filing and other requirements. Such actions
could free the Company from regulatory burdens, but might also increase the
pricing flexibility of its competitors.
State and Local Regulation. Cable systems are subject to state and
local regulation, typically imposed through the franchising process because a
cable television system uses local streets and rights-of-way. Regulatory
responsibility for essentially local aspects of the cable business such as
franchisee selection, billing practices, system design and construction, and
safety and consumer protection remains with either state or local officials and,
in some jurisdictions, with both.
Cable television systems generally are operated pursuant to
nonexclusive franchises, permits or licenses granted by a municipality or other
27
<PAGE>
state or local government entity. Franchises generally are granted for fixed
terms and in many cases are terminable for noncompliance with material
provisions. The terms and conditions of franchises vary materially from
jurisdiction to jurisdiction. Each franchise generally contains provisions
governing cable service rates, franchise fees, franchise term, system
construction and maintenance obligations, system channel capacity, design and
technical performance, customer service standards, franchise renewal, sale or
transfer of the franchise, territory of the franchisee, indemnification of the
franchising authority, use and occupancy of public streets and types of cable
services provided. State and local franchising jurisdiction must be exercised
consistently with federal law.
Employees
At December 31, 1995, the Company had approximately 251 full-time
employees and 44 part-time employees, none of whom are subject to a collective
bargaining agreement. The Company considers its relations with its employees to
be excellent. In addition, Galaxy Management employs 26 people who are dedicated
primarily to servicing the Company.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Introduction
On December 23, 1994, the Company commenced operations. The Company
acquired certain cable television systems of Galaxy Cablevision, Vantage Cable,
Vista Communications and Chartwell Cable on December 23, 1994, and certain other
cable systems of Galaxy Cablevision, L.P. on March 31, 1995, for aggregate
consideration of $98.8 million. The following discussion of results of
operations for the years ended December 31, 1993 and 1994 is based on the
combined historical results of operations for the Initial Systems. The
discussion of the results of operations for the years ended December 31, 1994
and December 31, 1995 is based on the combined historical financial data for the
Initial Systems adjusted to give historical pro forma effect to management fees,
depreciation and amortization, interest expense and debt issue costs that would
have been incurred if the Initial Systems had been acquired as of January 1,
1994. The combined results of operations of the Initial Systems and the
historical pro forma results of operations of the Company do not reflect any
changes in the operation or management of the Initial Systems that the Company
has made or intends to make and are not necessarily indicative of the results of
operations that would have been achieved had the Initial Systems been owned and
operated by the Company during the periods presented.
Results of Operations
Overview
In each of the past three years, the Initial Systems have generated
substantially all of their revenues from monthly customer fees for basic,
premium and other services (such as the rental of converters and remote control
devices) and from installation charges. Minimal additional revenues were
generated from the sale of advertising and from home shopping networks.
The Initial Systems have generated increases in revenues in each of the
past three fiscal years. This growth was accomplished primarily through internal
subscriber growth. Except for fiscal year 1993 to fiscal year 1994, total
systems operations expenses and selling, general and administrative expenses
have increased, but at a lower rate than revenues. Although the Company expects
to experience increases in programming expenses for the foreseeable future, the
Company believes it will be able, under the FCC's existing cable rate
regulations, to increase its rates for cable services to recover increases in
the costs of programming to the extent such increases exceed the general rate of
inflation. The high level of depreciation and amortization associated with the
acquisitions and capital expenditures related to continued construction and
upgrading of the Initial Systems, together with interest costs related to the
Company's and the prior owners' financing activities, have caused the prior
owners of the Initial Systems and the Company to report net losses. The Company
believes that such net losses are common for cable television companies.
The following table sets forth for the periods indicated certain statement
of operations items expressed in dollar amounts (in thousands) and a percentage
of total revenues from continuing operations on a combined historical basis.
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<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1993 1994(a) 1995 1994(b) 1995(b)
------------------ ------------------ ------------------ ------------------
- ----------------
% of % of % of % of % of
Amount Revenues Amount Revenues Amount Revenues Amount Revenues Amount Revenues
------ -------- ------ -------- ------ -------- ------ -------- ------
- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Revenues .............. $ 27,285 100.0% $ 27,694 100.0% $ 29,995 100.0% $ 55,438 100.0% $ 57,459 100.0%
Operating Expenses:
System Operations ... 9,938 36.4% 10,599 38.3% 13,219 44.1% 21,791 39.3% 24,531 42.7%
Selling, general
and administrative 4,722 17.3% 5,335 19.3% 3,681 12.3% 9,283 16.7% 7,546 13.1%
Management fees ..... 1,320 4.8% 1,523 5.5% 1,605 5.4% 2,492 4.5% 2,582 4.5%
Depreciation and
amortization ..... 15,681 57.5% 9,498 34.3% 10,206 33.9% 18,702 33.7% 19,105 33.3%
Total operating
expenses ......... 31,661 116.0% 26,955 97.3% 28,711 95.7% 52,268 94.2% 53,764 93.6%
Operating income (loss) (4,376) (16.0%) 739 2.7% 1,284 4.3% 3,170 5.8% 3,695 6.4%
Interest expense .... (6,229) (22.8%) (7,697) (27.8%) (10,442) (34.8%) (18,718) (33.8%) (18,813) (32.7%)
Other income
(expense) ........ 37 0.1% (242) (0.9%) 608 2.0% (263) (0.5%) (10) 00
Net Loss .............. $(10,568) (38.7%) $ (7,200) (26.0%) $ (8,550) (28.5%) $(15,811) (28.5%) $(15,128) (26.3%)
EBITDA ................ $ 11,305 41.4% $ 10,237 37.0% $ 11,490 38.3% $ 21,872 39.5% $ 22,800 39.7%
<FN>
(a) Reflects the combined historical financial data for the Initial Systems adjusted to give historical pro forma effect to
management fees, depreciation and amortization, interest expense and debt issue costs that would have been incurred if
the acquisitions of the Initial Systems had occurred as of January 1, 1994.
(b) Reflects the combined historical financial data for the Current Systems adjusted to give historical pro forma effect to
management fees, depreciation and amortization, interest expense and debt issue costs that would have been incurred if
the acquisitions of the Current Systems had occurred as of January 1, 1994.
</FN>
</TABLE>
Pro Forma Fiscal 1995 Compared to Pro Forma Fiscal 1994
Revenues increased 3.6%, or approximately $2.0 million, from fiscal
1994 to fiscal 1995. The increase in revenues resulted primarily from
inflationary rate increases in the Friendship systems and a few of the Douglas
systems. Rates were also increased in the Initial Systems that requested The
Disney Channel be placed on basic service.
Systems operations expenses increased 12.6%, or approximately $2.7
million, from fiscal 1994 to fiscal 1995. The growth in expenses was due
primarily to increases in programming and other subscriber related expenses
which typically vary with revenues and the increased number of channels carried.
Systems operations expenses, as a percentage of revenues, increased from 39.3%
in 1994 to 42.7% in 1995.
Selling, general and administrative expenses decreased 18.7%, or
approximately $1.7 million, from fiscal 1994 to fiscal 1995. Selling general and
administrative expenses, as a percentage of revenues, decreased to 13.1% in 1995
from 16.7% in 1994. The decrease was due primarily to reduced administrative
costs due to the closing of certain offices in acquired systems and the
economies of scale that resulted from folding the acquisitions into existing
operating management and facilities.
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<PAGE>
Management fees increased 3.6%, or approximately $0.1 million, from fiscal
1994 to fiscal 1995. The increase was proportionate to the increase in revenue.
Depreciation and amortization expense increased 2.2%, or approximately
$0.4 million, from fiscal 1994 to fiscal 1995. Depreciation and amortization
decreased from 33.7% of revenues in 1994 to 33.3% of revenues in 1995.
Interest expense increased 0.5%, or approximately $0.1 million, from
fiscal 1994 to fiscal 1995. Interest expense, as a percentage of revenues,
decreased from 33.8% in 1994 to 32.7% in 1995 because of lower interest rates
for Bank Debt in the last half of 1995.
Other income (expense) varied by $253,000 between fiscal 1994 and
fiscal 1995.
The prior owners of the Initial Systems as separate entities paid no
income taxes, although they were required to file federal and state income tax
returns for informational purposes only. All income or loss flowed through to
the partners of such entities as specified in the governing partnership
agreements.
Net loss decreased 4.3%, or approximately $0.7 million, from fiscal
1994 to fiscal 1995, primarily as a result of the increases in revenues and
changes in expenses as described above. As a percentage of revenues, net loss
decreased from 28.5% in 1994 to 26.3% in 1995.
EBITDA increased 4.2%, or approximately $0.9 million, from fiscal 1994 to
fiscal 1995, due primarily to the increase in revenues. As a percentage of
revenues, EBITDA increased from 39.5% in 1994 to 39.7% in 1995, primarily as a
result of the decrease in selling, general and administrative expense partially
offset by the increase of systems operations expense as a percentage of
revenues. EBITDA represents income (loss) before interest expense, income taxes,
depreciation and amortization, and other income (expense). EBITDA is not
presented in accordance with GAAP and should not be considered an alternative
to, or more meaningful than, operating income or operating cash flows as an
indicator of the Company's operating performance.
Fiscal 1995 Compared to Historical Pro Forma Fiscal 1994
Revenues increased 8.3%, or approximately $2.3 million, from fiscal
1994 to fiscal 1995. Revenues increased primarily due to increased subscribers
generated from the Douglas and Friendship acquisitions which closed effective
December 1.
Systems operations expenses increased 24.7%, or approximately $2.6
million, from fiscal 1994 to fiscal 1995. Systems operations expenses, as a
percentage of revenues, increased from 38.3% in 1994 to 44.1% in 1995. These
increases were due primarily to the increases in programming expenses due to
channel additions and increases in net technical salaries and benefits due to a
smaller percentage of such expenses being capitalized to drop installation
costs.
Selling, general and administrative expenses decreased 31.0%, or
approximately $1.7 million, from fiscal 1994 to fiscal 1995. Selling, general
and administrative expenses, as a percentage of revenues, decreased from 19.3%
in 1994 to 12.3% in 1995. The decreases were due primarily to reduced
administrative costs due to the closing of certain offices in acquired systems
and the
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<PAGE>
economies of scale that resulted from folding the acquisitions into existing
operating management and facilities.
Management fees increased 5.4%, or approximately $0.1 million, from
fiscal 1994 to fiscal 1995. Management fees, as a percentage of revenues,
decreased from 5.5% in 1994 to 5.4% in 1995. Management fees are calculated as a
percentage of revenue and are proportionate, except that in December, 1995, such
fees were adjusted from 5.5% of revenue to 4.5% of revenue.
Depreciation and amortization expense increased 7.5%, or approximately $0.7
million, from fiscal 1994 to fiscal 1995. As a percentage of revenues,
depreciation and amortization decreased from 34.3% in 1994 to 33.9% in 1995. The
increase was due primarily to increased depreciation due to Capital Expenditures
implemented in 1995, and, to a lesser extent, increased expense due to the
amortization of acquired intangible assets.
Interest expense increased 35.7%, or approximately $2.7 million, from
fiscal 1994 to fiscal 1995. As a percentage of revenues, interest expense
increased from 27.8% in 1994 to 34.8% in 1995. These increases were incurred
primarily because of the Notes issued in September for the acquisition of
systems which closed in December, and the approximate two months of interest
paid less escrow interest income as compared to the associated Revenue and cash
flow of the acquired properties.
Other income (expense) increased by approximately $0.9 million, from
expense of approximately $0.2 million in 1994 to income of approximately $0.6
million in 1995. The change was due primarily to the $0.7 million of interest
income related to Note proceeds less repayment of bank debt that accrued while
funds were in escrow and not immediately being utilized for the closing of the
acquired properties.
The prior owners of the Initial Systems and the Company as separate
entities paid no income taxes, although they were required to file federal and
state income tax returns for informational purposes only. All income or loss
flowed through to the partners of such entities as specified in the governing
partnership agreements.
Net loss increased 18.4%, or approximately $1.3 million, from fiscal
1994 to fiscal 1995, primarily as a result of the increase in interest expense
and other income (expense). As a percentage of revenues, net loss increased from
26.0% in 1994 to 28.4% in 1995, primarily as a result of the increase in
depreciation and amortization expense during 1995.
EBITDA increased 12.2%, or approximately $1.3 million, from fiscal 1994
to fiscal 1995, and, as a percentage of revenues, increased from 37.0% to 38.3%
over such periods due primarily to increased revenue, with decreases in selling,
general and administrative expenses at a greater rate than the increases in
systems operations expense. EBITDA represents income (loss) before interest
expense, income taxes, depreciation and amortization, and other income
(expense). EBITDA is not presented in accordance with GAAP and should not be
considered an alternative to, or more meaningful than, operating income or
operating cash flows as an indicator of the Company's operating performance.
33
<PAGE>
Historical Pro Forma Fiscal 1994 Compared to Fiscal 1993
Revenues increased 1.5%, or approximately $0.4 million, from fiscal 1993 to
fiscal 1994. Revenue growth was negatively affected by rate freezes and other
consequences of rate regulation by the FCC. Average basic service subscribers
increased from approximately 78,000 during fiscal 1993 to 79,000 during fiscal
1994, and average monthly revenue per basic subscriber increased from $29.14 to
$29.23 from 1993 to 1994. Homes passed decreased from 127,114 at December 31,
1993 to 126,733 at December 31, 1994, primarily as a result of the sale of a
system in Collins, Mississippi by Vista Communications. However, basic
subscribers increased from 77,618 to 80,287 at such dates.
System operations expenses increased 6.7%, or approximately $0.7
million, from fiscal 1993 to fiscal 1994. Systems operations expenses, as a
percentage of revenues, increased from 36.4% in 1993 to 38.3% in 1994. These
increases were due primarily to the classification of bad debt expense in the
Vista Communications systems totaling approximately $0.3 million as selling,
general and administrative expenses in 1993 rather than as systems operations
expenses and, to a lesser degree, to acquired Galaxy Cablevision systems bearing
proportionally higher expenses as Galaxy Cablevision disposed of certain other
cable systems. Bad debt expense decreased approximately $0.1 million in the
Vista Communications systems from 1993 to 1994.
Selling, general and administrative expenses increased 13.0%, or
approximately $0.6 million, from fiscal 1993 to fiscal 1994. Selling, general
and administrative expenses, as a percentage of revenues, increased from 17.3%
in 1993 to 19.3% in 1994. The increases were due primarily to acquired Galaxy
Cablevision systems bearing proportionally higher expenses as Galaxy Cablevision
disposed of certain other cable systems, and increased insurance premiums and
employee severance costs in the Vista Communications systems.
Management fees increased 15.4%, or approximately $0.2 million, from
fiscal 1993 to fiscal 1994. Management fees, as a percentage of revenues,
increased from 4.8% in 1993 to 5.5% in 1994. The increases resulted from the
historical pro forma application of the Company's 5.5% management fee rate for
1994.
Depreciation and amortization expense decreased 39.4%, or approximately
$6.2 million, from fiscal 1993 to fiscal 1994. As a percentage of revenues,
depreciation and amortization decreased from 57.5% in 1993 to 34.3% in 1994. The
decreases were due to the historical pro forma application of the Initial
Systems' depreciation and amortization methods applied to acquired assets valued
in accordance with APB No. 16. As a result, depreciation increased approximately
$0.4 million, while amortization decreased approximately $5.1 million. The
decrease in amortization resulted from a reduction of recorded intangible assets
from approximately $40.0 million and approximately $30.4 million in the Vantage
Cable systems and Vista Communications systems, respectively, to approximately
$38.0 million in the Company.
Interest expense increased 23.6%, or approximately $1.5 million, from
fiscal 1993 to fiscal 1994. As a percentage of revenues, interest expense
increased from 22.8% in 1993 to 27.8% in 1994. The increase resulted from the
historical pro forma application of the Company's debt structure and related
interest rates as if such debt structure were in place as of January 1, 1994.
Interest rates were approximately 8.0% and 12.0% in 1993 and 1994, respectively.
34
<PAGE>
Other income (expense) decreased by approximately $0.3 million, from
income of approximately $37,000 in 1993 to expense of approximately $0.2 million
in 1994. Other income (expense), as a percentage of revenues, changed from
income of 0.1% in 1993 to expense of 0.9% in 1994. The change was due primarily
to costs incurred and losses on the sales of systems and assets by Vista
Communications totaling approximately $0.3 million partially offset by interest
income earned by the Vantage Cable systems totaling approximately $74,000.
The prior owners of the Initial Systems and the Company as separate
entities paid no income taxes, although they were required to file federal and
state income tax returns for informational purposes only. All income or loss
flowed through to the partners of such entities as specified in the governing
partnership agreements.
Net loss deceased 31.9%, or approximately $3.4 million, from fiscal
1993 to fiscal 1994, primarily as a result of the decrease in depreciation and
amortization, offset in part by the increase in interest expense and other
income (expense). As a percentage of revenues, net loss decreased from 38.7% in
1993 to 26.0% in 1994, primarily as a result of the decrease in depreciation and
amortization expense during 1994.
EBITDA decreased 9.4%, or approximately $1.1 million, from fiscal 1993
to fiscal 1994, and, as a percentage of revenues, decreased from 41.4% to 37.0%
over such periods due primarily to the increases in systems operations expenses
and selling, general and administrative expenses. EBITDA represents income
(loss) before interest expense, income taxes, depreciation and amortization, and
other income (expense). EBITDA is not presented in accordance with GAAP and
should not be considered an alternative to, or more meaningful than, operating
income or operating cash flows as an indicator of the Company's operating
performance.
Liquidity and Capital Resources
The cable television business requires substantial financing for
construction, expansion and maintenance of plant. In addition, the Company
intends to continue pursuit of a business strategy which includes selective
acquisitions. Since December of 1994 the Company received cash equity
contributions of approximately $44.6 million from the Equity Investors and the
Senior Managers. The Company also received equity from Vantage Cable totaling
approximately $6.4 million. The Company had an aggregate of approximately $146
million of indebtedness as of December 31, 1995, representing $120 million of
senior subordinated notes, approximately $8.5 million related to the term loan
and $17.5 million drawn under the Company's revolving line of credit (the
"Revolving Credit Facility" or "Revolver"). This debt and equity financing was
utilized principally in the December 1994 acquisitions of the Systems, and the
December, 1995 acquisitions of the remaining systems that now make up the
Current Systems. The Company's cash flows provided by operating activities
totaling approximately $7.6 million for the twelve months of 1995 have been
sufficient to meet the Company's debt service, working capital and capital
expenditure requirements with the exception of the acquisition of the Cameron,
Phoenix, Douglas, Buford, and Vista systems completed in 1995, totaling
approximately $93.6 million, which was funded principally through borrowings
under the Revolver and the Notes.
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Capital Expenditures
During the twelve months of 1995, the Company's capital expenditures
(exclusive of system acquisitions) were approximately $5.1 million. These
expenditures were primarily for new vehicles and OmniTRACS units in such
vehicles, office expansions, expansion and replacement of headend buildings and
rewires of associated electronic equipment, drop installation, converters, traps
and other drop related items, and routine maintenance and replacement of the
cable plant. The Company expects capital expenditures over the next two years to
total approximately $25.5 million, of which approximately $5.0 million per year
represents anticipated maintenance capital expenditures. The remaining capital
expenditures will consist primarily of installation of fiber optic cable and
microwave links which will allow for the reduction in the number of headends by
more than 100 through headend consolidation. These expenditures also include
expansion and replacement of headend buildings, rewires of associated electronic
equipment, new vehicles, test equipment, computer equipment and continued
installation of OmniTRACS units. The remaining capital items include the
expenses and capital expenditures required to add new subscribers and the
expansion and upgrade of the cable television facilities. The Company expects to
finance the anticipated capital expenditures described above with cash flows
generated from operations, and borrowings under the Revolving Credit Facility.
The Revolving Credit Facility and Term Loan
Pursuant to the Company's loan agreement with certain financial
institutions (the Loan Agreement"), the Lenders have provided the Company with
an $8.0 million term loan. The Term Loan accrues interest at 15% with current
payments of the interest of 325 basis points over the costs of funds (LIBOR).
The interest accrued in excess of interest paid currently is deferred and due at
maturity of the loan. It is anticipated that the Term Loan will be retired out
of the proceeds of the Revolver or simply converted to the same basis as the
Revolver. The Loan Agreement was amended in September 1995 to include a
Revolving Credit Facility under which the Company may make revolving borrowings
of up to $58.5 million until December 31, 1997, subject to compliance with
certain conditions, including certain financial covenants. Outstanding balances
on December 31, 1997 will convert to a term loan amortizing quarterly until a
final maturity on December 31, 2002. The Revolving Credit Facility will require
the Company to maintain compliance with certain financial ratios and other
covenants. The financial covenants in the Revolving Credit Facility may
significantly limit the Company's ability to borrow under the Revolving Credit
Facility.
The Company presently intends to utilize the Revolving Credit Facility to
fund capital expenditures, repay the Term Loan and acquire additional cable
systems, including but not limited to the Pending Systems, and for general
corporate purposes. The Company expects that it will be able to meet its debt
service, working capital and capital expenditure requirements through its
operating cash flows and borrowings under the Revolving Credit Facility.
Senior Subordinated Notes
Pursuant to an indenture dated September 28, 1995 (the "Indenture")
between the Company and Capital Corp., and the Boatmen's Trust Company as
trustee, the Company issued $120.0 million aggregate principal amount of senior
subordinated obligations (the "Notes") maturing in October 2005. The Notes bear
an interest rate of 12.375% per annum payable semiannually on April 1 and
October 1, commencing April 1, 1996.
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The payment of principal and interest on the Notes is subordinated in right
of payment to the Revolving Credit Facility and Loan Agreement. The Notes will
rank pari passu with all other senior subordinated indebtedness of the Company,
if any, and is senior to all subordinated debt of the Company.
The Indenture contains various restrictive covenants, including
limitations on indebtedness, certain restricted payments and affiliate
transactions as defined, purchases, asset sales and capital expenditures in
addition to reporting requirements.
Item 11. Executive Compensation.
Management Agreement
Pursuant to the Management Agreement between Galaxy Management and the
Company, Galaxy Management, including Messrs. Tommy Gleason, Jr., Davidson,
James Gleason, Cordova, Morris and Voss, who are employed by Galaxy Management
and are otherwise referred to as the Senior Managers, manages all aspects of the
day-to-day business and operations of the Company and in connection therewith
undertakes those activities and services that are customary in the cable
television industry for the account and on behalf of the Company. For a more
detailed description of the Management Agreement, see Item 13 of this Part III
("Certain Relationships and Related Transactions -- Management Agreement").
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Executive Compensation
None of the employees of the Company are deemed to be executive officers of
the Company. The Senior Managers are employees of Galaxy Management and the
services of such individuals are provided to the Company, for which services the
Company pays Galaxy Management a fee pursuant to the Management Agreement. The
Senior Managers are compensated in their capacity as executive officers of
Galaxy Management and therefore receive no compensation from the Company. The
General Partners receive no compensation for their services to the Company in
such capacity.
Director Compensation
Galaxy GP pays an annual retainer of $15,000 to its directors, other
than those who are salaried employees or executive officers of Galaxy
Management. In addition, the Company pays to such directors the ordinary and
necessary out-of-pocket expenses incurred by them to attend meetings of the
Board of Directors of Galaxy GP and committees thereof.
Item 13. Certain Relationships and Related Transactions.
Management Agreement
Galaxy Management, which is owned by the Senior Managers and Tommy L.
Gleason, the father of Tommy L. Gleason, Jr. and James M. Gleason, currently
manages all aspects of the day-to-day business and operations of the Company
pursuant to the Management Agreement. The term of the Management Agreement
expires December 31, 1999, but provides for automatic renewal for successive
one-year terms. The Company may terminate the Management Agreement with 90 days'
written notice prior to the expiration of the initial or any renewal term. The
Company also has the option to terminate the Management Agreement in the event
(i) of a material breach of the Management Agreement by Galaxy Management and
failure to cure same or commence cure within 30 days after receipt of notice
from the Company, (ii) of an unwaived and uncured default by the Company of any
substantive covenant contained in its financing documents, (iii) of a 10%
reduction in the Company's gross revenues or operating cash flow over the prior
fiscal year or (iv) that none of Tommy L. Gleason, Jr., Tommy L. Gleason or
James M. Gleason is involved in the management of Galaxy Management. The
Management Agreement also will terminate, with respect to any of the Company's
cable systems, upon the sale of such system by the Company and will terminate in
its entirety upon the sale or other distribution of all of the Company's systems
or upon the dissolution or winding up of the Company, which may be effected by
the Equity Investors in certain circumstances pursuant to the terms of the
Equity Holders Agreement described below.
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The Management Agreement provides that Galaxy Management is authorized
to perform management services including, among other things: operation and
control of the physical assets of the Systems; engineering and supervision of
expansion and construction activities relating to the Systems; negotiation,
administration and extension of franchise and pole attachment agreements and
agreements with utility companies; management of programming agreements;
marketing; purchasing; budgeting; billing, record-keeping, accounting and
financial reporting; tax return preparation; and hiring, supervision and
termination of Company employees. Galaxy Management is also authorized to
establish and maintain bank accounts for the Company ("System Operating
Accounts") to deposit all funds collected by each System and to make withdrawals
therefrom for purposes of payment and reimbursement of expenses incurred by or
on behalf of the Company. Galaxy Management is entitled to reimbursement from
the System Operating Accounts on a monthly basis of various expenses allocable
to its management and operation of the Systems and the Company, including truck
and automobile expenses, travel expenses, meals and entertainment, and
third-party professional fees. For fiscal 1995, the Company paid Galaxy
Management approximately $281,600 in reimbursed expenses.
In return for its management services, Galaxy Management receives a
management fee, payable monthly, equal to a percentage of the gross revenues
derived by the Company from the Systems, excluding revenues from the sale of
Systems or franchises. The Management Agreement also provides that, prior to
January 1, 1998, the dollar amount of the management fee may not increase as a
result of revenues attributable to acquired cable television systems until such
time as the gross revenues of the Company reach a certain minimum level. The
management fee is currently 4.5% of revenues. For the year ended December 31,
1995, the Company incurred a management fee of approximately $1,605,400. Galaxy
Management paid approximately 32% to its executive officers and approximately
23% to its corporate staff of 34 employees as compensation, with the remaining
45% applied to the nonreimbursable operating expenses of Galaxy Management.
There can be no assurance that such amounts are representative of the amount of
annual fees to be paid to Galaxy Management in the future.
The management fee may be reduced (but not below 3.5%) in the event other
entities controlled by Tommy L. Gleason, Jr., James M. Gleason and/or J. Keith
Davidson acquire other entertainment or telecommunications business assets, with
the calculation to determine any such reduction in the management fee based upon
the percentage of the gross revenues of such other assets compared to the gross
revenues of the Company. None of such persons presently intends, or intends to
cause any such entities, to make any such acquisitions. The Loan Agreement
limits the Company's ability to pay any accrued management fee and Galaxy
management's right to such fee and reimbursement of expenses is restricted by
the terms of the Affiliate Subordination Agreement described below.
The Company believes that the terms of the Management Agreement are
substantially the same terms as could be obtained in arm's length arrangements
with unaffiliated third parties.
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Affiliate Subordination Agreement
The Company, Galaxy GP, Galaxy Investments, certain investors in Galaxy
GP and Galaxy Investments, Galaxy Telecom Management, L.L.C. ("Galaxy Management
Limited"), Tommy L. Gleason, Jr., James M. Gleason, Tommy L. Gleason, J. Keith
Davidson, Ronald Voss, Terry M. Cordova, and the sellers of the Galaxy
Cablevision Systems, Vista Communications Systems and Vantage Cable Systems
(collectively, the "Subordinated Parties") are parties to an Affiliate
Subordination Agreement dated as of December 23, 1994 (the "Subordination
Agreement") with Fleet National Bank and the Lenders under the Company's Loan
Agreement (the "Senior Parties"). Under the terms of the Subordination
Agreement, all obligations and liabilities of the Company, Galaxy GP and Galaxy
Investments to make any payments of cash or other property to any of the other
Subordinated parties are subordinated in right of payment and remedies to the
prior final payment in full of the obligations and liabilities of the Company,
Galaxy GP and Galaxy Investments to the Senior Parties under the Loan Agreement
and the financing documents related thereto.
Equity Holders Agreement
The Company, Galaxy GP, Galaxy Investments, the Senior Managers, the
Equity Investors and Vantage Cable have entered into the Equity Holders
Agreement relating to the management of Galaxy GP and Galaxy Investments, the
general partners of the Company, and certain other matters. Under the Equity
Holders Agreement, each stockholder of Galaxy GP and each member of Galaxy
Investments has agreed to elect as directors or managers, as the case may be,
three designees of the Equity Investors and Tommy Gleason, Jr. and one other
designee of the Senior Managers. The current designees of the Equity Investors
are William P. Collatos, Kenneth T. Schiciano and Richard D. Tadler. J. Keith
Davidson is the current second designee of the Senior Managers. The Equity
Holders Agreement provides that James M. Gleason shall serve as a director and
manager if Tommy Gleason, Jr. is unable to serve.
The Equity Holders Agreement also restricts transfer of equity
interests in Galaxy GP and Galaxy Investments by the Senior Managers and
provides the Equity Investors with piggyback registration rights and, on or
after December 23, 1998, demand registration rights with respect to interest in
the Company, Galaxy GP and Galaxy Investments. The Equity Investors have agreed
to waive their registration rights with respect to the registration of the
Notes. On or after (i) December 23, 1998 or (ii) a default by the Company in the
payment of principal or interest on the indebtedness outstanding under the Loan
Agreement, the Equity Investors have the right to require (a) the reorganization
of the Company, Galaxy GP and Galaxy Investment to facilitate the registration
and public offering of securities of the successor entity or (b) the sale of the
Company, Galaxy GP, Galaxy Investments or the assets, stock or other securities
of any such entities.
The Equity Holders Agreement also provides that the Senior Managers and
their affiliates will first offer any opportunity to invest in a
telecommunications or entertainment business to the Company before making such
investment. If the Company elects not to make such investment, the Senior
Managers and the Equity Investors, if they so elect, may make such investments
through another entity. The decision of the Company as to whether or not to make
such investment will be made by the board of directors of the Managing General
Partner. Although the directors and executive officers of the Managing General
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Partner have certain fiduciary obligations to its shareholders under applicable
corporate law and the Managing General Partner has fiduciary duties to the other
partners of the Company, there can be no assurance that a conflict of interest
relating to any such investment will be resolved in favor of the Company. The
Company presently does not have any agreements or policies governing possible
conflicts of interest.
Promissory Notes of Galaxy Investments
Pursuant to the terms of a Securities Purchase Agreement dated December 23,
1994 and as amended as of December 1, 1995, by and among the Equity Investors
and certain other third parties (collectively, the "Purchasers"), the Company,
Galaxy GP, Galaxy Investments and the Senior Managers (the "Securities Purchase
Agreement"), Galaxy Investments issued to the purchasers promissory notes in an
aggregate principal amount of approximately $26.4 million (the "Galaxy
Investments Notes"). The Galaxy Investments Notes are unsecured and mature
December 31, 2003, provided that if any of the Notes are outstanding when the
principal of any Galaxy Investments Note becomes due, then such principal
payment shall be deferred until not earlier than the 91st day after the date
when none of the Notes are outstanding. The Galaxy Investments Notes bear
interest at the rate of 17.5% per annum payable annually in arrears beginning
December 31, 1995 in cash or, at Galaxy Investments' option, the form of
additional Galaxy Investments Notes in an original principal amount equal to
such interest then payable. In December, 1995, the Securities Purchase Agreement
was amended to reflect additional promissory notes in the aggregate principal
amount of approximately $13.7 million issued in connection with the purchase of
additional cable systems. These notes bear interest at the rate of 17.5% per
annum payable annually in arrears beginning December 31, 1996, in cash or, at
Galaxy Investments' option, the form of additional Galaxy Investments Notes in
an original principal amount equal to such interest then payable.
In December, 1995, at Galaxy Investments' option, additional Galaxy Investments
Notes were issued to pay accrued interest on The Galaxy Investments Notes in the
aggregate principal amount of approximately $4.9 million.
The Galaxy Investments Notes may be redeemed at any time, in whole or
in part, by Galaxy Investments. The Galaxy Investments Notes also are subject to
mandatory redemption upon the occurrence of a "change of control", which is
defined in the Securities Purchase Agreement to include (i) the sale of all or
substantially all of the assets of the Company in one or a series of
transactions, (ii) the failure of Galaxy GP and Galaxy Investments to own
collectively 100% of the issued and outstanding general partnership interests of
the Company, (iii) the cessation of Galaxy GP's service as managing general
partner of the Company (except if Galaxy Investments exercises its right to
become the managing general partner), (iv) the transfer by the Senior Managers,
Tommy L. Gleason, Galaxy Management or Galaxy Management Limited (collectively,
the "Management Parties") of Class A voting Common Stock of Galaxy GP or Common
Interests or Voting Preferred Interests of Galaxy Investments (v) the
termination of the Management Agreement or the material reduction of the
Company's rights thereunder, (vi) the failure of Tommy L. Gleason, Jr. and James
M. Gleason to be actively involved in the management of the Company, Galaxy GP
and Galaxy Investments, (vii) the failure of Tommy L. Gleason, Jr., Tommy L.
Gleason and James M. Gleason and the failure of any one such individuals and the
spouses and children of such individuals to own 51% of the equity of Galaxy
Management or a majority of the preferred and common membership interests of
Galaxy Investments, (viii) the termination of the Equity Holders Agreement or
the material violation thereof by any of the Management parties named therein,
or (ix) the liquidation or dissolution of the Company, Galaxy GP or Galaxy
Investments. In addition, distributions made by the Company to Galaxy
Investments, other than permitted tax distributions, are subject, in part, to be
applied as a mandatory prepayment of the principal of the Galaxy Investments
Notes.
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Limited Partnership Interests in the Company
Galaxy Investments owns 100% of the Class B Limited Partnership
Interests in the Company, which it received in connection with the organization
and initial capitalization of the Company in December 1994. Galaxy GP received
100% of the Class C and Class E Limited Partnership Interests in the Company in
connection with the Company's acquisitions of the Vista Communications Systems
and the Galaxy Cablevision Systems, respectively. In connection with its
acquisition of the Vantage Cable Systems, the Company issued approximately $6.4
million in the form of Class D Limited Partnership Interests in the Company, out
of the total consideration of approximately $38.4 million paid for such Systems.
The Company's ability to declare or pay any dividend or make any other
distributions to its general and limited partners is restricted by the terms of
the Indenture dated September 28, 1995.
Subject to such restrictions and at such time as the Company may make
distributions under the Loan Agreement, Galaxy GP may cause the Company to make
distributions to its Class C Limited Partners, Class D Limited Partners and
Class E Limited Partners prior to making distributions to other partners of the
Company in accordance with the Limited Partnership Agreement dated December 23,
1994, as amended, by and among Galaxy GP, Galaxy Investments and Vantage Cable
(the "Partnership Agreement"). The Company may make such distributions until the
aggregate of such distributions equals the amount of the capital contributions
of each such class of limited partners, plus certain priority rates of return.
Under the Partnership Agreement, Class C Limited Partners are entitled to a rate
of return of 9%, compounded annually on the previously unreturned capital
contribution. The Partnership Agreement provides that Class D Limited Partners
are entitled to an annually compounded rate of return of 10.0% per annum from
December 23, 1994 until December 31, 1999, which rate of return increases each
year thereafter in increments of 2.0%, up to a maximum of 18.0%. Class E Limited
Partners are entitled under the Partnership Agreement to a priority rate of
return of 9% until December 31, 1999, which then increases 2.0% each year up to
a maximum of 17%. Class B Limited Partners are entitled to up to 11.90% of any
distribution remaining after allocation of the capital contributions of and
priority rates of return to the Class C, D and E Limited Partners and to the
Class A General Partners. To date, the Company has made no distributions to any
of the general or limited partners of the Company. The interests of each of the
general and limited partners of the Company are also subject to the terms of the
Affiliate Subordination Agreement and the Equity Holders Agreement.
Relationship of Agent with Equity Investor
Fleet National Bank, the Agent under the Loan Agreement, is a wholly
owned subsidiary of Fleet Financial Group, Inc., a bank holding company ("Fleet
Financial"). Fleet Equity Partners, one of the Equity Investors, is a marketing
name for Fleet Growth Resources, Inc., a wholly owned subsidiary of Fleet
Private Equity Company, Inc., which, in turn, is a wholly owned subsidiary of
Fleet Financial.
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PART IV
ITEM 14. Exhibits, Financial Statements, Financial Statement Schedules and
Reports on Form 8-K
(a)(1) Financial Statements. Reference is made to the Index on Page F-1
(included in Part II, Item 8) for a list of all financial statements
filed as part of this Report.
(a)(2) Financial Statement Schedules. The following consolidated financial
statement schedule (and related report thereon) is included in this
report in accordance with Item 8 and paragraph (d) of Item 14:
Report of Independent Accountants..............S-1
Schedule II - Valuation and
Qualifying Accounts.......................S-2
(a)(3) Exhibits. See Exhibit Index.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the last
quarter of the period covered by this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Co-Registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GALAXY TELECOM, L.P.
By: Galaxy Telecom Inc.
As General Partner
/s/ Tommy L. Gleason, Jr
March 29, 1996 _______________________________________
By: Tommy L. Gleason, Jr.
President and Chief Executive Officer
GALAXY TELECOM CAPITAL CORP.
/s/ Tommy L. Gleason, Jr
March 29, 1996 ________________________________________
By: Tommy L. Gleason, Jr
President and Chief Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of each of the
Registrants and in the capacities and on the dates indicated
Name Title Date
- ------------ --------------------- ------------
/s/ Tommy L. Gleason, Jr.
______________________ Director, President and March 29, 1996
Tommy L. Gleason, Jr. Chief Executive Officer
(Principal Executive
Officer)
/s/ J. Keith Davidson
______________________ Director and Vice March 29, 1996
J. Keith Davidson President-Finance
(Principal Financial
and Accounting Officer)
/s/ William P. Collatos
______________________ Director March 29, 1996
William P. Collatos
/s/ Kenneth T. Schiciano
______________________ Director March 29, 1996
Kenneth T. Schiciano
/s/ Richard P. Tadler
______________________ Director March 29, 1996
Richard P. Tadler
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SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT
TO SECTION 12 OF THE ACT.
No Annual report to security holders covering the Co-Registrants' latest fiscal
year and no proxy statement, form of proxy or other proxy soliciting material
has been sent to security holders. Such report or proxy material shall be
furnished to security holders subsequent to the filing of this Report on Form
10-K and copies of such material shall be furnished to the Commission when it is
sent to security holders.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the co-registrants have duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GALAXY TELECOM, L.P.
By: Galaxy Telecom Inc.
as General Partner
/s/ J. Keith Davidson
April 16, 1996 _______________________________________
By: J. Keith Davison, Vice President-Finance
(Principal Financial and Accounting Officer)
GALAXY TELECOM CAPITAL CORP.
/s/ J. Keith Davidson
April 16, 1996 _______________________________________
By: J. Keith Davison, Vice President-Finance
(Principal Financial and Accounting Officer)
INDEX TO EXHIBITS
2.1 - Asset purchase agreement by and between Douglas Cable
Communications, Limited Partnership and the Company,
dated as of July 19, 1995, incorporated herein by
reference to Exhibit 2.1 to the Registration Statement
on Form S-1 (Reg. No. 37-95278) (the "Form S-1").
2.2 - Asset Purchase Agreement by and between Friendship Cable
of Florida, Friendship Cable of Georgia,Friendship Cable
of South Carolina, Buford Group, Inc. and the Company,
dated as of July 19, 1995, incorporated herein by
reference to Exhibit 2.2 to the Form S-1.
2.3 - Asset Purchase Agreement by and between Vista
Communications Limited Partnership I and the Company,
dated as of August 31, 1995, incorporated herein by
reference to Exhibit 2.3 to the Form S-1.
2.4 - Asset Purchase Agreement by and between
Vista/Narragansett Cable, L.P. and the Company, dated as
of August 8, 1995, incorporated herein by reference to
Exhibit 2.4 to the Form S-1.
2.5 - Asset Purchase Agreement by and between Phoenix Country
Cable Joint Venture and the Company, dated as of July 19,
1995, incorporated herein by reference to Exhibit 2.5 to
the Form S-1.
2.6 - Agreement by and between the Company and Anderson Pacific
Corporation, dated as of August 4, 1995, incorporated
herein by reference to Exhibit 2.6 to the Form S-1.
3.1 - Limited Partnership Agreement (the "Partnership
Agreement") of the Company, dated as of December 23,
1994, incorporated herein by reference to Exhibit 3.1 to
the Form S-1.
3.2 - Certificate of Limited Partnership of the Company, dated
December 23, 1994, incorporated herein by reference to Exhibit 3.2
to the Form S-1.
3.3 - Certificate of Incorporation of Galaxy Telecom Capital
Corp. ("Capital Corp."), incorporated herein by
reference to Exhibit 3.3 to the Form S-1.
3.4 - Bylaws of Capital Corp., incorporated herein by
reference to Exhibit 3.4 to the Form S-1.
3.5 - Amendment No.1 to the Limited Partnership Agreement,
dated as of December 1, 1995.
3.6 - Amendment No.2 to the Limited Partnership Agreement,
dated as of December 29, 1995.
4.1 - Indenture by and among the Company, Capital Corp. and
Boatman's Trust Company, as Trustee, relating to the 12
3/8% Senior Subordinated Notes due 2005, incorporated
herein by reference to Exhibit 4.1 to the Form S-1.
4.2 - Form of Note (included in Exhibit 4.1).
10.1 - Management Agreement by and between Galaxy Systems
Management, Inc. and the Company, dated as of December
23, 1994, incorporated herein by reference to Exhibit
10.1 to the Form S-1.
10.2 - Securities Purchase Agreement by and among the Company,
Galaxy Telecom, Inc. and Galaxy Telecom Investments,
L.L.C. and the Purchasers and other parties named
therein, dated as of December 23, 1994 (the "Securities
Purchase Agreement"), incorporated herein by reference
to Exhibit 10.2 to the Form S-1.
10.3 - Equity Holders Agreement by and among the Company, Galaxy
Telecom, Inc., Vantage Cable Associates, L.P. and the
Management Stockholders and Purchasers named in the
Securities Purchase Agreement, dated as of December 23,
1994, incorporated herein by reference to Exhibit 10.3
to the Form S-1.
10.4 - Contract by and between the Company and QUALCOMM
Incorporated, dated as of November 18, 1993, as amended,
incorporated herein by reference to Exhibit 10.5 to the
Form S-1.
10.5 - Asset Purchase Agreement by and between the Company (as
assignee of Galaxy Management, Inc.) and Galaxy
Cablevision, L.P., dated as of May 16, 1994,
incorporated herein by reference to Exhibit 10.6 to the
Form S-1.
10.6 - Asset Purchase Agreement by and between the Company (as
assignee of Galaxy Management, Inc.) and Vantage Cable
Associaties, L.P., dated as of June 8, 1994, as amended
as of December 23, 1994, incorporated herein by
reference to Exhibit 10.7 to the Form S-1.
10.7 - Asset Purchase Agreement by and between the Company (as
assignee of Galaxy Management, Inc.) and Chartwell Cable
of Colorado, Inc., dated November 11, 1994, incorporated
herein by reference to Exhibit 10.8 to the Form S-1.
10.8 - Asset Purchase Agreement by and between the Company and
Galaxy Cablevision, L.P., dated as of December 23, 1994,
incorporated herein by reference to Exhibit 10.9 to the
Form S-1.
10.9 - Agreement of Purchase and Sale by and between the Company
(as assignee of Galaxy Management, Inc.) and Vista
Communications Limited Partnership III, dated as of June
13, 1994, incorporated herein by reference to Exhibit
10.10 to the Form S-1.
10.10 - Affiliate Subordination Agreement by and among the
Company and the other parties named therein, dated as of
December 23, 1994, incorporated herein by reference to
Exhibit 10.11 the Form S-1.
10.11 - First Amendment to Securities Purchase Agreement, dated as of
December 1, 1995.
10.12 - Amended and Restated Loan Agreement dated as of September 28, 1995
by and among the Company and Fleet National Bank, as Agent, Lender
and Co-Arranger, and Internationale Nederlanden (U.S.) Capital
Corporation, as Lender and Co-Arranger, and the other Financial
Institutions party thereto.
21.1 - Subsidiaries of the Company incorporated herein by
reference to Exhibit 21.1 to the Form S-1.
27.1 - Financial Data Schedule.
The Co-Registrants agree to furnish supplementally a copy of any omitted
schedules to such agreement upon request of the Commission.
AMENDED AND RESTATED
LOAN AGREEMENT
BY AND AMONG
GALAXY TELECOM, L.P.
AND
FLEET NATIONAL BANK, AS AGENT, LENDER AND CO-ARRANGER
AND
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, AS LENDER AND CO-ARRANGER
THE OTHER FINANCIAL INSTITUTIONS NOW OR
HEREAFTER PARTIES HERETO
$58,500,000 REVOLVING CREDIT FACILITY
$8,000,000 TERM LOAN
SEPTEMBER 28, 1995
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INDEX TO
LOAN AGREEMENT
Page
----
ARTICLE 1. DEFINITIONS AND ACCOUNTING AND OTHER TERMS 1
Section 1.1 Certain Defined Terms. 1
Section 1.2 Accounting Terms 22
Section 1.3 Other Terms 22
ARTICLE 2. AMOUNT AND TERMS OF THE LOANS 22
Section 2.1 The Loans 22
Section 2.1.1 Term Loan 22
Section 2.1.2 Revolving Loans 22
Section 2.1.3 Ability to Request Loans 23
Section 2.2 Making Revolving Loans 23
Section 2.3 Interest and Fees on the Loans 24
Section 2.3.1 Interest 24
Section 2.3.2 Additional Interest on the Term Loan 24
Section 2.3.3 Fees 24
Section 2.3.4 Increased Costs - Capital 25
Section 2.4 Notations 25
Section 2.5 Computation of Interest and Fees 26
Section 2.6 Time of Payments and Prepayments in
Immediately Available Funds and Setoff 26
Section 2.6.1 Time 26
Section 2.6.2 Setoff, etc 27
Section 2.6.3 Unconditional Obligations and No Deductions 27
Section 2.7 Prepayment and Certain Payments 28
Section 2.7.1 Mandatory Payments 28
Section 2.7.2 Voluntary Prepayments. 31
Section 2.7.3 Liquidated Damages On Term Loan 31
Section 2.7.4 Prepayment of Libor Loans 31
Section 2.7.5 Interest Rate Protection 31
Section 2.8 Payment on Non-Business Days 32
Section 2.9 Use of Proceeds 32
Section 2.10 Special Libor Loan Provisions 32
Section 2.10.1 Requests 32
Section 2.10.2 Libor Loans Unavailable 32
Section 2.10.3 Libor Lending Unlawful 33
Section 2.10.4 Additional Costs on Libor Loans 34
Section 2.10.5 Libor Funding Losses 36
Section 2.10.6 Banking Practices 36
Section 2.10.7 Borrower's Option on Unavailability or
Increased Cost of Libor Loans 37
Section 2.10.8 Assumptions Concerning Funding of Libor
Loans 37
ARTICLE 3. CONDITIONS OF LENDING 38
Section 3.1 Conditions Precedent to the Revolving
Commitment and to all Loans 38
Section 3.1.1 The Commitment and Initial Loan 38
Section 3.1.2 Conditions Precedent to Each Loan. 40
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ARTICLE 4. REPRESENTATIONS AND WARRANTIES 40
Section 4.1 Representations and Warranties of the
Borrower 40
Section 4.1.1 Organization and Existence 40
Section 4.1.2 Authorization and Absence of Defaults 41
Section 4.1.3 Acquisition of Consents 41
Section 4.1.4 Validity and Enforceability 41
Section 4.1.5 Financial Information 42
Section 4.1.6 No Litigation 42
Section 4.1.7 Regulation U 42
Section 4.1.8 Absence of Adverse Agreements 43
Section 4.1.9 Taxes 43
Section 4.1.10 ERISA 43
Section 4.1.11 Ownership of Properties 44
Section 4.1.12 Accuracy of Representations and Warranties 45
Section 4.1.13 Senior Subordinated Note Representations
and Warranties 45
Section 4.1.14 No Investment Company 45
Section 4.1.15 Solvency, etc 45
Section 4.1.16 Approvals 45
Section 4.1.17 Ownership Interests 46
Section 4.1.18 Licenses, Registrations, Compliance with
Laws, etc 46
Section 4.1.19 Principal Place of Business; Books and
Records 46
Section 4.1.20 Subsidiaries 46
Section 4.1.21 Franchises, etc 46
Section 4.1.22 Copyright 47
Section 4.1.23 Basic Subscribers 47
Section 4.1.24 Environmental Compliance 47
Section 4.1.25 Material Contracts 48
Section 4.1.26 Patents, Trademarks and Other Property
Rights 48
Section 4.1.27 Related Documents 48
Section 4.1.28 Transfer of Assets 48
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ARTICLE 5. COVENANTS OF THE BORROWER 48
Section 5.1 Affirmative Covenants of the Borrower Other
than Reporting Requirements 48
Section 5.1.1 Payment of Taxes, etc 48
Section 5.1.2 Maintenance of Insurance 49
Section 5.1.3 Preservation of Existence, etc 49
Section 5.1.4 Compliance with Laws, etc 49
Section 5.1.5 Visitation Rights 49
Section 5.1.6 Keeping of Records and Books of Account 50
Section 5.1.7 Maintenance of Properties, etc 50
Section 5.1.8 Accounting System 50
Section 5.1.9 Other Documents, etc 50
Section 5.1.10 Maximum Total Indebtedness and Maximum
Senior Indebtedness to Annualized
Operating Cash Flow 50
Section 5.1.11 Maximum Senior Indebtedness to Basic
Subscribers 51
Section 5.1.12 Minimum Ratio of Operating Cash Flow to
Interest Expense 51
Section 5.1.13 Minimum Ratio of Operating Cash Flow to
Total Debt Service 51
Section 5.1.14 Minimum Fixed Charge Coverage 51
Section 5.1.15 Incurrence Ratio 52
Section 5.1.16 Officer's Certificates and Requests 52
Section 5.1.17 Depository 52
Section 5.1.18 Chief Executive Officer 52
Section 5.1.19 Completion of Improvements 52
Section 5.1.20 Notice of Purchase of Real Estate and
Leases 52
Section 5.1.21 Additional Assurances 53
Section 5.1.22 Appraisals 53
Section 5.1.23 Environmental Compliance 53
Section 5.1.24 Remediation 53
Section 5.1.25 Site Assessments 53
Section 5.1.26 Indemnity 53
Section 5.1.27 Liquidity 54
Section 5.1.28 Pending Acquisitions 54
Section 5.2 Negative Covenants of the Borrower 54
Section 5.2.1 Liens, etc 54
Section 5.2.2 Assumptions, Guaranties, etc. of
Indebtedness of Other Persons 55
Section 5.2.3 Sale of Assets Dissolution, etc 56
Section 5.2.4 Change in Nature of Business 56
Section 5.2.5 Ownership 56
Section 5.2.6 Sale and Leaseback 56
Section 5.2.7 Sale of Accounts, etc 56
Section 5.2.8 Indebtedness 56
Section 5.2.9 Other Agreements 57
Section 5.2.10 Payment or Prepayment of Equity 57
Section 5.2.11 Dividends, Payments and Distributions 57
Section 5.2.12 Investments in or to Other Persons 58
Section 5.2.13 Transactions with Affiliates 60
Section 5.2.14 Change of Fiscal Year 60
Section 5.2.15 Subordination of Claims 60
Section 5.2.16 Compliance with ERISA 60
Section 5.2.17 Capital Expenditures 61
Section 5.2.18 Hazardous Waste 62
Section 5.2.19 Payments on Senior Subordinated Notes 62
Section 5.3 Reporting Requirements 62
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ARTICLE 6. EVENTS OF DEFAULT 65
Section 6.1 Events of Default 65
ARTICLE 7. REMEDIES OF LENDERS 68
ARTICLE 8. ADMINISTRATIVE AGENT 69
Section 8.1 Appointment 69
Section 8.2 Powers; General Immunity 70
Section 8.2.1 Duties Specified 70
Section 8.2.2 No Responsibility for Certain Matters 70
Section 8.2.3 Exculpatory Provisions 70
Section 8.2.4 Agent Entitled to Act as Lender 71
Section 8.3 Representations and Warranties; No
Responsibility for Appraisal of
Creditworthiness 71
Section 8.4 Right to Indemnity 72
Section 8.5 Payee of Note Treated as Owner 72
Section 8.6 Resignation by Agent 72
Section 8.7 Successor Agent 73
ARTICLE 9. MISCELLANEOUS 73
Section 9.1 Consent to Jurisdiction and Service of
Process 73
Section 9.2 Rights and Remedies Cumulative 74
Section 9.3 Delay or Omission Not Waiver 74
Section 9.4 Waiver of Stay or Extension Laws 74
Section 9.5 Amendments, etc 74
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Section 9.6 Addresses for Notices, etc 75
Section 9.7 Costs, Expenses and Taxes 76
Section 9.8 Participations 77
Section 9.9 Binding Effect; Assignment 77
Section 9.10 Actual Knowledge 78
Section 9.11 Substitutions and Assignments 78
Section 9.12 Payments Pro Rata 80
Section 9.13 Governing Law 81
Section 9.14 Severability of Provisions 81
Section 9.15 Headings 81
Section 9.16 Counterparts 81
Section 9.17 Senior Indebtedness 81
Section 9.18 Joint and Several Obligations 81
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SCHEDULE OF EXHIBITS
1.1 Equity
1.2 Franchises
1.3 Ownership Interests
1.4 Form of Interest Rate Election
1.5 Form of Term Note
1.6 Form of Revolving Note
1.7 Permitted Encumbrances
1.8 Pro Rata Shares
1.9 Form of Borrowing Request
2.6.1 Lender's Wire Transfer Instructions
2.7.3 Schedule of Liquidated Damages Factors
3.1.1.3 Opinion of Borrower's Counsel and Borrower's FCC
counsel opinion
3.1.1.8 Permitted Indebtedness and Capitalized Leases
4.1.1 Jurisdictions of Incorporation, Foreign
Qualifications
4.1.6 Litigation
4.1.11 Real Property
4.1.18 Governmental Permits
4.1.21 Licenses, Franchises
4.1.22 Copyrights
4.1.24 Hazardous Waste
4.1.25 Material Contracts
4.1.26 Intellectual Property
4.1.28 GTI Assets Not Transferred
5.2.2 Guaranties
5.3.5 Form of Compliance Certificate
9.11.1 Form of Substitution Agreement
<PAGE>
AMENDED AND RESTATED
LOAN AGREEMENT
AMENDED AND RESTATED LOAN AGREEMENT dated as of September 28, 1995
by
and among GALAXY TELECOM, L.P., a Delaware limited partnership ("GTLP"), and
Galaxy Telecom Capital Corp., a Delaware corporation ("Capital Corp.), each with
a principal place of business at 1220 North Main Street, Sikeston, Missouri
63801 (GTLP and Capital Corp are sometimes hereafter referred to collectively as
the "Borrower"), the financial institutions party hereto from time to time (the
"Lenders"), INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION
("ING"), as a
Lender and a Co-Arranger, and FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States and having a head
office at 111 Westminster Street, Providence, Rhode Island 02903 ("Fleet"), as a
Co-Arranger and as agent for the Lenders (the "Agent").
PRELIMINARY STATEMENTS. GTLP entered into a Loan Agreement dated as of
December 23, 1994 with Fleet and ING as Lenders, and Fleet as agent for the
Lenders (the "Original Loan Agreement"), pursuant to which the Lenders made a
term loan in the original principal amount of $59,000,000 (the "A Loan"), and an
additional term loan in the original principal amount of $8,000,000 (the "B
Loan"). Pursuant to a Substitution Agreement dated as of March 31, 1995 among
Fleet, ING, Union Bank ("Union") and State Street Bank and Trust Company ("State
Street"), Union and State Street became Lenders under the Original Loan
Agreement. The Borrower intends to repay the A Loan, and has requested that the
Lenders and the Agent enter into this Amended and Restated Loan Agreement to
continue the B Loan and provide a revolving credit facility in an aggregate
principal amount of $58,500,000, on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS AND ACCOUNTING AND OTHER TERMS
Section 1.1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Active Plant" shall mean coaxial and/or fiberoptic television cable
together with all amplifiers and electronics which has been connected to a
Headend, has been
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energized and is capable of carrying television signals to Basic Subscribers
with only the addition of a drop-line from such television cable to the Unit in
question.
"Additional Equity" means the additional investment by the Investors and
the Management LLC in GTI and LLC, and in turn by GTI and LLC in GTLP, in the
aggregate amount of $15,000,000 (with not less than $5,000,000 to be invested on
or before the initial Revolving Loan is made pursuant to Section 2.1 hereof),
which will be used to fund a portion of the purchase price of the Pending
Acquisitions, allocated as follows:
Pending Acquisition Required Equity
- ------------------- ----------
Douglas $7,700,000
Buford $3,400,000
Vista Narragansett $2,600,000
Vista I $1,200,000
Phoenix $ 100,000
"Additional Principal" shall have the meaning assigned to such term in
Section 2.3.2.
"Adjusted Cash Flow" means, for any fiscal period, the Borrower's Net
Income, plus Interest Expense for such fiscal period, plus the amount of
depreciation and amortization for such fiscal period plus non-cash charges for
such fiscal period, plus Incentive Management Fees for such fiscal period, less
the amount of extraordinary gains during such fiscal period, plus the amount of
extraordinary losses during such fiscal period, plus the amount of Closing Costs
for such fiscal period, in each case to the extent deducted or (in the case of
extraordinary gains) added in the calculation of Net Income for such fiscal
period and all determined on a combined basis in accordance with GAAP.
"Adjusted Libor Rate" means, with respect to any Libor Loan to be made
by the Lenders for its Interest Period, the interest rate per annum determined
by the Agent (fixed throughout such Interest Period (subject to adjustments for
the Libor Rate Reserve Percentage)) and rounded upwards, if necessary, to the
next 1/16 of 1%) which is equal to the quotient of (i) the rate of interest
determined by the Agent to be the average of the interest rates per annum at
which Dollar deposits in immediately available funds are offered to each
Reference Lender by first-class banks in the London interbank market at
approximately 11:00 A.M., London time, two Business Days prior to the Business
Day on which such Interest Period begins, in an amount approximately equal to
the principal amount of such Libor Loan, for a period of time equal to such
Interest Period and (ii) a number equal to the number one minus the Libor Rate
Reserve Percentage. The "Libor Rate Reserve Percentage" applicable to
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any Interest Period means the average of the maximum effective rates (expressed
as a decimal) of the statutory reserve requirements (without duplication, but
including, without limitation, basic, supplemental, marginal and emergency
reserves) applicable to each Reference Lender during such Interest Period under
regulations of the Board of Governors of the Federal Reserve System (or any
successor), including without limitation Regulation D or any other regulation
dealing with maximum reserve requirements which are applicable to each Reference
Lender with respect to its "Eurocurrency Liabilities", as that term may be
defined from time to time by the Board of Governors of the Federal Reserve
System (or any successor) or which in any other respect relate directly to the
funding of loans bearing interest at rates based on the interest rates at which
Dollar deposits in immediately available funds are offered to banks by
first-class banks in the London interbank market. If any Reference Lender fails
to provide its offered quotation to the Agent, the Adjusted Libor Rate shall be
determined on the basis of the offered quotation(s) of the other Reference
Lender(s). The Adjusted Libor Rate shall be adjusted automatically on and as of
the effective date of any change in the Libor Rate Reserve Percentage.
"Affiliate" means singly and collectively, any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, the Borrower. For purposes of this definition,
a Person shall be deemed to be "controlled by" the Borrower if the Borrower
possesses, directly or indirectly, power either to (i) vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person or (ii) direct or cause the direction of the management and policies of
such Person whether by contract or otherwise, and the legal representative,
successor or assign of any such Person.
"Affiliate Subordination Agreement" means that certain Affiliate
Subordination Agreement between GTLP, GTI, LLC, the Manager, the Lenders, Tommy
L. Gleason, Jr., James M. Gleason, J. Keith Davidson, Vantage, Vista, and the
Investors dated as of December 23, 1994, and any other affiliate subordination
agreement executed from time to time by any Affiliate of the Borrower, as
amended or otherwise modified from time to time.
"Affiliate Subordinated Indebtedness" means Indebtedness of the
Borrower, GTI and/or LLC to Affiliates of the Borrower which has been
subordinated to the Obligations pursuant to terms and conditions satisfactory in
all respects to the Majority Lenders and which contains terms and conditions
which are satisfactory in all respects to the Majority Lenders.
"Agent" means Fleet or any other Person which is at the time in question
serving as the agent under the terms of Article 8 hereof.
"Agreement" means this Amended and Restated Loan Agreement, as the same
may from time to time be amended or otherwise modified.
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"A.M." means a time from and including 12 o'clock midnight to and
excluding 12 o'clock noon on any Business Day using Eastern Standard (Daylight
Savings) time.
"Annualized Operating Cash Flow" means Operating Cash Flow for the most
recently ended fiscal quarter based on the Borrower's financial statements
provided to the Lenders in accordance with Sections 5.3.2 and 5.3.3 for the
fiscal quarter in question, times four (4).
"Applicable Margin" means, for each Libor Loan, three and one quarters
percent (3.25%) per annum, provided, however, that if, at any time on or after
the receipt by the Agent of the Borrower's quarterly financial statements
provided to the Agent by the Borrower pursuant to Section 5.3.3 hereof, the
ratio of (a) total Indebtedness for Borrowed Money of the Borrower and its
Subsidiaries on a combined basis as of the last day of the most recently ended
fiscal quarter of the Borrower to (b) Annualized Operating Cash Flow for such
fiscal quarter, is within the ratios set forth below, and if and so long as no
Event of Default or Default exists under Section 6.1.1, 6.1.2 or 6.1.3 hereof,
the Applicable Margin shall, subject to the last sentence of this definition,
equal the rate set forth below opposite the applicable ratio:
Ratio Applicable Margin
----- -----------------
Less than 5.5:1 and greater Three per cent (3.00%)
than or equal to 4.5:1 per annum
Less than 4.5:1 and greater Two and three quarters per cent
than or equal to 3.5:1 (2.75%) per annum
Less than 3.5:1 Two and one half per cent
(2.50%) per annum
Any change in the Applicable Margin required pursuant to the foregoing shall
become effective on the first day of the calendar month commencing after the
month in which the Agent receives the Borrower's financial statement for the
Borrower's fiscal quarter or year-end, as the case may be, in question and only
after, in the case of a decrease in the Applicable Margin, receipt by the Agent
of a written request for such rate decrease from the Borrower; provided,
however, that each of the above-referenced margins shall remain in effect only
so long as Borrower qualifies therefor and provided further, however, that
interest rate reductions shall become final only on the basis of Borrower's
annual audited financial statements, and in the event that such annual audited
financial statements establish that the Borrower was not entitled to a rate
reduction which was previously granted, the Borrower shall, upon written demand
by the Agent, repay to the Agent for the account of each Lender an amount equal
to the excess of interest at the rate which should have been charged based on
such annual audited financial statements and the rate actually charged on the
basis of Borrower's quarterly financial statement(s) (provided that in the event
of a dispute as to the
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appropriate fiscal quarter as to which any adjustment should be allocated, the
decision of the accountants of the Borrower shall be made in accordance with
GAAP and shall be binding upon the Lenders and the Borrower absent manifest
error); and provided further, however, that in the event that the Borrower fails
to provide any financial statement on a timely basis in accordance with Section
5.3.3, any interest rate increase payable as a result thereof shall be
retroactively effective to the date on which the financial statement in question
should have been received by the Agent in accordance with Section 5.3.3, and the
Borrower shall pay any amount due as a result thereof upon written demand from
the Agent.
"Asset Sale" means any sale or other transfer by the Borrower, GTI or
any of the Borrower's Subsidiaries of any interest in any of the assets or
rights of the Borrower, GTI or the Borrower's Subsidiaries out of the ordinary
course of business having an aggregate value, when combined with all prior such
sales during the term of this Agreement in excess of $500,000, other than a
System Asset Sale, the sale of certain assets of Douglas and Vista Narragansett
scheduled to occur contemporaneously with the closing of those acquisitions by
the Borrower, and the sale of obsolete or worn out equipment no longer used or
usable in the business of the Borrower, GTI or applicable Subsidiary which the
Borrower, GTI or applicable Subsidiary does not substantially contemporaneously
replace.
"Basic Service" shall mean the simultaneous delivery by the Borrower to
television receivers (or any other suitable audio-video communication receiver)
of Basic Subscribers of the basic level full cable television service offered by
the Borrower.
"Basic Subscriber" shall mean a Person located in a Unit Passed which is
connected by a drop line to the Borrower's cable television system, who has
contracted to pay for the right to receive Basic Service over the Borrower's
cable television system, who has paid at least one regular monthly payment in
addition to any initial deposits, and whose account is not more than 60 days
past due.
"Borrowed Money" means any obligation to repay funded Indebtedness, any
Indebtedness evidenced by notes, bonds, debentures, guaranties or similar
obligations including without limitation the Loans and any obligation under a
conditional sale or other title retention agreement, the net aggregate rentals
under any Capitalized Lease Obligation or any lease which is the substantial
equivalent of the financing of the property so leased, any reimbursement
obligation for any letter of credit and any obligations in respect of banker's
and other acceptances or similar obligations.
"Borrower" has the meaning assigned in the first paragraph of this
Agreement.
"Borrowing Request" has the meaning specified in Section 2.2 hereof.
"Budget" has the meaning assigned to such term in Section 5.3.9.
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"Buford" means Friendship Cable Southeast, a division of Buford Group,
Inc., a Delaware corporation.
"Business Day" means (i) for all purposes other than as covered by
clause (ii) below, any day on which banks in Providence, Rhode Island or New
York, New York are not authorized or required to close; and (ii) with respect to
all notices and determinations in connection with, and payments of principal and
interest on, Libor Loans, any day which is a Business Day described in clause
(i) and which is also a day for trading by and between banks in Dollar deposits
in the London interbank market.
"Capital Corp." has the meaning specified in the recitals hereto.
"Capital Expenditures" means all expenditures paid or incurred by the
Borrower or any of its Subsidiaries in respect of (i) the acquisition,
construction, improvement or replacement of land, buildings, machinery,
equipment or any other fixed assets or leaseholds, and (ii) to the extent
related to and not included in (i) above, materials, contract labor and direct
labor, which expenditures have been or should be, in accordance with GAAP,
capitalized on the books of the Borrower or such Subsidiary. Where a fixed asset
is acquired by a lease which is required to be capitalized pursuant to statement
of financial accounting standards number 13 or any successor thereto, the amount
required to be capitalized in accordance therewith shall be considered to be an
expenditure in the year such asset is first leased.
"Capitalized Lease Obligations" means all lease obligations which have
been or should be, in accordance with GAAP, capitalized on the books of the
lessee.
"Cash Equivalent Investments" means any Investment in (i) direct
obligations of the United States or any agency, authority or instrumentality
thereof, or obligations guaranteed by the United States or any agency, authority
or instrumentality thereof, whether or not supported by the full faith and
credit of, a right to borrow from or the ability to be purchased by the United
States; (ii) commercial paper rated in the highest grade by a nationally
recognized statistical rating agency or which, if not rated, is issued or
guaranteed by any issuer with outstanding long-term debt rated A or better by
any nationally recognized statistical rating agency; (iii) demand and time
deposits with, and certificates of deposit and bankers acceptances issued by,
any office of the Agent or any other bank or trust company which is organized
under the laws of the United States or any state thereof and has capital,
surplus and undivided profits aggregating at least $500,000,000, the outstanding
long-term debt of which is rated A or better by any nationally recognized
statistical rating agency; (iv) any short-term note which has a rating of MIG-2
or better by Moody's Investors Service Inc. or a comparable rating from any
other nationally recognized statistical rating agency; (v) any municipal bond or
other governmental obligation (including without limitation any industrial
revenue bond or project note) which is rated A or better by any nationally
recognized statistical rating agency; (vi) any other obligation of any issuer,
the outstanding long-term debt of which is rated A or better by any nationally
recognized statistical rating agency; or (vii) any
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repurchase agreement with any financial institution described in clause (iii)
above, relating to any of the foregoing instruments and fully collateralized by
such instruments. Each Cash Equivalent Investment shall have a maturity of less
than one year at the time of purchase; provided that the maturity of any
repurchase agreement shall be deemed to be the repurchase date and not the
maturity of the subject security and that the maturity of any variable or
floating rate note subject to prepayment at the option of the holder shall be
the period remaining (including any notice period remaining) before the holder
is entitled to prepayment.
"Change of Control" means any one of the following events: (i) Tommy L.
Gleason, Jr., James C. Gleason and/or Tommy L. Gleason, Sr. own less than 51% of
the common equity interests in the Manager or Management LLC, respectively
(other than transfers to trusts for the benefit of their respective wives and/or
children for estate planning purposes so long as the transferor involved retains
effective control over the disposition and voting of such interests and other
than transfers to their respective executors and administrators following
death), (ii) Tommy L. Gleason, Jr., James C. Gleason and/or Tommy L. Gleason,
Sr. own less than 51% of the common equity interests in LLC which they hold as
of the date hereof (other than transfers to trusts for the benefit of their
respective wives and/or children for estate planning purposes so long as the
transferor involved retains effective control over the disposition and voting of
such interests and other than transfers to their respective executors and
administrators following death), or (iii) any change in the ownership of GTI or
LLC such that the Investors own, collectively, beneficially and of record less
than 51% of the voting equity interests in GTI or LLC and less than 51% of the
notes which LLC is issuing to them as of the date hereof. Notwithstanding the
foregoing, no Change of Control shall be deemed to occur hereunder upon any sale
of the equity securities of the Borrower in an offering registered with the
Securities and Exchange Commission under the Securities Act of 1933 provided
that the Borrower receives for its own use the net (after expenses) proceeds
thereof.
"Chartwell" means Chartwell Cable of Colorado, Inc., a Colorado
corporation.
"Closing Costs" means the following costs incurred by the Borrower in
connection with the Loans: (i) the fees payable pursuant to Section 2.3.3
hereof, (ii) all out-of-pocket expenses reimbursed to others by the Borrower in
connection with the closing of the Loans, (iii) fees paid to Merrill Lynch & Co.
and BT Securities Corporation in connection with the Related Transactions, (iv)
fees to purchase interest rate protection under Section 2.7.5, and (vi) any
administrative fees payable to the Agent in connection with the syndication of
the Loans.
"Closing Date" means the date on which all of the conditions precedent
set forth in Section 3.1 of this Agreement have been satisfied.
"Co-Arrangers" means, collectively, Fleet and ING.
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"Code" means the Internal Revenue Code of 1986 as amended from time to
time.
"Commitment" means the Lenders' several commitments to continue the Term
Loan, as set forth in Section 2.1.1 hereof, and to make Revolving Loans, as set
forth in Section 2.1.2 hereof.
"Commonly Controlled Entity" means a Person, whether or not
incorporated, which is under common control with the Borrower within the meaning
of section 414(b) or (c) of the Code.
"Conversion Date" means December 31, 1997.
"Converted Loan" has the meaning specified in Section 2.1.2 hereof.
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"Converted Loan Repayment Date" means the earlier to occur of December 31,
2002, or such earlier date on which the Obligations become immediately due and
payable pursuant to the terms hereof.
"Default" means an event or condition which with the giving of notice or
lapse of time or both would become an Event of Default.
"Discharged Rights and Obligations" shall have the meaning assigned to
such term in Section 9.11.4.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Douglas" means Douglas Cable Communications, Limited Partnership, a
Delaware limited partnership.
"Effective Prime" means the Prime Rate plus one and three quarters
percent (1.75%) per annum; provided, however, that if, at any time on or after
the receipt by the Agent of the Borrower's quarterly financial statements
provided to the Agent by the Borrower pursuant to Section 5.3.3 hereof, the
ratio of (a) total Indebtedness for Borrowed Money of the Borrower and its
Subsidiaries on a combined basis as of the last day of the most recently ended
fiscal quarter of the Borrower to (b) Annualized Operating Cash Flow for such
fiscal quarter, is within the ratios set forth below, and if and so long as no
Event of Default or Default exists under Section 6.1.1, 6.1.2 or 6.1.3 hereof,
Effective Prime shall, subject to the last sentence of this definition, equal
the rate set forth below opposite the applicable ratio:
Ratio Effective Prime
----- ---------------
Less than 5.5:1 and greater Prime Rate plus one and one
than or equal to 4.5:1 half percent (1-1/2%) per annum
Less than 4.5:1 and greater Prime Rate plus one and one
than or equal to 3.5:1 quarter percent (1-1/4%) per
annum
Less than 3.5:1 Prime Rate plus one percent
(1%) per annum
Any change in Effective Prime required pursuant to the foregoing shall become
effective on the first day of the calendar month commencing after the month in
which the Agent receives the Borrower's financial statement for the Borrower's
fiscal quarter or year-end, as the case may be, in question and only after, in
the case of a decrease in Effective Prime, receipt by the Agent of a written
request for such rate decrease from the Borrower; provided, however, that each
of the above-referenced interest rates shall remain in effect only so long as
Borrower qualifies therefor; and provided further, however, that interest rate
reductions shall become final only on the basis of Borrower's annual audited
financial statements, and in the event that such annual audited financial
statements establish that the Borrower was not entitled to a rate reduction
which was
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previously granted, the Borrower shall, upon written demand by the Agent repay
to the Agent for the account of each Lender an amount equal to the excess of
interest at the rate which should have been charged based on such annual audited
financial statements and the rate actually charged on the basis of Borrower's
quarterly financial statement(s) (provided that in the event of a dispute as to
the appropriate fiscal quarter as to which any adjustment should be allocated,
the decision of the accountants of the Borrower shall be made in accordance with
GAAP and shall be binding upon the Lenders and the Borrower absent manifest
error); and provided further, however, that in the event that Borrower fails to
provide any financial statement on a timely basis in accordance with Section
5.3.3, any interest rate increase payable as a result thereof shall be
retroactively effective to the date on which the financial statement in question
should have been received by the Agent in accordance with Section 5.3.3, and the
Borrower shall pay any amount due as a result thereof upon written demand from
the Agent.
"Equity" means the investments by the Investors and the Management LLC
in GTI and LLC, and in turn by GTI and LLC in GTLP.
"Equity Documents" means, collectively, all material documents entered
into by the Borrower, any of its Subsidiaries, GTI, LLC, Management LLC and/or
the Investors in connection with the investment of the Equity or the Additional
Equity.
"ERISA" means the Employment Retirement Income Security Act of 1974 as
amended from time to time.
"Events of Default" has the meaning assigned to that term in Section 6.1
of this Agreement.
"Excess Cash Flow" means, for any fiscal period of the Borrower, Net
Income plus an amount equal to the sum of Interest Expense, depreciation and
amortization of assets, Subordinated Management Fees and other non-cash charges,
all to the extent deducted in the calculation of Net Income for such fiscal
period, less an amount equal to the sum of (i) Total Debt Service paid during
such fiscal period, (ii) voluntary prepayments of the Loans during such period,
(iii) all Capital Expenditures incurred during such fiscal period (other than
those Capital Expenditures paid for with purchase money Indebtedness or
Capitalized Lease Obligations permitted to exist under this Agreement), and (iv)
Permitted Restricted Payments paid during such fiscal period.
"Exhibit" means, when followed by a letter, the exhibit attached to this
Agreement bearing that letter and by such reference fully incorporated in this
Agreement.
"FCC" shall mean the Federal Communications Commission and any successor
governmental agency performing functions similar to those performed by the
Federal Communications Commission on the date hereof.
"FCC License" means any license or permit issued by the FCC, including
without limitation licenses issued for the operation of community antenna
television systems,
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community antenna relay systems, microwave systems, earth stations and business
and other two-way radios.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/16th of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York, provided that (i) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next succeeding Business Day as so published, and (ii) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Agent on such
day on such transactions as determined by the Agent in its discretion.
"Financeable Interest" shall have the meaning assigned to such term in
Section 2.3.2.
"Financing Documents" means, collectively, this Agreement, the Notes,
the Security Documents, and each other agreement, instrument or document now or
hereafter executed in connection herewith or therewith.
"Fixed Charge Coverage" means, as of the last day of any fiscal quarter
of the Borrower occurring after September 30, 1996, a fraction, the numerator of
which shall be an amount equal to Operating Cash Flow for such fiscal quarter
and each of the three immediately preceding fiscal quarters of the Borrower less
(a) Capital Expenditures made by the Borrower (other than those Capital
Expenditures paid for with (i) purchase money Indebtedness (ii) Loans, (iii)
cash (except to the extent that the Borrower's cash balance at the end of such
fiscal quarter is less than $1,500,000), or (iv) Capitalized Lease Obligations
permitted to exist under this Agreement) and its Subsidiaries and (b) Permitted
Restricted Payments paid during such fiscal quarter and each of the three
immediately preceding fiscal quarters of the Borrower, and the denominator of
which shall be an amount equal to Total Debt Service (exclusive of voluntary
prepayments of principal on the Loans and exclusive of Closing Costs) for such
fiscal quarter and each of the three immediately preceding fiscal quarters of
the Borrower. For any fiscal quarter ending on or prior to September 30, 1996,
"Fixed Charge Coverage" shall be calculated for such fiscal quarter then ended
and the aggregate fiscal quarters ended during the period from the Closing Date
through such fiscal quarter.
"Franchise" means any franchise, permit, license, right of entry
agreement, other authorization or other right granted by any governmental unit
or authority or any private association, incorporated or otherwise, for the
construction and operation of a cable television system or the reception and
transmission of signals by microwave, including without limitation any FCC
License.
"Franchise Agreement" means the ordinance, agreement, contract or other
documents stating the terms and conditions of any Franchise, including without
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limitation all exhibits and schedules thereto, all amendments thereof and
consents, waivers and extensions issued thereunder, any documents incorporated
therein by reference and any application upon which such Franchise was granted.
"Franchise Area(s)" means the communities listed on Exhibit 4.1.21 hereto.
"GAAP" means generally accepted accounting principles in effect from time
to time in the United States of America.
"Gross Revenues" means all revenues derived directly or indirectly from
the operation or use of the Systems (other than revenues from a refinancing or
sale of all or part of the Systems), including, without limitation, revenue from
subscriber service fees, auxiliary service fees, installation and reconnection
fees, leased channel fees, converter rentals, studio rentals, late fees,
production equipment and personnel fees and advertising revenues; provided,
however, that "Gross Revenues" shall not include (a) any taxes on services
furnished by the Borrower imposed directly upon any subscriber or user by any
governmental unit and collected by the Borrower on behalf of said governmental
unit, or (b) the amount of any discounts or rebates relating to any such fees or
revenues, or (c) interest actually earned on any such fees or revenues.
"GTI" means Galaxy Telecom, Inc., a Delaware corporation which is the
sole managing general partner and a limited partner of the Borrower.
"Hazardous Material" shall mean any substance or material defined or
designated as a hazardous or toxic waste, hazardous or toxic material, hazardous
or toxic substance, or other similar term, by any federal, state or local
environmental statute, regulation or ordinance.
"Headend" shall mean the antenna site, the tower and antenna, the
microwave communications equipment, the earth station and the head end
facilities which form a part of a cable television system.
"Incentive Management Fees" means, as of the last day of any fiscal
quarter of the Borrower, 60% of the Management Fees which have accrued during
such fiscal quarter.
"Incurrence Ratio" means, with respect to any Permitted Acquisition, the
ratio of Total Indebtedness of the Borrower to Annualized Operating Cash Flow,
each calculated on a pro forma basis after giving effect to the proposed
acquisition, as of the end of the fiscal quarter immediately preceding the
fiscal quarter in which such Permitted Acquisition occurs.
"Indebtedness" means, for any Person, (i) all indebtedness or other
obligations of said Person for Borrowed Money or for the deferred purchase price
of property or services, (ii) all indebtedness or other obligations of any other
Person ("Other Person") for Borrowed Money or for the deferred purchase price of
property or services, the payment or collection of which said Person has
guaranteed (except by reason of
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<PAGE>
endorsement for collection in the ordinary course of business) or in respect of
which said Person is liable, contingently or otherwise, including, without
limitation, liable by way of agreement to purchase or lease, to provide funds
for payment, to supply funds to purchase, sell or lease property or services
primarily to assure a creditor of such Other Person against loss or otherwise to
invest in or make a loan to the Other Person, or otherwise to assure a creditor
of such Other Person against loss, (iii) all indebtedness or other obligations
of any Person for Borrowed Money or for the deferred purchase price of property
or services secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
any property owned by said Person, whether or not said Person has assumed or
become liable for the payment of such indebtedness or obligations, (iv)
Capitalized Lease Obligations of said Person, (v) obligations of such Person
under contracts pursuant to which such Person has agreed to purchase interest
rate protection or swap interest rate obligations (including, without
limitation, any such obligations purchased or maintained under Section 2.7.5
hereof) and (vi) all other liabilities or obligations of said Person which
would, in accordance with GAAP, be classified as liabilities of such a Person.
"Indenture" means that certain Indenture dated as of September 28, 1995
by and among the Borrower and Capital Corp., as issuers, and Boatmen's Trust
Company, as trustee, pursuant to which the Senior Subordinated Notes were
issued.
"Interest Adjustment Date" means (i) as to any Prime Rate Loan, the
Business Day elected by the Borrower in its applicable Interest Rate Election,
but being not less than three (3) Business Days (or four (4) Business Days in
the case of an Interest Rate Election as to which the consent of the Lenders is
required) after the receipt by the Agent before 12:00 o'clock P.M. on a Business
Day of an Interest Rate Election changing the interest rate on such Loan to the
Libor Rate; and (ii) as to any Libor Loan, the last Business Day of the Interest
Period pertaining to such Libor Loan.
"Interest Expense" means, with respect to any fiscal quarter, the
aggregate amount required to be paid in cash by the Borrower and its
Subsidiaries for interest, fees (excluding however the facility fee paid to
Fleet and ING, as Co-Arrangers, pursuant to the side letter referenced in
Section 2.2.3 of the Original Loan Agreement and the fees being paid to the
Agent and the Lenders pursuant to Section 2.3.3(a) and (c)), charges and
expenses, however characterized, on its Indebtedness, including, without
limitation, all such interest, fees, charges and expenses accrued and required
to be paid in cash with respect to Indebtedness under the Financing Documents
(but not including fees associated with the purchase of interest rate protection
arrangement).
"Interest Period" means, with respect to each Libor Loan:
(i) initially, the period commencing on the date of such Libor
Loan and ending one, two, three, six, twelve (to the extent readily
available) or such greater number of months thereafter as may be
acceptable to all the Lenders and as the Borrower may elect in the
applicable Interest Rate Election and subject to Section 2.10; and
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<PAGE>
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Libor Loan and
ending one, two, three, six or such greater number of months thereafter as
may be acceptable to all the Lenders and as the Borrower may elect in the
applicable Interest Rate Election and subject to Section 2.10;
provided that clauses (i) and (ii) of this definition are subject to the
following:
(A) any Interest Period (other than an Interest Period determined
pursuant to clause (C) below) which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the immediately preceding Business Day;
(B) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall, subject to
clause (C) below, end on the last Business Day of a calendar month;
(C) no Interest Period shall end after the Converted Loan Repayment
Date; and
(D) with respect to all Libor Loans, no more than five (5) Interest
Periods may be in effect at any time.
"Interest Rate Election" means the Borrower's irrevocable telecopied or
telephonic notice of election, which shall be promptly confirmed by a written
notice of election that Effective Prime or the Libor Rate shall apply to any
Loan or any portion of a Loan, which shall, subject to this Agreement, be
effective on the next Interest Adjustment Date, such telecopied or telephonic
notice and written confirmation thereof to be in the form of Exhibit 1.4 and to
be received by the Agent prior to 12:00 o'clock P.M. on a Business Day and at
least three (3) Business Days prior to an Interest Adjustment Date in the case
of a Libor Loan (or four (4) Business Days in the case of an Interest Rate
Election as to which the consent of the Lenders is required), and by 12:00 p.m.
on an Interest Adjustment Date in the case of a Prime Rate Loan, each such
Interest Rate Election, subject to the terms of this Agreement, to effect a
change in the interest rate on the applicable portion of the Loans then
outstanding, with respect to which such Interest Rate Election was made, such
change to occur on the Interest Adjustment Date next succeeding receipt of such
Interest Rate Election by the Agent. Any Interest Rate Election received by the
Agent after 12 o'clock P.M. on a Business Day shall be deemed, for all purposes
of this Agreement to have been received prior to 12 o'clock P.M. on the next
succeeding Business Day.
"Interim Interest Expense" means, during the period from the Closing
Date through the earlier of the date on which all the Pending Acquisitions have
been consummated or April 30, 1996, all expenditures constituting Interest
Expense made in
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respect of the Senior Subordinated Notes, less (i) the amount of Interest
Expense attributable to the aggregate amount of proceeds of the Senior
Subordinated Notes used to prepay Loan A (as defined in the Original Loan
Agreement) and (ii) the amount of Interest Expense payable with respect to that
amount of proceeds of the Senior Subordinated Notes used to pay a portion of the
purchase price of any Pending Acquisition.
"Investment" means any investment in any Person whether by means of a
purchase of capital stock, notes, bonds, debentures or other evidences of
Indebtedness and/or by means of a capital or partnership contribution, loan,
deposit, advance or otherwise.
"Investors" means, collectively, the entities (other than Vantage, Vista
and Old Galaxy) listed on Exhibit 1.3 hereto.
"Lender" means any financial institution which is now a party to this
Agreement, or at any time hereafter becomes a party to this Agreement pursuant
to the terms of Section 9.11 hereof, each in their individual capacity, and
"Lenders" means each of such financial institutions.
"Libor Loan" means any Loan or any portion of a Loan bearing interest at
the Libor Rate.
"Libor Rate" means, for any Interest Period, the Adjusted Libor Rate in
effect on the first day of such Interest Period (subject to adjustment as
provided in the definition of Adjusted Libor Rate) plus the Applicable Margin
for Libor Loans from time to time in effect.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other) or other security agreement
or preferential arrangement of any kind or nature whatsoever (including without
limitation any conditional sale or other title retention agreement and any
Capitalized Lease Obligation) having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the
applicable Uniform Commercial Code or comparable law of any jurisdiction in
respect of any of the foregoing.
"LLC" means Galaxy Telecom Investments, L.L.C., a Delaware limited
liability company which is a general and a limited partner of GTLP.
"Loans" and "Loan" means at any time the outstanding principal amount of
Indebtedness owed to the Lenders consisting of Revolving Loans, the Converted
Loan, and the Term Loan made or continued pursuant to this Agreement.
"Majority Lenders" means, when there are fewer than three Lenders, each
of the Lenders, and when there are three or more Lenders, Lenders holding an
aggregate Pro Rata Share of the outstanding principal balance of the Loans in an
amount equal to or in excess of 51% of the total outstanding principal balance
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<PAGE>
of the Loans but in no event less than three Lenders (or four Lenders if there
are seven or more Lenders).
"Management Agreement" means that certain Management Agreement dated
December 23, 1994 between GTLP and the Manager, in the form delivered to the
Lenders on or prior to the Closing Date.
"Management Fees" means the aggregate of all fees and other forms of
compensation paid or incurred by GTLP and/or any Subsidiary pursuant to the
Management Agreement.
"Management LLC" means Galaxy Telecom Management, L.L.C., a Texas
limited liability company.
"Manager" means Galaxy Systems Management, Inc., a Missouri corporation.
"Material Adverse Effect" shall have the meaning set forth in Section
4.1.1.
"Multiemployer Plan" means a multiemployer plan as defined in Title IV
of ERISA.
"Net Income" means, for any fiscal period, the net after tax income
(loss) of the Borrower and its Subsidiaries for such period determined on a
combined basis in accordance with GAAP.
"Note" means any Term Note or Revolving Note, and "Notes" means all of
the Notes, collectively.
"Obligations" mean any and all Indebtedness, obligations and liabilities
of GTLP, GTI, LLC, Capital Corp. and/or any of their Subsidiaries to any one or
or more of the Lenders and/or the Agent of every kind and description, absolute
or contingent, due or to become due, whether for payment or performance, now
existing or hereafter arising, including, without limitation, all Loans,
interest, taxes, fees, charges, and expenses under the Financing Documents,
fees, charges and expenses in connection with any interest protection
arrangement under Section 2.7.5 and attorneys' fees chargeable to GTLP, GTI,
LLC, Capital Corp. and/or any of their Subsidiaries or incurred by any of the
Lenders and/or the Agent hereunder or under any of the Financing Documents.
"Officer's Certificate" means a certificate signed by a duly authorized
officer of the Borrower, or signed by a duly authorized officer of the Manager
as duly authorized agent of the Borrower, and delivered to the Agent on behalf
of the Lenders.
"Old Galaxy" means Galaxy Cablevision, L.P., a Delaware limited
partnership.
"Operating Cash Flow" means, for any fiscal period, the Borrower's Net
Income, plus Interest Expense for such fiscal period, plus the amount of
depreciation and amortization for such fiscal period plus non-cash charges for
such fiscal period, plus any Subordinated Management Fees accrued and not paid
in cash during such fiscal period, less the amount of extraordinary gains during
such fiscal period, plus the
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amount of extraordinary losses during such fiscal period, plus the amount of
Closing Costs for such fiscal period, in each case to the extent deducted or (in
the case of extraordinary gains) added in the calculation of Net Income for such
fiscal period and all determined on a combined basis in accordance with GAAP.
"Original Loan Agreement" shall have the meaning specified in the
Preliminary Statements hereto.
"PBGC" means the Pension Benefit Guarantee Corporation established
pursuant to subtitle A of Title 4 of ERISA.
"P.M." means a time from and including 12 o'clock noon on any Business
Day to the end of such Business Day using Eastern Standard (Daylight Savings)
time.
"Pending Acquisitions" means the proposed acquisitions of cable
television systems from Douglas, Buford, Phoenix, Vista Narragansett and Vista
I, with respect to which the Borrower has entered into Asset Purchase Agreements
dated, respectively, July 19, 1995, July 19, 1995, July 19, 1995, August 8, 1995
and August 31, 1995.
"Permitted Acquisition" shall have the meaning specified in Section
5.2.12 hereof.
"Permitted Cable System" means a cable television system or group of
systems which are being acquired by the Borrower in one or a series of related
transactions (a) with respect to which the Borrower can demonstrate to the
reasonable satisfaction of the Majority Lenders that the Operating Cash Flow of
such system or group of systems divided by Gross Revenues of such system or
group of systems for the most recent 12- month period (on an adjusted basis) has
been 35% or more, and (b) which are located in reasonable proximity to the cable
television systems then operated by the Borrower.
"Permitted Encumbrances" means those Liens, security interests and
defects in title listed on Exhibit 1.7 hereto.
"Permitted Restricted Payment" shall have the meaning set forth in
Section 5.2.11 (i).
"Person" means an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Phoenix" means Phoenix Country Cable, Joint Venture, a California
limited partnership.
"Plan" means an employee benefit plan or other plan maintained for
employees of the Borrower or any Commonly Controlled Entity and covered by Title
IV of ERISA.
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"Pledge and Assignment Agreement" means the Pledge and Assignment Agreement
dated as of September 28, 1995 among GTLP, Capital Corp. and Boatmen's Trust
Company, as trustee.
"Premises" has the meaning assigned to such term in Section 4.1.24.1.
"Prime Rate" means (i) the floating rate of interest per annum
designated from time to time by the Agent as being its "prime rate" of interest,
such interest rate to be adjusted on the effective date of any change thereof by
the Agent, it being understood that such rate of interest may not be the lowest
rate of interest from time to time charged by the Agent or (ii) during the last
four (4) Business Days of each calendar year and the first two (2) Business Days
of the immediately succeeding calendar year, if higher than (i), the Federal
Funds Rate, such interest rate to be adjusted on the effective date of any
change thereof by the Federal Reserve Bank of New York.
"Prime Rate Loan(s)" means any Loan or any portion of a Loan bearing
interest at Effective Prime.
"Pro Rata Share" means (i) with respect to the Commitment, each Lender's
percentage share of the Commitment as set forth immediately opposite such
Lender's name on Exhibit 1.8, and (ii) with respect to the Loans, each Lender's
percentage share of the aggregate outstanding principal balance of the Loans.
"Projections" means Borrower's written projections of its 10-year future
performance dated July 27, 1995 delivered to the Agent and the Lenders prior to
the Closing Date and certified by the Borrower on the Closing Date as being the
Projections.
"Reference Lenders" means two Lenders (one of which may be the Agent)
selected by the Agent in its discretion from time to time as a reference lender
for purposes of determining the Adjusted Libor Rate, provided that if any Lender
(other than the Agent) shall have a rating issued by a National Rating Agency at
least equal to A, then any Reference Lender (other than the Agent) shall have at
least such an A rating as well.
"Related Documents" means the Indenture, the Pledge and Assignment
Agreement, and any other documents executed in connection with the Senior
Subordinated Notes.
"Related Transactions" means consummation of the transactions
contemplated by the Related Documents and consummation of the transactions
constituting the Additional Equity.
"Request" means a written request for the Loans in the form of Exhibit
1.9, received by the Agent on behalf of the Lenders from the Borrower in
accordance with this Agreement, specifying the date on which the Borrower
desires such Loans and the disbursement instructions of the Borrower with
respect thereto.
"Reportable Event" shall have the meaning assigned to that term in Title
IV of ERISA.
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"Revolving Commitment" means the Lenders' several commitments to make
Revolving Loans as set forth in Section 2.1.2. hereof in the maximum outstanding
amount of each Lender's Pro Rata Share of $58,500,000.
"Revolving Loan" shall have the meaning specified in Section 2.1.2
hereof.
"Revolving Note" means a Revolving Note of the Borrower payable to a
Lender in the form of Exhibit 1.6 hereto evidencing the indebtedness of the
Borrower to such Lender with respect to the Revolving Loans owing to such
Lender.
"Section" means, when followed by a number, the section or subsection of
this Agreement bearing that number.
"Security Documents" means any and all documents, instruments and
agreements now or hereafter providing security for the Loans and any other
Indebtedness of GTLP, GTI, LLC Capital Corp. or any of the Borrower's
Subsidiaries to the Lenders and/or the Agent, including without limitation the
following: (i) any mortgages on and collateral assignments of real property
interests (fee, leasehold and easement) of the Borrower and its Subsidiaries and
GTI granting first Liens thereon; (ii) security agreements granting first Liens
on all GTLP's, its Subsidiaries', GTI's, LLC's, and Capital Corp.'s fixtures and
tangible and intangible personal property; (iii) a collateral assignment of
Borrower's, its Subsidiaries' and GTI's contracts, licenses, permits and
Franchises; (iv) those certain partnership interest pledge agreements between
the Agent and Vantage, GTI and LLC; (v) the Affiliate Subordination Agreement;
(vi) those certain limited liability company interest pledge agreements between
the Investors, Management LLC and the Agent; (vii) that certain Stock Pledge
Agreement regarding the shares of GTI between the shareholders of GTI and the
Agent; (viii) those certain Unlimited Guaranties of GTI, LLC, and Capital Corp.
in favor of the Agent; (ix) title and casualty insurance policies providing
coverage to the Agent; and (x) UCC-1 financing statements or similar filings
perfecting the above-referenced security interests, all as executed, delivered
to and accepted by the Agent either in connection with the Original Loan
Agreement or on or prior to the Closing Date, as same may be amended or
otherwise modified from time to time in writing by the Agent (with the authority
of the requisite Lenders) and the parties thereto.
"Seller Notes" means those certain promissory notes issued by GTI in
favor of any one or more of Chartwell, Old Galaxy, Vantage, or Vista as partial
payment of the purchase price under those certain Asset Purchase Agreements
dated, respectively, June 8, 1994, May 16, 1994 and November 11, 1994 between
GTLP (as assignee of Galaxy Management, Inc.) and Vantage, Old Galaxy and
Chartwell, and that certain Agreement of Purchase and Sale dated June 13,1994
between GTLP (as assignee of Galaxy Management, Inc.) and Vista.
"Selling Lender" shall have the meaning assigned to such term in Section
9.11.1.
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"Senior Indebtedness" means all Indebtedness of the Borrower to the
Lenders and/or the Agent from time to time outstanding including, without
limitation, the aggregate outstanding principal amount of the Notes and any
accrued and unpaid principal, interest, fees and other charges due under other
Financing Documents, plus the net aggregate rentals under any Capitalized Lease
Obligation.
"Senior Subordinated Notes" means the 12.375% Senior Subordinated Notes
due 2005 issued by GTLP and Capital Corp. pursuant to the Indenture.
"Single Employer Plan" means any Plan which is not a Multiemployer Plan.
"Subordinated Management Fees" shall have the meaning assigned to such
term in Section 5.2.11 hereof.
"Subsidiary" means any corporation, if any, of which more than 50% of
the outstanding capital stock having ordinary voting power to elect a majority
of the board of directors or other managers of such entity (irrespective of
whether or not at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by the Borrower or by
the Borrower and/or one or more Subsidiaries or the management of which
corporation is under control of the Borrower and/or any other Subsidiary,
directly or indirectly through one or more Persons and any other Person which,
under GAAP, should at any time for financial reporting purposes be consolidated
or combined with the Borrower and/or any other Subsidiary.
"Substituted Lender" has the meaning set forth in Section 9.11 hereof.
"Substitution Agreement" has the meaning assigned to such term in
Section 9.11.1.
"Systems" means (i) the cable television systems acquired by the
Borrower pursuant to the Pending Acquisitions, and (ii) any Permitted Cable
System acquired by the Borrower, and "System" means any one of them.
"System Asset Sale" means the sale by the Borrower, GTI or one of their
Subsidiaries to a third party which is not an Affiliate of the Borrower of one
or more Franchises and the assets related to such Franchise.
"Term Loan" means the term loan in the initial principal amount of
$8,000,000 made by the Lenders pursuant to the Original Loan Agreement and
continued pursuant to Section 2.1.1 hereof.
"Term Note" means an Amended and Restated Term Note of the Borrower
payable to the order of a Lender in the form of Exhibit 1.5 hereto evidencing
the indebtedness of the Borrower to such Lender with respect to the Term Loan
plus any Additional Principal owing to such Lender.
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"Term Loan Repayment Date" means the earlier to occur of (i) June 30,
2003, or (ii) such earlier date on which the Obligations become immediately due
and payable pursuant to the terms hereof.
"Total Cash Interest Expense" means, with respect to any fiscal quarter,
Interest Expense for such fiscal quarter, minus Additional Principal accrued for
such fiscal quarter, minus Interim Interest Expense for such fiscal quarter.
"Total Debt Service" means, for any fiscal quarter of the Borrower, the
sum of the Borrower's and its Subsidiaries' Total Cash Interest Expense for such
quarter (exclusive of any Closing Costs), plus the amount necessary to meet the
regularly scheduled principal amortization on the Loans, plus regularly
scheduled payments on other Indebtedness and Capitalized Lease Obligations of
the Borrower and its Subsidiaries for such quarter.
"Unused Revolving Commitment" means, with respect to any Lender, such
Lender's Pro Rata Share of the Revolving Commitment at such time minus such
Lender's Pro Rata Share of all Revolving Loans outstanding at such time.
"Unit" means a single residential dwelling or commercial building which
can be connected by a single drop line. In the case of multiple residential
dwellings, such as apartment houses, mobile home parks and multi-family homes,
which do not obtain reduced bulk service rates, each separate dwelling unit
shall be counted as one Unit. The number of Units in a multiple residential
dwelling which does obtain a reduced bulk service rate shall be obtained by
dividing (x) the aggregate dollar amount of monthly subscriber's fees paid by
all individual subscribers within such dwelling for Basic Service by (y) the
maximum monthly subscriber's fee charged by the Borrower to a single residential
dwelling connected by a single drop line for Basic Service. The term "Passed" as
applied to a Unit shall mean a Unit which can be connected by a single drop line
from Active Plant.
"Vantage" means Vantage Cable Associates, L.P., an Iowa limited
partnership.
"Vista" means Vista Communications Limited Partnership III, a Delaware
limited partnership.
"Vista I" means Vista Communications Limited Partnership I, a Delaware
limited partnership.
"Vista Narragansett" means Vista/Narragansett Cable L.P., a Delaware
limited partnership.
Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, calculations of
amounts for the purposes of calculating any financial covenants or ratios
hereunder shall be made in accordance with GAAP applied on a basis consistent
with those used in the financial statements prepared by Old Galaxy with respect
to the Systems being acquired from
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Old Galaxy and referred to in Section 4.1.5 (other than departures therefrom not
material in their impact), and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with GAAP, including, without
limitation, that items of trade or barter shall be excluded.
Section 1.3. Other Terms. The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE 2.
AMOUNT AND TERMS OF THE LOANS
Section 2.1. The Loans.
Section 2.1.1. Term Loan. Each of the Lenders has made, subject
to the terms and conditions of the Original Loan Agreement, a term loan to the
Borrower in the amount of their respective Pro Rata Share of $8,000,000 (the
"Term Loan"), and each Lender agrees to continue the Term Loan, subject to the
terms and conditions of this Agreement. The principal balance of the Term Loan
outstanding on December 31, 2002 shall be repaid in two installments, the first
such installment to be in the amount of $4,000,000 and to be paid on March 31,
2003, with the remaining balance (including, without limitation, any Additional
Principal) to be repaid on the Term Loan Repayment Date.
Section 2.1.2. Revolving Loans. (a) Each Lender severally
agrees, subject to the terms and conditions of this Agreement, to make advances
(each a "Revolving Loan") to the Borrower from time to time on any Business Day
during the period from the date hereof until the Conversion Date in an amount
not to exceed such Lender's Unused Revolving Commitment on such Business Day.
Each Revolving Loan shall be in an aggregate principal amount of not less than
$250,000, and shall consist of each Lender's Pro Rata Share of the principal
amount of the Loan requested. Within the limits of each Lender's Unused
Revolving Commitment in effect from time to time, the Borrower may borrow under
this Section 2.1.2, prepay pursuant to Section 2.7.2, and reborrow under this
Section 2.1.2.
(b) On the Conversion Date, subject to the terms and conditions of this
Agreement and so long as no Default or Event of Default has occurred, the
aggregate principal amount of Revolving Loans outstanding on that date shall be
converted to a term loan (the "Converted Loan"), with each Lender being deemed
to have made a loan in an amount equal to such Lender's Pro Rata Share of the
Converted Loan. Commencing on March 31, 1998, the Borrower shall make principal
repayments equal to, in the aggregate for each calendar year, the percentages
set forth below of the outstanding principal balance of the Revolving Loans on
the Conversion Date, with the aggregate
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principal payment for each year to be divided into equal quarterly installments,
payable on the last Business Day of each calendar quarter:
Percentage of
Repayment Dates Outstanding Principal
--------------- ---------------------
1998 6%
1999 16%
2000 22%
2001 26%
2002 30%
Any remaining outstanding principal of the Converted Loan, together with
all accrued and unpaid interest thereon, shall be payable on the Converted Loan
Repayment Date,
Section 2.1.3. Ability to Request Loans. Without the prior written
consent of all of the Lenders, Capital Corp. shall not be permitted to request
or receive any Loan, or any proceeds of any Loan, hereunder.
Section 2.2. Making Revolving Loans. Each Revolving Loan shall be made
on notice, given not later than 11:00 A.M. Providence time, (i) on the same
Business Day such Revolving Loan is to be made, if the requested Loan is to be a
Prime Rate Loan, and (ii) on the Business Day three Business Days prior to the
day such Revolving Loan is to be made, if the requested Loan is to be a Libor
Loan. Each such request (a "Borrowing Request") shall be substantially in the
form of Exhibit 1.9 hereto, specifying the requested (i) date of such Loan, (ii)
aggregate principal amount of such Loan, (iii) whether such Loan is to be made
as a Prime Rate Loan or a Libor Loan, (iv) in the case of a Libor Loan, the
initial Interest Period for such Loan, and (v) the purpose of such Loan. Upon
receipt of such Borrowing Request, the Agent shall notify the Lenders of the
specifics of such request, and each Lender shall make available to the Agent in
immediately available funds its Pro Rata Share of such Revolving Loan not later
than 2:00 P.M. on the date such Loan is proposed to be made. Any Lender's
failure to make available to the Agent its Pro Rata Share of any Loan shall not
relieve any other Lender of its obligation to make available its Pro Rata Share
of such Loan.
Section 2.3. Interest and Fees on the Loans.
Section 2.3.1. Interest. Interest shall accrue and be paid
currently on the principal balances of the Loans (other than Additional
Principal) at Effective Prime or the Libor Rate for each of the Loans' Interest
Periods in accordance with the Borrower's Borrowing Request or Interest Rate
Elections for the Loans, subject to and in accordance with the terms and
conditions of this Agreement and the Notes. The
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Borrower shall pay such interest to the Agent for the pro rata account of each
Lender in arrears on the Loans (including, without limitation, Libor Loans)
outstanding from time to time after the date hereof, in accordance with the
following: (a) if any Loan or any portion of a Loan is a Prime Rate Loan, such
payments shall be made quarterly on the last Business Day of each March, June,
September and December of each year commencing September 30, 1995; (b) if any
Loan or any portion of Loan is a Libor Loan and is for a term of more than 90
days, such payments shall be made quarterly on the last Business Day of each
March, June, September and December of each year commencing September 30, 1995
and, in addition to each such quarterly payment required pursuant to the
foregoing, with respect to each such Libor Loan as to which an Interest
Adjustment Date occurs, on each such Interest Adjustment Date; and (c) if any
Loan or any portion of a Loan is a Libor Loan and is for a term of 90 days or
less, with respect to each such Libor Loan as to which an Interest Adjustment
Date occurs, on each such Interest Adjustment Date.
Section 2.3.2. Additional Interest on the Term Loan. In addition
to the interest accruing and being paid on the Term Loan pursuant to Section
2.3.1 hereof, an amount of interest on the outstanding principal balance of the
Term Loan (excluding the Additional Principal, as defined below) shall accrue
and be payable quarterly in arrears on the last Business Day of each March,
June, September and December commencing March 31, 1995 at a rate per annum equal
to the excess, if any, of 15% per annum over the the rate of interest from time
to time accruing and being paid on the Term Loan under Section 2.3.1 hereof, and
an amount of interest on the Additional Principal shall accrue and be paid
quarterly in arrears on the last date of each March, June, September and
December commencing June 30, 1995 at a rate per annum equal to 15%
(collectively, the "Financeable Interest"). The aggregate amount of all
Financeable Interest shall be deemed loaned by the Lenders to the Borrower as of
the quarterly accrual date on which it accrues, shall be added to the principal
of the Term Notes as of such date and shall constitute "Additional Principal"
for all purposes hereof.
Section 2.3.3. Fees. (a) The Borrower shall pay to the Agent for its own
account certain fees as specified in a side letter between the Agent and the
Borrower dated August 28, 1995.
(b) The Borrower shall pay to the Agent for the ratable benefit of the
Lenders an unused commitment fee equal to one-half of one percent (0.50%) per
annum (computed on the basis of the actual number of days elapsed using a
360-day year) of the average daily Unused Revolver Commitment, payable quarterly
in arrears commencing on September 30, 1995 and on the last Business Day of each
March, June, September and December thereafter.
(c) The Borrower shall on the Closing Date pay to the Agent for the pro
rata account of each Lender an amendment fee equal to $181,250.00.
Section 2.3.4. Increased Costs - Capital. If, after the date
hereof, any Lender shall have reasonably determined that the adoption after the
date hereof of any applicable law, governmental rule, regulation or order
regarding capital adequacy of
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banks or bank holding companies, or any change therein, or any change 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 such Lender with any policy, guideline, directive or
request regarding capital adequacy (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the capital of such Lender as a consequence of
the obligations hereunder of such Lender to a level below that which such Lender
could have achieved but for such adoption, change or compliance (taking into
consideration the policies of such Lender with respect to capital adequacy
immediately before such adoption, change or compliance and assuming that the
capital of such Lender was fully utilized prior to such adoption, change or
compliance) by an amount reasonably deemed by such Lender to be material, then
such Lender shall notify the Agent and the Borrower thereof and the Borrower
shall pay to the Agent for the account of such Lender from time to time as
specified by such Lender such additional amounts as shall be sufficient to
compensate such Lender for such reduced return, each such payment to be made by
the Borrower within five (5) Business Days after each demand by such Lender,
provided that the liability of the Borrower to pay such costs shall only accrue
with respect to costs accruing from and after the 90th day prior to the date of
each such demand. A certificate in reasonable detail of one of the officers of
such Lender describing the event giving rise to such reduction and setting forth
the amount to be paid to such Lender hereunder shall accompany any such demand
and shall, in the absence of manifest error, be presumed correct. In determining
such amount, such Lender may use any reasonable averaging and attribution
methods.
Section 2.4. Notations. At the time of (i) the making of each Loan
evidenced by any of the Notes, (ii) each change in the interest rate under any
of the Notes effected as a result of an Interest Rate Election; and (iii) each
payment or prepayment of any of the Notes, each Lender may enter upon its
records an appropriate notation evidencing (a) such Lender's Pro Rata Share of
the Loans and (b) the interest rate and Interest Adjustment Date applicable
thereto or (c) such payment or prepayment of principal and (d) in the case of
payments or prepayments of principal, the portion of the applicable Loan which
was paid or prepaid. No failure to make any such notation shall affect the
Borrower's unconditional obligations to repay the Loans and all interest, fees
and other sums due in connection with this Agreement and/or any of the Notes in
full, nor shall any such failure, standing alone, constitute grounds for
disproving a payment of principal by the Borrower. However, in the absence of
manifest error, such notations and each Lender's records containing such
notations shall constitute presumptive evidence of the facts stated therein,
including, without limitation, the outstanding amount of such Lender's Pro Rata
Share of the Loans and all amounts due and owing to such Lender at any time. Any
such notations and such Lender's records containing such notations may be
introduced in evidence in any judicial or administrative proceeding relating to
this Agreement, the Loans or any of the Notes.
Section 2.5. Computation of Interest and Fees. Interest and fees due
under this Agreement and under the Notes shall be computed on the basis of a
year of 360 days for the actual number of days elapsed.
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Section 2.6. Time of Payments and Prepayments in Immediately Available
Funds and Setoff.
Section 2.6.1. Time. All payments and prepayments of principal,
fees, interest and any other amounts owed from time to time under this Agreement
and/or under any of the Notes shall be made to the Agent for the pro rata
account of each Lender at the address referred to in Section 9.6 in Dollars and
in immediately available funds prior to 12:00 o'clock P.M. on the Business Day
that such payment is due, provided that the Borrower hereby authorizes and
instructs the Agent to charge against the Borrower's accounts with the Agent on
each date on which a payment is due hereunder and/or under any of the Notes an
amount up to the principal, interest and fees due and payable to the Lenders,
the Agent or any Lender hereunder and/or under any of the Notes and such charge
shall be deemed payment hereunder and under the Notes in question to the extent
that immediately available funds are then in such accounts. In addition, the
Borrower hereby irrevocably authorizes the Agent, if and to the extent payment
of any installment of principal, interest and/or fees hereunder and/or under any
of the Notes is not made when due, to charge against the Borrower's accounts
with the Agent an amount equal to the amount thereof not paid when due. Any such
payment or prepayment which is received by the Agent in Dollars and in
immediately available funds after 12 o'clock P.M. on a Business Day shall be
deemed received for all purposes of this Agreement on the next succeeding
Business Day except that solely for the purpose of determining whether a Default
has occurred under Section 6.1.1, any such payment or prepayment if received by
the Agent prior to the close of the Agent's business on a Business Day shall be
deemed received on such Business Day. All payments of principal, interest, fees
and any other amounts which are owing to any or all of the Lenders or the Agent
hereunder and/or under any of the Notes that are received by the Agent in
immediately available Dollars prior to 12:00 o'clock P.M. on any Business Day
shall, to the extent owing to the Lenders other than the Agent, be sent by wire
transfer by the Agent (in each case, without deduction for any claim, defense or
offset of any type) before 3:00 o'clock P.M. on the same Business Day. Each such
wire transfer shall be addressed to each Lender in accordance with the wire
instructions set forth in Exhibit 2.6.1 hereto. The amount of each payment wired
by the Agent to each such Lender shall be such amount as shall be necessary to
provide such Lender with its Pro Rata Share of such payment (without
consideration or use of any contra accounts of any Lender), or with such other
amount as may be owing to such Lender in accordance with this Agreement (in each
case, without deduction for any claim, defense or offset of any type). Each such
wire transfer shall be sent by the Agent only after the Agent has received
immediately available Dollars from or on behalf of the Borrower and each such
wire transfer shall provide each Lender receiving same with immediately
available Dollars on receipt by such Lender. Any such payments of immediately
available Dollars received by the Agent after 12:00 o'clock P.M. and before 3:00
o'clock P.M. on any Business Day shall be forwarded in the same manner by the
Agent to such Lenders as soon as practicable on said Business Day, and if any
such payments of immediately available Dollars are received by the Agent after
3:00 o'clock P.M. on a Business Day, the Agent shall so forward same to such
Lenders before 10:00 o'clock A.M. on the immediately succeeding Business Day.
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Section 2.6.2. Setoff, etc. Upon the occurrence and during the
continuance of any Event of Default, each Lender and the Agent is hereby
authorized at any time and from time to time, without notice to the Borrower
(any such notice being expressly waived by the Borrower), to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and any other Indebtedness at any time owing by such Lender to
or for the credit or the account of the Borrower against any and all of the
Obligations of the Borrower irrespective of whether or not such Lender shall
have made any demand under this Agreement or any of its Notes and although such
obligations may be unmatured. Each such Lender agrees to promptly notify the
Borrower and the Agent after any such setoff and application; provided that the
failure to give such notice shall not affect the validity of such setoff and
application. Promptly following any notice of setoff received by the Agent from
a Lender pursuant to the foregoing, the Agent shall notify each other Lender
thereof. The rights of each Lender under this Section 2.6.2 are in addition to
all other rights and remedies (including, without limitation, other rights of
setoff) which such Lender may have and are subject to Section 9.12.
Section 2.6.3. Unconditional Obligations and No Deductions. The
Borrower's obligation to make all payments provided for in this Agreement and
the other Financing Documents shall be unconditional. Each such payment shall be
made without deduction for any claim, defense or offset of any type, including
without limitation any withholdings and other deductions on account of income or
other taxes and regardless of whether any claims, defenses or offsets of any
type exist.
Section 2.7. Prepayment and Certain Payments.
Section 2.7.1. Mandatory Payments.
Section 2.7.1.1. In addition to each other principal payment required
hereunder, the outstanding principal balance of the Term Loan shall be repaid on
the Term Loan Repayment Date, and the outstanding principal balance of the
Converted Loan shall be repaid on the Converted Loan Repayment Date.
Section 2.7.1.2. On or before the 120th day after the end of each
fiscal year of the Borrower commencing with the fiscal year ending December 31,
1997, the Borrower shall prepay to the Agent for the pro rata account of the
Lenders an amount of the outstanding principal balance of the Converted Loan,
(or the Term Loan if the Converted Loan has been repaid in full) equal to 70% of
the Excess Cash Flow of the Borrower and its Subsidiaries for such fiscal year;
provided that if, on the due date of any such principal payment, such payment
would reduce the Borrower's cash on hand to less than $250,000, the Borrower may
elect to defer paying only that portion of such payment which reduces cash on
hand to less than $250,000, in which event, on the last day of each succeeding
calendar month, the Borrower shall make a payment of the deferred amount to the
extent that it has cash on hand in excess of $250,000 until
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such time as the entire deferred amount has been paid. All such deferred amounts
shall bear interest at the then current Effective Prime plus 2% per year (but
without duplication). Such prepayments shall be in addition to any and all other
mandatory and voluntary prepayments required or permitted hereunder and shall be
applied to the outstanding principal balances of the Converted Loan or the Term
Loan in the inverse order of their maturity.
Section 2.7.1.3. Simultaneously with the receipt by the Borrower of
the cash proceeds of any Asset Sale occurring prior to the Conversion Date, the
Borrower shall prepay to the Agent for the pro rata account of each Lender the
outstanding principal balance of the Revolving Loans in an amount equal to the
net (after reasonable expenses) cash proceeds thereof. Simultaneously with the
receipt by the Borrower of the cash proceeds of any Asset Sale occurring on or
after the Conversion Date, the Borrower shall prepay to the Agent for the pro
rata account of each Lender a portion of the Converted Loan and the Term Loan in
an amount equal to the amount of such net cash proceeds, to be applied first to
the principal of the Converted Loan (in the inverse order of maturity) with the
excess, if any, being applied to the principal balance of the Term Loan
installments coming due in the inverse order of maturity. Notwithstanding the
foregoing, on or after the Conversion Date, so long as no Default or Event of
Default exists, and so long as no Default or Event of Default would be created
thereby on a pro forma basis, the Borrower shall be permitted to consummate a
System Asset Sale or series of System Asset Sales for aggregate net (after
reasonable expenses) sale proceeds to the Borrower in an amount not to exceed
$5,000,000 in unapplied sale proceeds at any one time; provided, however, that
such System Asset Sale proceeds are paid to the Agent to be held in escrow for
the account of the Borrower and the Lenders; and provided further that at least
95% of the purchase price for each System Asset Sale shall be in cash. While it
is holding such System Asset Cash Sale proceeds in escrow, the Agent is hereby
authorized to invest the same in Cash Equivalent Investments of its own choosing
and any income thereon shall be paid monthly to the Borrower. All such System
Asset Sale cash proceeds shall be reinvested by the Borrower to effect the
acquisition of Permitted Cable Systems within eight months after the receipt by
the Borrower of such proceeds and any such cash proceeds which are not so
reinvested within such eight month period shall be applied by the Agent to
permanently reduce the Revolving Commitment in an amount equal to such cash
proceeds not reinvested, or paid by the Agent to the Lenders for pro rata
application to the Converted Loan installments in inverse order of maturity, if
such prepayment occurs after the Conversion Date, , or if the Converted Loan has
been repaid, to the Term Loan installments in inverse order of their maturity.
The terms of this Section shall not be construed as constituting a consent by
the Lenders to any such Asset Sale or System Asset Sale which would otherwise be
prohibited by the terms of this Agreement.
Notwithstanding the foregoing, the Agent shall release the cash
proceeds of any System Asset Sales to the Borrower to effect the acquisition of
a Permitted Cable System only after the terms of such acquisition (including,
without limitation, the Security Documents and collateral relating thereto) has
been approved by the Majority Lenders and the following terms and conditions
have been satisfied with respect to such acquisition:
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(a) Immediately prior to and upon such release, no Event of
Default or Default shall have occurred and be continuing and the
Borrower shall have provided the Lenders with evidence
satisfactory to them to the effect that, upon the acquisition of
the Permitted Cable System in question, no Default or Event of
Default will exist on a pro forma basis.
(b) The representations and warranties of the Borrower contained
in Article 4, infra, shall be true and correct in all material
respects on and as of the date of such release except as altered
hereafter by actions not prohibited hereunder. The Borrower's
delivery of a Request for such release shall be deemed to be a
representation and warranty by the Borrower as of the date of
such release as to the facts specified in Sections 2.7.1.3(a)
and (b).
(c) The Agent shall have received a written Request requesting
the release of all or a portion of escrowed proceeds of System
Asset Sales to the Borrower, signed by a duly authorized officer
of GTI or LLC of the Borrower.
(d) There shall have been no enactment of any law by any
governmental authority having jurisdiction over any Lender which
would make it unlawful in any respect for such release to occur
and there has been no material adverse change to the financial
condition or business of the Borrower and its Subsidiaries.
(e) The Lenders shall have received copies of any financial
information relating to the Permitted Cable System in question
reasonably requested by the Majority Lenders.
(f) The Agent shall have been provided with all due diligence
materials reasonably requested by the Agent with respect to the
Permitted Cable System in question, including, without
limitation, copies of all required consents, copies of all
Franchises, copies of all material contracts relating to such
Permitted Cable System, and legal opinions addressed to the
Agent from Borrower's counsel, FCC counsel, local counsel to the
Borrower and counsel to the seller of such Permitted Cable
System.
(g) The Agent shall have received Security Documents relating to
the Permitted Cable System in question substantially in the form
of those Security Documents previously provided to the Agent for
the benefit of the Lenders on or prior to the Closing Date and
all other documentation required to provide the Agent as agent
for the Lenders with first priority perfected Liens on the
assets being acquired with the proceeds of the System Asset
Sales as the Agent deems necessary or desirable as collateral
for the Loans.
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Section 2.7.1.4. In the event that the Borrower, GTI, or any of their
Subsidiaries receives, collectively, proceeds from any insurance policies
maintained by any of them (including, without limitation, casualty policies and
key man policies), which proceeds are in an aggregate amount during the term of
this Agreement in excess of $500,000, the Revolving Commitment shall be
permanently reduced (in inverse order of maturity) by an amount equal to such
proceeds, or, if such prepayment occurs after the Conversion Date, the Borrower
shall prepay the Converted Loan installments in inverse order of their maturity,
or if the Converted Loan has been repaid the Borrower shall prepay the Term Loan
installments in inverse order of their maturity.
Section 2.7.2. Voluntary Prepayments. All or any portion of the
unpaid principal balance of any Revolving Loan (other than Revolving Loans
constituting Libor Loans) may be prepaid at any time, without premium or
penalty, by a payment to the Agent for the account of each Lender of such
prepayment in immediately available Dollars by the Borrower; provided that each
such partial payment or prepayment of principal of the Loans shall be in a
principal amount of at least $100,000 or an integral multiple of $100,000 in
excess thereof.
Section 2.7.3. Liquidated Damages On Term Loan. All or any
portion of the unpaid principal balance of the Term Loan may be prepaid at any
time after December 31, 1996, without premium or penalty, by a payment by the
Borrower to the Agent for the pro rata account of each Lender of the amount of
such prepayment in immediately available Dollars. Any prepayment, whether
voluntary or mandatory, of all or any portion of the principal balance of Term
Loan on or prior to December 31, 1996 shall be accompanied by a payment in cash
to the Agent for the pro rata account of each Lender of a liquidated damages
payment in an amount equal to the amount of the prepayment multiplied by the
Term Loan prepayment liquidated damages factor shown on Exhibit 2.7.3 hereto for
the date of the prepayment.
Section 2.7.4. Prepayment of Libor Loans. Notwithstanding anything to
the contrary contained in the Notes or in any other agreement executed in
connection herewith or therewith, the Borrower shall be permitted to prepay any
portion of the Loans constituting Libor Loans only in accordance with Section
2.10 hereof and any amounts required to be paid in connection therewith shall be
in addition to any amounts required to be paid under Section 2.7.3 hereof.
Section 2.7.5. Interest Rate Protection. The Borrower shall
maintain an interest rate protection arrangement covering not less than 60% of
its then outstanding Indebtedness for Borrowed Money (it being understood that
the Senior Subordinated Notes, by virtue of their bearing interest at a fixed
rate, shall be deemed to be covered by such an arrangement). In addition to the
foregoing, in the event that and for so long as the 3-month Adjusted Libor Rate
(without giving effect to the Libor Rate Reserve Percentage) exceeds 7.875% per
annum, the Borrower agrees to maintain such an interest rate protection
arrangement covering not less than 50% of the Loans from time to time
outstanding. Such interest rate protection arrangement may consist of any one or
a combination of the following: (i) the purchase of an interest rate swap
arrangement from a financial institution acceptable to the Co-Arrangers covering
such Loans
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effectively converting the Borrower's interest payment obligations with respect
to such Loans to a fixed rate acceptable to the Majority Lenders for a term of
not less than two years or (ii) the purchase of an interest rate cap from a
financial institution acceptable to the Majority Lenders covering such Loans at
a cap rate acceptable to the Majority Lenders for a term expiring not earlier
than December 31, 1996. The terms and conditions of any such interest rate swap
or interest rate cap shall be reasonably satisfactory to the Majority Lenders.
Section 2.8. Payment on Non-Business Days. Whenever any payment to be
made hereunder or under one of the Notes shall be stated to be due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of fees, if any, and interest under this Agreement and
under such Note.
Section 2.9. Use of Proceeds. The Borrower shall use the proceeds of the
Loans for working capital, to finance its acquisitions of Permitted Cable
Systems, to pay closing costs in connection with any Permitted Acquisition,
which are to be in amounts reasonably acceptable to the Agent, the purchase of
the interest rate protection required hereunder, and other general corporate
purposes, all subject to and in accordance with the provisions of this
Agreement. The Borrower shall use the proceeds of the Additional Equity to pay a
portion of the purchase price under and closing costs incurred in connection
with the consummation of the Pending Acquisitions in accordance with Section
5.2.12 hereof. A portion of the net proceeds of the Senior Subordinated Notes
shall be used to prepay Loan A (as defined in the original Loan Agreement), with
the balance of such net proceeds being placed in escrow for payment of the
purchase prices of the Pending Acquisitions or to redeem the Senior Subordinated
Notes in accordance with the terms of Section 11.01(b) of the Indenture.
Section 2.10. Special Libor Loan Provisions. The Libor Loans shall be
subject to and governed by the following terms and conditions:
Section 2.10.1. Requests. Each Borrowing Request or Interest Rate Election
selecting the Libor Rate must be received by the Agent in accordance with the
definition of Interest Rate Election.
Section 2.10.2. Libor Loans Unavailable. Notwithstanding any other
provision of this Agreement, if, prior to or on the date on which any Loan or
any portion of a Loan is to be made as or converted into a Libor Loan, any of
the Lenders (or the Agent with respect to (ii) below) shall reasonably determine
(which determination shall be conclusive and binding on the Borrower), that
(i) Dollar deposits in the relevant amounts and for the relevant Interest
Period are not offered to such Lender in the London interbank market,
(ii) by reason of circumstances affecting the London interbank market,
adequate and reasonable means do not exist for ascertaining the Adjusted Libor
Rate, or
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(iii) the Adjusted Libor Rate shall no longer represent the effective cost
to such Lender for Dollar deposits in the London interbank market for reasons
other than the fact, standing alone, that the Adjusted Libor Rate is based on an
averaging of rates determined by the Agent and that such Lender's rate may
exceed such average,
such Lender may elect not to accept any Interest Rate Election electing a Libor
Loan and such Lender shall notify the Agent by telephone or telex thereof,
stating the reasons therefor, not later than the close of business on the second
Business Day prior to the date on which such Libor Loan is to be made. The Agent
shall promptly give notice of such determination and the reason therefor to the
Borrower, and all or such portion of the Loans, as the case may be, which are
subject to any of Section 2.10.2 (i), (ii) through (iii) as a result of such
Lender's determination shall be made as or converted into, as the case may be,
Prime Rate Loans and such Lender shall have no further obligation to make Libor
Loans, until further written notice to the contrary is given by the Agent to the
Borrower. If such circumstances subsequently change so that such Lender shall no
longer be so affected, such Lender's obligation to make or maintain its Pro Rata
Share of or any portion of a Loan as Libor Loans shall be reinstated when such
Lender obtains actual knowledge of such change of circumstances and promptly
after obtaining such actual knowledge such Lender shall forward written notice
thereof to the Agent. After receipt of such notice, the Agent shall promptly
forward written notice thereof to the Borrower. Upon or after receipt by the
Borrower of such written notice, the Borrower may submit an Interest Rate
Election in accordance with this Agreement electing an Interest Period ending no
later than the Interest Adjustment Date for the then current Interest Period for
the other Lenders' Pro Rata Shares of Libor Loans and electing the Libor Rate
for such Lenders' or Lender's Pro Rata Share(s) of the Loans as to which such
Lender's or Lenders' obligation(s) to make or maintain its or their Pro Rata
Share(s) of the Loans as Libor Loans was suspended and such Pro Rata Share(s)
shall be converted to Libor Loans in accordance with this Agreement. During any
period throughout which any of the Lenders has or have no obligation to make or
maintain its or their Pro Rata Share(s) of the Loans as Libor Loans, no Interest
Rate Elections electing the Libor Rate shall be effective with regard to the
Loans to the extent of the Pro Rata Share(s) of such Lender(s).
Section 2.10.3. Libor Lending Unlawful. In the event that any
change in applicable laws or regulations (including the introduction of any new
applicable law or regulation) or in the interpretation thereof (whether or not
having the force of law) by any governmental or other regulatory authority
charged with the administration thereof, shall make it unlawful for any of the
Lenders to make or continue to maintain its Pro Rata Share of all or any portion
of the Loans as Libor Loans, each such Lender shall promptly notify the Agent by
telephone or telex thereof, and of the reasons therefor, and the obligation of
such Lender to make or maintain its Pro Rata Share of the Loans or such portion
thereof as Libor Loans shall, upon the happening of such event, terminate and
the Agent shall, by telephonic notice to the Borrower, declare that such
obligation has so terminated with respect to such Lender, and such Pro Rata
Share of
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the Loans or any portion thereof to the extent then maintained as Libor Loans,
shall, on the last day on which such Lender can lawfully continue to maintain
such Pro Rata Share of the Loans or any portion thereof as Libor Loans,
automatically convert into Prime Rate Loans without additional cost to the
Borrower. If circumstances subsequently change so that such Lender shall no
longer be so
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affected, such Lender's obligation to make or maintain its Pro Rata Share of all
or any portion of the Loans as Libor Loans shall be reinstated when such Lender
obtains actual knowledge of such change of circumstances, and promptly after
obtaining such actual knowledge such Lender shall forward written notice thereof
to the Agent. After receipt of such notice, the Agent shall promptly forward
written notice thereof to the Borrower. Upon or after receipt by the Borrower of
such written notice, the Borrower may submit an Interest Rate Election in
accordance with this Agreement electing an Interest Period ending no later than
the Interest Adjustment Date for the then current Interest Period for the other
Lenders' Pro Rata Shares of Libor Loans and electing the Libor Rate for such
Lenders' or Lender's Pro Rata Share(s) of the Loans as to which such Lender's or
Lenders' obligation(s) to make or maintain its or their Pro Rata Share(s) of the
Loans as Libor Loans was suspended and such Pro Rata Share(s) shall be converted
to Libor Loans in accordance with this Agreement. During any period throughout
which any of the Lenders has or have no obligation to make or maintain its or
their Pro Rata Share(s) of the Loans as Libor Loans, no Interest Rate Elections
electing the Libor Rate shall be effective with regard to the Loans to the
extent of the Pro Rata Share(s) of such Lender(s).
Section 2.10.4. Additional Costs on Libor Loans. The Borrower further
agrees to pay to the Agent for the account of the applicable Lender or Lenders
such amounts as will compensate any of the Lenders for any increase in the cost
to such Lender of making or maintaining (or of its obligation to make or
maintain) all or any portion of its Pro Rata Share of any Loan as a Libor Loan
and for any reduction in the amount of any sum receivable by such Lender under
this Agreement in respect of making or maintaining all or any portion of such
Lender's Pro Rata Share of any Loan as a Libor Loan, in either case, from time
to time by reason of:
(i) any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by,
such Lender, under or pursuant to any law, treaty, rule, regulation
(including, without limitation, any Regulations of the Board of
Governors of the Federal Reserve System) or requirement in effect on or
after the date hereof, any interpretation thereof by any governmental
authority charged with administration thereof or by any central bank or
other fiscal or monetary authority or other authority, or any
requirement imposed by any central bank or such other authority whether
or not having the force of law;
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or
(ii) any change in (including the introduction of any new)
applicable law, treaty, rule, regulation or requirement or in the
interpretation thereof by any official authority, or the imposition of
any requirement of any central bank, whether or not having the force of
law, which shall subject such Lender to any tax (other than taxes on net
income imposed on such Lender), levy, impost, charge, fee, duty,
deduction or withholding of any kind whatsoever or change the taxation
of such Lender with respect to making or maintaining all or any portion
of its Pro Rata Share of any Loan as a Libor Loan and the interest
thereon (other than any change which affects, and to the extent that it
affects, the taxation of net income of such Lender); provided, that with
respect to any withholding the foregoing shall not apply to any
withholding tax described in sections 1441, 1442 or 3406 of the Code, or
any succeeding provision of any legislation that amends, supplements or
replaces any such section, or to any tax, levy, impost, duty, charge,
fee, deduction or withholding that results from any noncompliance by a
Lender with any federal, state or foreign law or from any failure by a
Lender to file or furnish any report, return, statement or form the
filing or furnishing of which would not have an adverse effect on such
Lender and would eliminate such tax, impost, duty, deduction or
withholding;
In any such event, such Lender shall promptly notify the Agent thereof, and of
the reasons therefor, and the Agent shall promptly notify the Borrower thereof
in writing stating the reasons provided to the Agent by such Lender therefor and
the additional amounts required to fully compensate such Lender for such
increased or new cost or reduced amount as reasonably determined by such Lender.
Such additional amounts shall be payable on each date on which interest is to be
paid hereunder or, if there is no outstanding principal amount under any of the
Notes, within 20 Business Days after the Borrower's receipt of said notice. Such
Lender's certificate as to any such increased or new cost or reduced amount
(including calculations, in reasonable detail, showing how such Lender computed
such cost or reduction) shall be submitted by the Agent to the Borrower and
shall, in the absence of manifest error, be presumptive. In determining any such
amount, the Lender(s) may use any reasonable averaging and attribution methods.
Notwithstanding anything to the contrary set forth above, the Borrower shall not
be obligated to pay any amounts pursuant to this Section 2.10.4 as a result of
any requirement or change referenced above with respect to any
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period prior to the ninetieth (90th) day prior to the date on which the Borrower
is first notified thereof (other than any amounts which relate to any such
requirement or change which is adopted with retroactive effect in which case the
Borrower shall be obligated to pay all such amounts accrued from the date as of
which such requirement or change is retroactively effective) unless the failure
to give such notice within such ninety (90) day period resulted from reasonable
circumstances beyond such Lender's normal control.
Section 2.10.5. Libor Funding Losses. In the event any of the
Lenders shall incur any loss or expense (including, without limitation, any loss
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund or maintain any Loan or any portion
of a Loans as a Libor Loan) as a result of:
(i) payment or prepayment by the Borrower of all or any portion
of any Libor Loan on a date other than the Interest Adjustment Date for
such Libor Loan, for any reason; provided, however that this clause
shall not be deemed to grant the Borrower any right to convert a Libor
Loan to a Prime Rate Loan prior to the end of any Interest Period or to
imply such right;
(ii) conversion of all or any portion of any Libor Loan on a day
other than the last day of an Interest Period applicable to such Loan to
a Prime Rate Loan for any reason including, without limitation,
acceleration of the Loans upon or after an Event of Default, any
Interest Rate Election or any other cause whether voluntary or
involuntary and whether or not referred to or described in this
Agreement, other than any such conversion resulting solely from
application of Section 2.10.2 or 2.10.3 by any Lender; or
(iii) any failure by the Borrower to borrow any Loan as a Libor
Loan on the date specified in any Borrowing Request or Interest Rate
Election selecting the Libor Rate, other than any such failure resulting
solely from application of Section 2.10.2 or 2.10.3 by any Lender;
such Lender shall promptly notify the Agent thereof, and of the
reasons therefor. Upon the request of the Agent, the Borrower
shall pay directly to the Agent for the account of such Lender
such amount as will (in the reasonable determination of such
Lender, which shall be presumptive absent manifest error)
reimburse such Lender for such loss or expense. Each Lender
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shall furnish to the Borrower, upon written request received by the Agent, a
written statement setting forth the computation of any such amounts payable to
such Lender under this Section 2.10.5.
Section 2.10.6 Banking Practices. Each Lender agrees that upon
the occurrence of any of the events described in Section 2.3.3 and/or 2.10.2.1,
2.10.2.2, 2.10.2.3, 2.10.4 or 2.9.5, such Lender will exercise all reasonable
efforts to take such reasonable actions at no expense to such Lender (other than
expenses which are covered by the Borrower's advance deposit of funds with such
Lender for such purpose, or if such Lender agrees, which the Borrower has agreed
to pay or reimburse to such Lender in full upon demand), in accordance with such
Lender's usual banking practices in such situations and subject to any statutory
or regulatory requirements applicable to such Lender, as such Lender may take
without the consent or participation of any other Person to, in the case of an
event described in Section 2.3.3 and/or 2.10.4 or 2.10.5, mitigate the cost of
such events to the Borrower and, in the case of an event described in Section
2.10.2 (i), (ii) or (iii), to seek Dollar deposits in any other interbank Libor
market in which such Lender regularly participates and in which the applicable
determination(s) described in Section 2.10.2 (i), (ii) or (iii), as the case may
be, does not apply.
Section 2.10.7 Borrower's Option on Unavailability or Increased
Cost of Libor Loans. In the event of any conversion of all or any portion of any
Lender's Pro Rata Share of any Libor Loan to a Prime Rate Loan for reasons
beyond the Borrower's control or in the event that any Lender's Pro Rata Share
of all or any portion of any Libor Loan becomes subject, under Section 2.10.4 or
2.10.5, to additional costs, the Borrower shall have the option, subject to the
other terms and conditions of this Agreement, to convert such Lender's Pro Rata
Share to a Prime Rate Loan by making Interest Rate Elections for Interest
Periods which (i) end on the Interest Adjustment Date for such Libor Loan or
(ii) end on Business Days occurring prior to such Interest Adjustment Date, in
which case at the end of the last of such Interest Periods any such Libor Loan
shall automatically convert to a Prime Rate Loan and the Borrower shall have no
further right to make an Interest Rate Election with respect to such Prime Rate
Loan other than an Interest Rate Election which is effective on the Interest
Adjustment Date for such Libor Loan. The Borrower's options set forth in this
Section 2.10.7 may be exercised, if and only if the Borrower pays, concurrently
with delivery to the Agent of each such Interest Rate Election and thereafter in
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accordance with Section 2.10.4, 2.10.5 and 2.10.6, all amounts provided for
therein to the Agent in accordance with this Agreement.
Section 2.10.8. Assumptions Concerning Funding of Libor Loans. The
calculation of all amounts payable to the Lenders under this Section 2.10 shall
be made as though each Lender actually funded its relevant Libor Loans through
the purchase of a deposit in the London interbank market bearing interest at the
Libor Rate in an amount equal to that Libor Loan and having a maturity
comparable to the relevant Interest Period and through the transfer of such
deposit from an offshore office of such Lender to a domestic office of such
Lender in the United States of America; provided, however, that each Lender may
fund each of its Libor Loans in any manner it sees fit and the foregoing
assumption shall be utilized solely for the calculation of amounts payable under
this Section 2.10.
ARTICLE 3.
CONDITIONS OF LENDING
Section 3.1. Conditions Precedent to the Revolving Commitment and to all
Loans.
Section 3.1.1. The Commitment and Initial Loan. The effectiveness of this
amendment and restatement of the Original Loan Agreement and the obligations
hereunder of the Lenders to make Revolving Loans and continue the Term Loan are
subject to performance by the Borrower of all of its obligations under this
Agreement, and to the satisfaction of the conditions precedent that all legal
matters incident to the transactions contemplated hereby or incidental to the
Loans shall be satisfactory to counsel for the Agent, and the Lenders shall have
received on or before the Closing Date all of the following, each dated the
Closing Date or another date acceptable to the Lenders and each to be in form
and substance satisfactory to the Agent in the Agent's sole and complete
discretion:
Section 3.1.1.1. The Notes, the Security Documents, and each of the other
Financing Documents, including, without limitation, those hereinafter set forth.
Section 3.1.1.2. Certificates from GTI, LLC and Capital Corp. certifying as
to the resolutions authorizing and
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approving such of the Financing Documents to which GTLP, LLC, GTI or Capital
Corp. is a party and other matters contemplated hereby and certifying as to the
names and signatures of each officer and manager of GTI, LLC and Capital Corp.
authorized to sign each Financing Document to be executed and delivered by or on
behalf of GTLP, LLC, GTI or Capital Corp. The Lenders may conclusively rely on
each such certificate until the Lenders shall receive a further certificate of
GTI, LLC and Capital Corp. cancelling or amending the prior certificate and
submitting the signatures of the officers named in such further certificate.
Section 3.1.1.3. Favorable opinions of Messrs.
Thompson & Mitchell and Goodwin, Procter & Hoar counsel for the Borrower, and
Messrs. Hogan & Hartson, FCC counsel for the Borrower, substantially in the
forms of Exhibit 3.1.1.3 hereto.
Section 3.1.1.4. An Officer's Certificate stating that:
(a) The representations and warranties contained in Section 4.1 are correct
on and as of the Closing Date as though made on and as of such date; and
(b) No Default or Event of Default has occurred and is continuing, or would
result from the making of the initial Revolving Loan.
Section 3.1.1.5. Certificates of good standing of the Secretaries of State
of all states listed on Exhibit 4.1.1, dated reasonably near the Closing Date.
Section 3.1.1.6. Evidence that (i) a portion of the net proceeds of the
Senior Subordinated Notes have been used to prepay Loan A (as defined in the
Original Loan Agreement) in its entirety, with the balance of such net proceeds
being placed in escrow for payment of the purchase prices of the Pending
Acquisitions or to redeem the Senior Subordinated Notes in accordance with the
terms of Section 11.01(b) of the Indenture; (ii) the ownership interests in the
Borrower are as set forth in Exhibit 1.1, and (iii) on the Closing Date the sum
of the Borrower's cash on hand and the Unused Revolving Commitment is not less
than $5,000,000.
Section 3.1.1.7. A completed Borrowing Request and an Interest Rate
Election.
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Section 3.1.1.8. Payment to the Agent and the Lenders of the fees specified
in this Agreement as being payable on the Closing Date and all reasonable
out-of-pocket costs and expenses incurred by the Agent in connection with the
transactions contemplated hereby, including, but not limited to, outside legal
expenses, accounting fees, auditing fees, appraisal fees, and other fees
associated with any independent analyses of the Borrower.
Section 3.1.1.9. Such other information about the Borrower and/or its
assets, business and/or financial condition as the Lenders may request.
Section 3.1.1.10. Certificates of fire, liability and extended coverage
insurance policies, each such policy to name the Agent as mortgagee and loss
payee and as additional insured on all liability policies.
Section 3.1.1.11. True descriptions of any pending or threatened litigation
against or by the Borrower.
Section 3.1.1.12. Evidence that all necessary third party consents have
been obtained.
Section 3.1.1.13. The fact that the representations and warranties of the
Borrower contained in Article 4, infra, are true and correct in all material
respects on and as of the date of the Loans except as altered hereafter by
actions not prohibited hereunder. The Borrower's delivery of the Notes to the
Lenders and the Borrower's Borrowing Request shall be deemed to be a
representation and warranty by the Borrower as of the date thereof to such
effect.
Section 3.1.1.14. That there has been no enactment of any law by any
governmental authority having jurisdiction over any Lender which would make it
unlawful in any respect for such Lender to make its Pro Rata Share of the Loans.
Section 3.1.1.15. The Lenders shall be satisfied in their sole discretion
with the terms and conditions of the Senior Subordinated Notes and the Related
Documents, including but not limited to the satisfactory subordination of such
Senior Subordinated Notes to payment in full of the Obligations, and shall have
received confirmation that the Borrower has received gross proceeds from the
sale of the Senior Subordinated Notes of not less than $120,000,000, at an
interest rate not greater than 12.375% per annum.
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Section 3.1.2. Conditions Precedent to Each Loan. The obligation of each
Lender to make the initial Revolving Loan pursuant to Section 2.1 hereof shall
be subject to the condition that a contribution of Additional Equity in an
amount of not less than $5,000,000 shall have been made, and the obligation of
each Lender to make any Loan pursuant to Section 2.1 hereof shall be subject to
the further conditions precedent that on the date of such Loan the following
statements shall be true, and the acceptance of the Borrower of such Loan shall
constitute a representation and warranty by the Borrower that on the date of
such Loan such statements are true:
Section 3.1.2.1. The representations and warranties contained in each
Financing Document are correct on and as of the date of such Loan, before and
after giving effect to such Loan and the application of the proceeds thereof, as
though made on and as of such date;
Section 3.1.2.2. No Default or Event of Default has occurred or would
result from such Loan or from the application of the proceeds therefrom;
Section 3.1.2.3. There has been no enactment of any law by an governmental
authority having jurisdiction over any Lender that would make it unlawful in any
respect for such Lender to make its Pro Rata Share of such Loan; and
Section 3.1.2.4. The Agent shall have received such other approvals,
opinions, or documents as any Lender through the Agent may reasonable request.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Borrower. The Borrower
represents and warrants to the Lenders that, after giving effect to the Loans
and the application of the proceeds thereof (which representations and
warranties shall survive the making of the Loans):
Section 4.1.1. Organization and Existence. GTLP, GTI, LCC, Capital Corp.
and each Subsidiary is a limited partnership or corporation, duly organized,
validly existing and in good standing under the laws of the state of its
incorporation or organization and is duly qualified to do business in all
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jurisdictions in which such qualification is required, all as noted on Exhibit
4.1.1, except where failure to so qualify would not have a material adverse
effect on the financial condition or business of the Borrower and its
Subsidiaries, on a combined basis (a "Material Adverse Effect"), and has all
requisite power and authority to conduct its business, to own its properties and
to execute and deliver, and to perform all of its obligations under the
Financing Documents.
Section 4.1.2. Authorization and Absence of Defaults. The execution,
delivery to the Lenders and performance by GTLP, GTI, LLC, Capital Corp. and any
Subsidiaries of the Financing Documents have been duly authorized by all
necessary corporate, partnership and governmental action and do not and will not
(i) require any consent or approval of the partners, shareholders or board of
directors of the Borrower or any Subsidiary which has not been obtained, (ii)
violate any provision of any law, rule, regulation (including, without
limitation, Regulations U and X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Borrower and/or any Subsidiary
and/or the Certificates and Agreements of Limited Partnership, articles of
incorporation or by-laws, where applicable, of GTLP, GTI, LLC, Capital Corp.
and/or any Subsidiary, (iii) result in a material breach of or constitute a
material default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which GTLP, GTI, LLC, Capital Corp. and/or any
Subsidiary is or are a party or parties or by which it or they or its or their
properties may be bound or affected; or (iv) result in, or require, the creation
or imposition of any Lien on any of its or their respective properties or
revenues other than Liens granted to the Agent by the Security Documents
securing the Obligations. Each of GTLP, GTI, LLC, Capital Corp. and its
Subsidiaries are in compliance with any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument, except where the failure to be in compliance
would not have a Material Adverse Effect.
Section 4.1.3. Acquisition of Consents. No authorization, consent,
approval, license, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, other than those which have been obtained, is or will be
necessary to the valid execution and delivery to the Lenders or performance by
GTLP, GTI, LLC, Capital Corp. or any Subsidiary of any Financing Documents.
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Section 4.1.4. Validity and Enforceability. Each of the Financing Documents
when delivered hereunder will constitute the legal, valid and binding
obligations of GTLP, GTI, LLC, Capital Corp. and the Subsidiaries enforceable
against such Persons in accordance with their respective terms.
Section 4.1.5. Financial Information. The following information with
respect to the Borrower has heretofore been furnished to the Lenders:
Section 4.1.5.1. Audited annual financial statements of the Borrower for
the period ended December 31, 1994;
Section 4.1.5.2. Unaudited internally prepared financial statements of the
Borrower for the fiscal period ended June 30, 1995.
Section 4.1.5.23. The Projections. Each of the financial statements
referred to above in Sections 4.1.5.1 and 4.1.5.2 was prepared in accordance
with GAAP (subject, in the case of Section 4.1.5.2, to the absence of footnotes
and normal year-end adjustments) applied on a consistent basis, except as stated
therein. The financial statements referred to above in Sections 4.1.5.1 and
4.1.5.2 fairly present the financial condition of the Borrower on at such dates
and are complete and correct in all material respects and no Material Adverse
Effect has occurred since the date thereof. The Projections have been prepared
by the Borrower in light of the past business of the Borrower and the cable
television systems that are the subject of the Pending Acquisitions, based on
certain assumptions, those assumptions believed by the Borrower to be material
being attached to the Projections. The Borrower believes that those assumptions
are reasonable in all material respects as of the Closing Date. The Projections
have been prepared in good faith and represent the best opinion of the Borrower
as of the Closing Date as to the most probable course of Borrower's businesses.
The Projections were prepared in accordance with practices usually followed in
the preparation of accounting projections in good faith and the regular course
of an ongoing business.
Section 4.1.6. No Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower, any Affiliate and/or any Subsidiary or any of their properties
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which if
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determined adversely to the Borrower, any Affiliate and/or any Subsidiary would
draw into question the legal existence of the Borrower and/or any such
Subsidiary and/or the validity, authorization and/or enforceability of the
Financing Documents and/or any provision thereof and/or could reasonably be
expected to have a Material Adverse Effect, except those matters, if any,
described on Exhibit 4.1.6 none of which, in Borrower's good faith opinion, will
have such a Material Adverse Effect.
Section 4.1.7. Regulation U. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying "margin stock" within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System (12 CFR Part 221), does not own and has no present intention of acquiring
any such margin stock or a "margin security" within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System (12 CFR, Part 207). None
of the proceeds of the Loans will be used directly or indirectly by the Borrower
for the purpose of purchasing or carrying, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry,
any such margin security or margin stock or for any other purpose which might
constitute the transaction contemplated hereby a "purpose credit" within the
meaning of said Regulation G or Regulation U, or cause this Agreement to violate
any other regulation of the Board of Governors of the Federal Reserve System or
the Securities and Exchange Act of 1934, as amended, or any rules or regulations
promulgated under either said statute.
Section 4.1.8. Absence of Adverse Agreements. Neither the Borrower nor any
Subsidiary is a party to any indenture, loan or credit agreement or any lease or
other agreement or instrument (other than the Equity Documents) or subject to
any corporate or partnership restriction which would have a Material Adverse
Effect on the ability of the Borrower or any Subsidiary to carry out its
obligations under the Financing Documents.
Section 4.1.9. Taxes. The Borrower and each Subsidiary has filed all tax
returns (federal, state and local) required to be filed and paid all taxes shown
thereon to be due, including interest and penalties, or provided adequate
reserves for payment thereof.
Section 4.1.10. ERISA. The Borrower and any Commonly Controlled Entity do
not maintain or contribute to any Single Employer Plan which is not in
substantial compliance with ERISA and Title X of the Consolidated Omnibus Budget
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Reconciliation Act of 1986, as amended, or which has incurred any accumulated
funding deficiency within the meaning of section 412 and 418 of the Code, or
which has applied for or obtained a waiver from the Internal Revenue Service of
any minimum funding requirement under section 412 of the Code. The Borrower and
any Commonly Controlled Entity have not incurred any liability to the PBGC in
connection with any Plan covering any employees of The Borrower or any Commonly
Controlled Entity in amount exceeding Fifty Thousand Dollars ($50,000) in the
aggregate or ceased operations at any facility or withdrawn from any Plan in a
manner which could subject any of them to liability under section 4062(e), 4063
or 4064 of ERISA in amount exceeding Fifty Thousand Dollars ($50,000) in the
aggregate, and know of no facts or circumstance which might give rise to any
liability of the Borrower or any Commonly Controlled Entity to the PBGC under
Title IV of ERISA in amount exceeding Fifty Thousand Dollars ($50,000) in the
aggregate. The Borrower and any Commonly Controlled Entity have not incurred any
withdrawal liability in amount exceeding Fifty Thousand Dollars ($50,000) in the
aggregate (including but not limited to any contingent or secondary withdrawal
liability) within the meaning of sections 4201 and 4202 of ERISA, to any
Multiemployer Plan, and no event has occurred, and there exists no condition or
set of circumstances, which presents a risk of the occurrence of any withdrawal
from or the partition, termination, reorganization or insolvency of any
Multiemployer Plan which could result in any liability to a Multiemployer Plan
in amount exceeding Fifty Thousand Dollars ($50,000) in the aggregate.
Except for payments for which the minimum funding requirement has been
waived under section 412 of the code, full payment has been made of all amounts
which the Borrower and any Commonly Controlled Entity are required to have paid
as contributions to any Plan under applicable law or under any Plan or any
agreement relating to any Plan to which the Borrower or any Commonly Controlled
Entity is a party. The Borrower and each Commonly Controlled Entity have made
adequate provision for reserves to meet contributions that have not been made
because they are not yet due under the terms of any Plan or related agreements.
Neither the Borrower nor any Commonly Controlled Entity has any knowledge,
nor do any of them have any reason to believe that any Reportable Event which
could result in a liability or liabilities of Fifty Thousand Dollars ($50,000)
or more in the aggregate has occurred with respect to any Plan.
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Section 4.1.11. Ownership of Properties.
Section 4.1.11.1. Except for Permitted Encumbrances and Liens permitted
under Section 5.2.1 hereof, each of the Borrower, GTI and each Subsidiary has
good title to all of their respective properties and assets free and clear of
all mortgages, security interests, restrictions, Liens and encumbrances of any
kind.
Section 4.1.11.2. Exhibit 4.1.11 accurately and completely lists the
location of all real property owned or leased by the Borrower, GTI or any
Subsidiary. The Borrower, GTI and each Subsidiary enjoys quiet possession under
all material leases to which it is a party as a lessee, and all of such leases
are valid, subsisting in full force and effect. No other such leases contain any
provision restricting the incurrence of indebtedness by the lessee.
Section 4.1.11.3. To the Borrower's knowledge, except as specified in
Exhibit 4.1.11, none of the real property owned by the Borrower, GTI or any
Subsidiary is located within any federal, state or municipal flood plain zone.
Section 4.1.11.4. Except as set forth in Exhibit 4.1.11, all of the
material properties used in the conduct of the Borrower's, GTI's and each
Subsidiary's business (i) are in good repair, working order and condition
(reasonable wear and tear accepted) and suitable for use in the operation of the
Borrower's, GTI's and each Subsidiary's business; and (ii) are currently
operated and maintained, in all material respects, in accordance with the
requirements of the National Electrical Safety Code on Engineering and the FCC
and other standards generally accepted in the cable television industry.
Section 4.1.12. Accuracy of Representations and Warranties. None of the
Borrower's representations or warranties set forth in this Agreement or in any
document or certificate taken together with any related document or certificate
furnished pursuant to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make any
statement of fact contained herein or therein, in light of the circumstances
under which it was made, not misleading; except that unless provided otherwise
any such document or certificate which is dated speaks as of the date stated and
not the present.
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Section 4.1.13. Senior Subordinated Note Representations and Warranties.
All representations and warranties and all statements of fact made by GTLP, GTI,
LLC, and Capital Corp., and contained in any Related Document or any document,
instrument or written agreement issued or entered into in connection with the
Senior Subordinated Notes are true, accurate and complete in all material
respects as of the Closing Date. The sale of the Senior Subordinated Notes has
been consummated in accordance with the Related Documents and the evidence
provided to the Lenders under Section 3.1 hereof, and the Borrower has received
at least $120,000,000 in gross proceeds, at an interest rate not greater than
12.375% per annum.
Section 4.1.14. No Investment Company. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended, which is required to register thereunder.
Section 4.1.15. Solvency, etc. After giving effect to the consummation of
each Loan outstanding and to be made under this Agreement as of the time this
representation and warranty is given, the Borrower (a) will be able to pay its
debts as they become due, (b) will have funds and capital sufficient to carry on
its business and all businesses in which it is about to engage, and (c) will own
property having a value both at fair valuation and at fair saleable value in the
ordinary course of the Borrower's business greater than the amount required to
pay its Indebtedness, including for this purpose unliquidated and disputed
claims. The Borrower will not be rendered insolvent by the execution and
delivery of this Agreement and the consummation of any transactions contemplated
herein.
Section 4.1.16. Approvals. All approvals required from all Persons
including without limitation all governmental authorities with respect to the
Financing Documents have been obtained.
Section 4.1.17. Ownership Interests. The schedule of ownership interests in
the Borrower and its Subsidiaries set forth in Exhibit 1.3 is true, accurate and
complete and the Investments to be made for all ownership interests disclosed
therein have in fact been fully paid in immediately available Dollars.
Section 4.1.18. Licenses, Registrations, Compliance with Laws, etc. Exhibit
4.1.18 accurately and completely
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describes all permits, governmental licenses, registrations and approvals,
material to carrying out of the Borrower's and each of the Subsidiaries'
businesses as presently conducted and as required by law or the rules and
regulations of any federal, foreign governmental, state, county or local
association, corporation or governmental agency, body, instrumentality or
commission having jurisdiction over the Borrower or any of the Subsidiaries,
including but not limited to the FCC, the United States Environmental Protection
Agency, the United States Department of Labor, the United States Occupational
Safety and Health Administration, the United States Equal Employment Opportunity
Commission, the Federal Trade Commission and the United States Department of
Justice and analogous and related state and foreign agencies and each community
which has granted the Borrower a Franchise, each of which is listed on Exhibit
1.2 hereto. There is no material violation or material failure of compliance or,
to the Borrower's knowledge, allegation of such violation or failure of
compliance on the part of the Borrower or any of the Subsidiaries with any of
the foregoing permits, licenses, registrations, approvals, rules or regulations
and there is no action, proceeding or investigation pending or to the knowledge
of the Borrower threatened nor has the Borrower or any Subsidiary received any
notice of such which might result in the termination or suspension of any such
permit, license, registration or approval which in any case could have a
Material Adverse Effect.
Section 4.1.19. Principal Place of Business; Books and Records. The
Borrower's chief executive office is located at Borrower's address set forth in
Section 9.6. All of the Borrower's books and records are kept at one or more of
its addresses set forth in Section 9.6.
Section 4.1.20. Subsidiaries. GTLP has no Subsidiaries other than Capital
Corp. Capital Corp. has no Subsidiaries.
Section 4.1.21. Franchises, etc. Exhibit 4.1.21 attached hereto accurately
and completely lists all material authorizations, licenses, permits and
Franchises granted or assigned to the Borrower 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 in the Franchise Areas, 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 conduct by the Borrower of
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its business as presently conducted or proposed to be conducted. Except as
disclosed on Exhibit 4.1.21, all existing Franchises are in full force and
effect, are duly issued in the name of, or validly assigned to, GTI, the
Borrower or one of its Subsidiaries and the Borrower or one of its Subsidiaries
has full power and authority to operate thereunder. Except as set forth in
Exhibit 1.2, no cable television Franchise issued with respect to a Franchise
Area has a term which will expire prior to the scheduled maturity of the Notes.
Exhibit 1.2 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 Systems.
Section 4.1.22. Copyright. The Borrower has not violated any of the
provisions of the Copyright Act of 1976, 17 U.S.C. ss.101, et seq. The Borrower
has filed all notices and statements of account with United States Copyright
Office and has made all payments to the United States Copyright Office that are
required in connection with the secondary transmission by the Borrower of any
broadcast television, radio or other signals. Exhibit 4.1.22 accurately and
completely sets forth all copyrights held by the Borrower or any of the
Subsidiaries.
Section 4.1.23. Basic Subscribers. As of August 31, 1995, the Borrower
shall have not less than 82,937 Basic Subscribers, and Operating Cash Flow
(including the Pending Acquisitions) for the fiscal quarter ended June 30, 1995
of not less than $5,345,000.
Section 4.1.24. Environmental Compliance. Neither the Borrower nor, to the
best knowledge of the Borrower after due inquiry, any other Person:
Section 4.1.24.1. has ever caused, permitted, or suffered to exist any
Hazardous Material to be spilled, placed, held, located or disposed of on,
under, or about, nor are any now existing on, under, or about, the Borrower's
facilities (the "Premises"), or into the atmosphere, any body of water, any
wetlands, or on any other real property legally or beneficially owned by any
Borrower, other than as disclosed on Exhibit 4.1.24, or in respect of Hazardous
Material used or disposed of in compliance with law,
Section 4.1.24.2. has any knowledge after due inquiry that either the
Premises or any other real property legally or beneficially owned by the
Borrower has ever been used (whether by the Borrower or, to the best knowledge
of the
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Borrower after due inquiry, by any other Person) as a treatment, storage (except
for its own material in the ordinary course of business) or disposal (whether
permanent or temporary) site for any Hazardous Material, and
Section 4.1.24.3. has any knowledge after due inquiry of any notice of
violation, lien or other notice issued by any governmental agency with respect
to the environmental condition of the Premises, any other property owned by the
Borrower, or any other property which was included in the property description
of the Premises or such other real property within the preceding three years.
Section 4.1.25. Material Contracts. Exhibit 4.1.25 attached hereto
accurately and completely lists all material agreements to which the Borrower
and any of the Subsidiaries are a party including, without limitation, all
Franchises and all material construction, programming, engineering, consulting,
employment, management, operating and related agreements, if any, which are
presently in effect. All of the foregoing agreements, including without
limitation the Franchises, are legally valid, binding, subsisting and in full
force and effect and neither the Borrower, any of the Subsidiaries nor any other
parties are in material default thereunder.
Section 4.1.26. Patents, Trademarks and Other Property Rights. Except as
set forth in Exhibit 4.1.26 attached hereto, each of the Borrower and the
Subsidiaries own, possess, or have licenses to use all the patents, trademarks,
service marks, tradenames, copyrights and non-governmental licenses, and all
rights with respect to the foregoing, necessary for the conduct of their
respective businesses as now conducted, without any conflict with the rights of
others with respect thereto.
Section 4.1.27. Related Documents. The Borrower has, prior to the date
hereof, delivered to the Lenders true copies of the Related Documents and each
and every amendment or modification thereto.
Section 4.1.28. Transfer of Assets. Except as set forth in Exhibit 4.1.28,
GTI has transferred all assets related to cable television systems (including
but not limited to any Franchise) to the Borrower.
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ARTICLE 5.
COVENANTS OF THE BORROWER
Section 5.1. Affirmative Covenants of the Borrower Other than Reporting
Requirements. From the date hereof and thereafter for so long as any portion of
the Commitment is outstanding or the Borrower is indebted to any Lender and/or
the Agent under any of the Financing Documents, the Borrower will, with respect
to itself and, unless noted otherwise below, with respect to each of its
Subsidiaries, ensure that each Subsidiary will, unless the Majority Lenders
shall otherwise consent in writing:
Section 5.1.1. Payment of Taxes, etc. Pay and discharge all taxes and
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims for the same which, if
unpaid, might become a Lien upon any of its properties; provided that (unless
and until foreclosure, restraint, sale or any similar proceeding shall have been
commenced) the Borrower shall not be required to pay any such tax, assessment,
charge, levy or claim which is being contested in good faith and by proper
proceedings and for which proper reserve or other provision has been made in
accordance with GAAP, unless failure to pay is not material.
Section 5.1.2. Maintenance of Insurance. Maintain insurance in
accordance with the Security Documents, including without limitation, liability
insurance reasonably acceptable to the Lenders and, to the extent not covered by
any of the Security Documents, with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
and in accordance with the requirements of any governmental agency having
jurisdiction over the Borrower and/or any Subsidiary. The Borrower shall provide
the Lenders with such evidence as the Agent may request from time to time as to
the maintenance of all such insurance.
Section 5.1.3. Preservation of Existence, etc. Preserve and
maintain in full force and effect its legal existence, rights, Franchises and
privileges in the jurisdiction of its organization, preserve and maintain all
licenses, governmental approvals, trademarks, patents, trade secrets, copyrights
and trade names owned or possessed by it and which are necessary or, in its
reasonable business judgment, desirable in view of its business and operations
or the ownership of its
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properties and qualify or remain qualified as a foreign corporation or
partnership in each jurisdiction in which such qualification is necessary or, in
its reasonable business judgement, desirable in view of its business and
operations and ownership of the properties.
Section 5.1.4. Compliance with Laws, etc. Comply with the
requirements of all present and future applicable laws, rules, regulations and
orders of any governmental authority having jurisdiction over it and/or its
business, except where the failure to comply would not have a Material Adverse
Effect.
Section 5.1.5. Visitation Rights. Permit, during normal business
hours, and, prior to the occurrence of a Default or an Event of Default, upon
prior notice, the Lenders or any agents or representatives thereof, to examine
and make copies of and abstracts from the records and books of account of, and
visit the properties of the Borrower and any Subsidiary to discuss the affairs,
finances and accounts of the Borrower or any Subsidiary with any or their
partners, officers or employees and/or any independent certified public
accountant of the Borrower and/or any Subsidiary.
Section 5.1.6. Keeping of Records and Books of Account. Keep
adequate records and books of account, in which complete entries will be made in
accordance with GAAP and with applicable requirements of any governmental
authority having jurisdiction over the Borrower and/or any Subsidiary in
question, reflecting all financial transactions.
Section 5.1.7. Maintenance of Properties, etc. Maintain and
preserve all of its properties necessary or useful in the proper conduct of its
business, in good working order and condition, ordinary wear and tear excepted,
and in accordance with each of the Security Documents.
Section 5.1.8. Accounting System. Maintain a standard system of
accounting in accordance with GAAP and in accordance with the requirements of
any governmental authority having jurisdiction over the Borrower and/or any
Subsidiary.
Section 5.1.9. Other Documents, etc. Except as otherwise
required by this Agreement, pay, perform and fulfill all of its obligations and
covenants under each material document, instrument or agreement to which it is a
party including, without limitation, the Related Documents, the Equity Documents
and the Affiliate Subordination Agreement.
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Section 5.1.10. Maximum Total Indebtedness and Maximum Senior
Indebtedness to Annualized Operating Cash Flow. Maintain at all times ratios of
(i) total Indebtedness for Borrowed Money (excluding for the period through
April 30, 1996, an amount of the Senior Subordinated Notes equal to the amount
from time to time pledged under the Pledge and Assignment Agreement and
$5,000,000 to the extent held on deposit with the Agent to secure the first
interest payment payable under the Senior Subordinated Notes) to Annualized
Operating Cash Flow and (ii) total Senior Indebtedness to Annualized Operating
Cash Flow of not greater than the respective ratio set forth below for each
period set forth below:
Total Senior
Indebtedness Indebtedness
Period Ratio Ratio
- -------------------------------- ------------ -------------
Closing Date through 7.00:1.00 2.50:1.00
September 30, 1996
October 1, 1996 6.75:1.00 2.25:1.00
through March 31, 1997
April 1, 1997 6.50:1.00 2.25:1.00
through December 31, 1997
January 1, 1998 6.25:1.00 2.00:1.00
through December 31, 1998
January 1, 1999 6.00:1.00 2.00:1.00
through December 31, 1999
January 1, 2000 5.75:1.00 2.00:1.00
and thereafter
Section 5.1.11. Maximum Senior Indebtedness to Basic
Subscribers. Maintain at all times a ratio of (i) total Indebtedness for
Borrowed Money (excluding for the period through April 30, 1996, an amount of
the Senior Subordinated Notes equal to the amount from time to time pledged
under the Pledge and Assignment Agreement and $5,000,000 to the extent held on
deposit with the Agent to secure the first interest payment payable under the
Senior Subordinated Notes) (in dollars) to (ii) the number of Basic Subscribers
of not greater than $950:1.
Section 5.1.12. Minimum Ratio of Operating Cash Flow
to Interest Expense. Maintain at all times a ratio of (i)
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Operating Cash Flow to (ii) Total Cash Interest Expense (exclusive of Closing
Costs) of not less than the ratio set forth below for each period set forth
below:
Period Ratio
- ------------------------------- ---------
Closing Date through 1.20:1.00
September 30, 1996
October 1, 1996 through 1.30:1.00
December 31, 1996
January 1, 1997 through 1.45:1.00
December 31, 1997
January 1, 1998 through 1.60:1.00
December 31, 1998
January 1, 1999 through 1.80:1.00
December 31, 1999
January 1, 2000 through 1.90:1.00
December 1, 2000
January 1, 2001 and 2.00:1.00
thereafter
Section 5.1.13. Minimum Ratio of Operating Cash Flow to Total
Debt Service. Maintain for each fiscal quarter of the Borrower ending after the
date hereof a ratio of (i) Operating Cash Flow for such fiscal quarter to (ii)
Total Debt Service for such fiscal quarter of not less than 1.20:1.00 through
September 30, 1996, and of not less than 1.25:1.00 for each fiscal quarter
ending thereafter.
Section 5.1.14. Minimum Fixed Charge Coverage. Maintain for each
fiscal quarter of the Borrower a Fixed Charge Coverage for such fiscal quarter
of not less than 1.00:1.00 through December 31, 1997 and of not less than
1.05:1.00 for each fiscal quarter ending thereafter.
Section 5.1.15. Incurrence Ratio. No less than thirty (30) days
prior to the closing of any Permitted Acquisition made in accordance with
Section 5.2.12, the Borrower shall provide the Lenders with projections,
satisfactory in all respects to the Majority Lenders in their sole discretion,
and showing an Incurrence Ratio of not more than the ratio set forth below for
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the fiscal quarter ended immediately prior to the fiscal quarter in which such
Permitted Acquisition is to occur.
Period Ratio
- --------------------------------------- ---------
Closing Date through 6.75:1.00
September 30, 1996
October 1, 1996 through 6.50:1.00
June 30, 1997
July 1, 1997 through 6.25:1.00
December 31, 1997
Section 5.1.16. Officer's Certificates and Requests. Provide
each Officer's Certificate required under this Agreement and each Request so
that the statements contained therein are accurate and complete in all respects.
Section 5.1.17. Depository. Use the Agent as a
depository of the Borrower's funds.
Section 5.1.18. Chief Executive Officer. Maintain Tommy L.
Gleason, Jr. and/or James M. Gleason as the Person with principal executive,
operating and management responsibility for the Systems or obtain a replacement
of comparable experience and training in the cable television industry
reasonably satisfactory to the Majority Lenders within ninety (90) days of his
ceasing to act in such capacity.
Section 5.1.19. Completion of Improvements. Complete all
improvements by such date as may be necessary to comply with applicable
Franchise and other regulatory or contractual requirements, and, within thirty
(30) days after the request of the Majority Lenders, supply the Lenders with
such documentation as the Majority Lenders shall reasonably request evidencing
such completion.
Section 5.1.20. Notice of Purchase of Real Estate and Leases.
Promptly notify the Lenders in the event that the Borrower shall purchase any
real estate or enter into any lease of real estate or of equipment material to
the operation of the Systems, supply the Lenders with a copy of the related
purchase agreement or of such lease, as the case may be, and if requested by the
Lenders, execute and deliver, or cause to be executed and delivered, to the
Agent for the benefit of the Lenders a deed of trust or mortgage or assignment,
together with landlord consents,
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in the case of leased property, satisfactory in form and substance to the Agent,
granting a valid first Lien (subject to any Liens permitted under Section 5.2.1
hereof) on such real property or leasehold as security for the Financing
Documents.
Section 5.1.21. Additional Assurances. From time to time
hereafter, execute and deliver or cause to be executed and delivered, such
additional instruments, certificates and documents, and take all such actions,
as the Agent shall reasonably request for the purpose of implementing or
effectuating the provisions of the Financing Documents, and upon the exercise by
the Agent of any power, right, privilege or remedy pursuant to the Financing
Documents which requires any consent, approval, registration, qualification or
authorization of any governmental authority or instrumentality, exercise and
deliver all applications, certifications, instruments and other documents and
papers that the Agent may be so required to obtain.
Section 5.1.22. Appraisals. Permit the Agent and its agents, at
any time and in the sole discretion of the Agent or at the request of the
Majority Lenders, to conduct appraisals of the Systems, the cost of which
appraisals shall be borne by the Borrower following a Default or Event of
Default.
Section 5.1.23. Environmental Compliance. Comply strictly and in
all respects with the requirements of all federal, state, and local
environmental laws; notify the Lenders promptly in the event of any spill,
Hazardous Material affecting the premises occupied by the Borrower from time to
time; forward to the Lenders promptly any notices relating to such matters
received from any governmental agency; and pay promptly when due any uncontested
fine or assessment against the Premises.
Section 5.1.24. Remediation. Immediately contain and remove any
Hazardous Material found on the Premises in compliance with applicable laws and
at the Borrower's expense, subject however, to the right of the Agent, at the
Agent's option but at the Borrower's expense, to have an environmental engineer
or other representative review the work being done.
Section 5.1.25. Site Assessments. Promptly upon the request of
the Agent, based upon the Agent's reasonable belief that a material hazardous
waste or other environmental problem exists with respect to the Premises,
provide the Agent with an environmental site assessment report or an update of
any existing report, all in scope, form and content and performed by such
company as may be reasonably satisfactory to the Agent.
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Section 5.1.26. Indemnity. Indemnify, defend, and hold each of
the Lenders and the Agent harmless from and against any claim, cost, damage
(including without limitation consequential damages), expense (including without
limitation reasonable attorneys' fees and expenses), loss, liability, or
judgment now or hereafter arising as a result of any claim for environmental
cleanup costs, any resulting damage to the environment and any other
environmental claims against the Borrower, the Lenders and/or the Agent arising
out of the transactions contemplated by this Agreement, or the Premises. The
provisions of this Section shall continue in effect and shall survive (among
other events) any termination of this Agreement, foreclosure, a deed in lieu
transaction, payment and satisfaction of the Note and other obligations of the
Borrower hereunder, and release of any collateral for the Loans.
Section 5.1.27. Liquidity. Maintain, at all times during the
period from the Closing Date through December 31, 1997, liquidity equal to the
sum of Cash Equivalent Investments, plus the amount of the Unused Revolving
Commitment of not less than $5,000,000.
Section 5.1.28. Pending Acquisitions. Consummate all of the
Pending Acquisitions other than the Vista I System no later than April 30, 1996,
and consummate the acquisition of the Vista I System no later than June 30,
1996.
Section 5.2. Negative Covenants of the Borrower. From the date hereof
and thereafter for so long as any portion of the Commitment is outstanding or
the Borrower is indebted to any Lender and/or the Agent under any of the
Financing Documents, each of the Borrower and GTI will not, with respect to
itself and, unless noted otherwise below, with respect to each of its
Subsidiaries, will ensure that each such Subsidiary will not, without the prior
written consent of the Majority Lenders:
Section 5.2.1. Liens, etc. Create, incur, assume or suffer to
exist any Lien of any nature, upon or with respect to any of its properties, now
owned or hereafter acquired, or assign as collateral or otherwise convey as
collateral, any right to receive income, except that the foregoing restrictions
shall not apply to any Liens:
Section 5.2.1.1. For taxes, assessments or
governmental charges or levies on property if the same shall not at the time be
delinquent or thereafter can be paid without penalty or interest, or (if
foreclosure, distraint, sale or other
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similar proceedings shall not have been commenced) are being contested in good
faith and by appropriate proceedings diligently conducted and for which proper
reserve or other provision has been made in accordance with GAAP;
Section 5.2.1.2. Imposed by law, such as
carriers', warehousemen's and mechanics' liens, bankers' set off rights and
other similar liens arising in the ordinary course of business for sums not yet
due or being contested in good faith and by appropriate proceedings diligently
conducted and for which proper reserve or other provision has been made in
accordance with GAAP;
Section 5.2.1.3. Arising in the ordinary course of
business out of pledges or deposits under worker's compensation laws,
unemployment insurance, old age pensions, or other social security or retirement
benefits, or similar legislation;
Section 5.2.1.4. Arising from or upon any judgment
or award, provided that such judgment or award is being contested in good faith
by proper appeal proceedings and only so long as execution thereon shall be
stayed;
Section 5.2.1.5. Set forth on Exhibit 1.7;
Section 5.2.1.6. Now or hereafter granted pursuant to the
Security Documents or otherwise now or hereafter granted to the Agent for the
benefit of the Lenders as collateral for the Loans and/or the Borrower's other
Obligations arising in connection with or under this Agreement;
Section 5.2.1.7. Consisting of deposits to secure
the performance of bids, trade contracts (other than for borrowed money),
leases, statutory obligations, surety bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of the Borrower's
or any Subsidiary's business;
Section 5.2.1.8. Consisting of easements, rights of way,
restrictions and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of business by the Borrower or
any Subsidiary;
Section 5.2.1.9. Securing Indebtedness permitted to exist under
Section 5.2.8.5 hereof; and
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Section 5.2.1.10. Granted pursuant to the Pledge and Assignment
Agreement for the sole purpose of securing the obligations of the Borrower under
Section 11.01(b) of the Indenture.
Section 5.2.2. Assumptions, Guaranties, etc. of Indebtedness of Other
Persons. Assume, guarantee, endorse or otherwise become directly or contingently
liable in connection with any obligation or Indebtedness of any other Person,
except:
Section 5.2.2.1. Guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business;
Section 5.2.2.2. Assumptions, guaranties, endorsements
and contingent liabilities within the definition of Indebtedness and permitted
by Section 5.2.8; and
Section 5.2.2.3. Those set forth on Exhibit 5.2.2.
Section 5.2.3. Sale of Assets Dissolution, etc. Dissolve,
liquidate, wind up, merge or consolidate or combine with another Person or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or a substantial part of its assets (whether now owned or
hereafter acquired), or any of the General Partner's, the Borrower's or any
Subsidiary's interests in real property other than (i) Asset Sales involving
assets having an aggregate fair salable value of less than $500,000 during the
term of this Agreement, (ii) Asset Sales having an aggregate fair salable value
in excess of $500,000 during the term of this Agreement and as to which the
Majority Lenders have given their prior written consent, and (iii) System Asset
Sales in accordance with Section 2.6.1.3.
Section 5.2.4. Change in Nature of Business. Make any material
change in the nature of its business.
Section 5.2.5. Ownership. Cause or permit (i) the occurrence of
any Change in Control, or (ii) any change in the ownership interests of the
Borrower which would cause GTI or LLC to cease to be the managing general
partner of the Borrower holding at least a 1% ownership interest in the
Borrower.
Section 5.2.6. Sale and Leaseback. Enter into any sale and
leaseback arrangement with any lender or investor, or enter into any leases
except in the normal course of business at
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reasonable rents comparable to those paid for similar leasehold
interests in the area.
Section 5.2.7. Sale of Accounts, etc. Sell, assign, discount or
dispose in any way of any accounts receivable, promissory notes or trade
acceptances held by the Borrower or any Subsidiary, with or without recourse,
except in the ordinary course of the Borrower's or any Subsidiary's business.
Section 5.2.8. Indebtedness. Incur, create, become or
be liable directly or indirectly in any manner with respect to or
permit to exist any Indebtedness except:
Section 5.2.8.1. Indebtedness under the Financing
Documents;
Section 5.2.8.2. Indebtedness with respect to
trade obligations and other normal accruals and customer deposits in the
ordinary course of business not yet due and payable in accordance with customary
trade terms or with respect to which the Borrower or any Subsidiary is
contesting in good faith the amount or validity thereof by appropriate
proceedings and then only to the extent such Person has set aside on its books
adequate reserves therefor;
Section 5.2.8.3. The Management Fees and the
Seller Notes (the Seller Notes to be in an amount not to exceed
$616,000);
Section 5.2.8.4. Any Affiliate Subordinated
Indebtedness from time to time outstanding, all upon terms and conditions
satisfactory to the Majority Lenders, and provided that the Majority Lenders, in
their sole discretion, have consented to the incurrence thereof;
Section 5.2.8.5. Indebtedness with respect to
Capitalized Lease Obligations, leases and loans with respect to motor vehicles,
purchase money Indebtedness and mortgage Indebtedness with respect to real
property in an aggregate amount at any time outstanding not to exceed $500,000;
Section 5.2.8.6. Indebtedness with respect to
interest rate protection obligations under Section 2.7.5.
Section 5.2.8.7. Indebtedness with respect to the
Senior Subordinated Notes and the Related Documents not exceeding $120,000,000
in the aggregate.
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Section 5.2.9. Other Agreements. Amend any of the terms or
conditions of the documents evidencing the Related Documents, the Equity
Documents, the Affiliate Subordination Agreement, any Purchase and Sale
Agreement relating to any Pending Acquisition, or any material term of the
Management Agreement, or any indenture, agreement, document, note or other
instrument evidencing, securing or relating to any other Indebtedness permitted
under Section 5.2.8.
Section 5.2.10. Payment or Prepayment of Equity. Except for
Permitted Restricted Payments, make any payment or prepayment of any principal
of or interest on or any payment, prepayment, redemption, defeasance, sinking
fund payment, other repayment of principal or deposit for the purpose of any of
the foregoing on or in connection with the Equity.
Section 5.2.11. Dividends, Payments and Distributions. Declare
or pay any dividends, management fees or like fees or make any other
distribution of cash or property or both to any of the Manager, GTI or LLC or
use any of its assets for payment, purchase, retention, acquisition or
retirement of any beneficial interest in the Borrower or GTI or LLC or set aside
or reserve assets for sinking or like funds for any of the foregoing purposes,
make any other distribution by reduction of capital or otherwise in respect of
any beneficial interest in the Borrower or GTI or LLC or permit any Subsidiary
which is not a wholly-owned Subsidiary so to do; provided, that the Borrower (i)
may make distributions (A) to GTI and LLC (but only so long as no Default or
Event of Default then exists or would be created thereby) not more frequently
than once per Borrower fiscal year to enable GTI, LLC and its members to pay
federal and state income taxes payable by GTI, LLC and its members as a result
of the taxable income of the Borrower for federal income tax purposes to the
extent that such taxable income cannot be offset by previously generated taxable
losses of the Borrower, and (B) to LLC in an aggregate annual amount not to
exceed $45,000 to enable LLC to pay managers' fees to the managers appointed by
the Investors (collectively, the "Permitted Restricted Payments"), and (ii) may
pay Management Fees to the Manager only in accordance with and subject to the
Management Agreement and the Affiliate Subordination Agreement, as those
agreements are in effect on the date hereof, but in no event may the amount of
Management Fees paid with respect to any fiscal quarter of the Borrower in any
of the periods set forth below exceed an amount equal to the percentage of the
Gross Revenues of the Borrower (other than from the sale or other disposition of
a capital asset) for any fiscal quarter during the period set forth below
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opposite each such percentage.
Period Percentage of Gross Revenues
- ---------- ------------------------------
1995 5.50%
1996 5.25%
1997 5.00%
1998 and thereafter 4.50%
Notwithstanding the foregoing, following consummation of the acquisition of the
Douglas System, the Management Fee shall not exceed 4.5% of the Gross Revenues
of the Borrower (other than from the sale or other disposition of a capital
asset) for any fiscal quarter. The Management Fees shall be fully subordinated
to the payment of the Obligations pursuant to the terms of the Affiliate
Subordination Agreement. Notwithstanding anything to the contrary set forth
herein or in the Management Agreement, during the existence of a Default or an
Event of Default, Management Fees shall accrue at the percentages permitted
above, but no amount of Management Fees shall be permitted to be paid in excess
of 40% of the amount which would otherwise be permitted to be paid pursuant to
the terms of this Section (any such Management Fees accruing but not permitted
to be paid pursuant to this sentence being herein referred to as "Subordinated
Management Fees"). No Subordinated Management Fees may be paid until one day
following the Term Loan Repayment Date and Subordinated Management Fees shall
not bear interest.
Section 5.2.12. Investments in or to Other Persons. (a) Make or
commit to make any Investment in or to any other Person (including without
limitation any Subsidiary) other than (i) advances to employees for business
expenses not to exceed Ten Thousand Dollars ($10,000) in the aggregate
outstanding for any one employee and not to exceed Twenty-five Thousand Dollars
($25,000) in the aggregate outstanding at any one time to all such employees,
(ii) Cash Equivalent Investments, (iii) Investments in accounts, contract rights
and chattel paper (as defined in the Uniform Commercial Code) and notes
receivable, arising or acquired in the ordinary course of business, (iv) the
Pending Acquisitions and (v) the acquisition of Permitted Cable Systems
(together with the Pending Acquisitions, each a "Permitted Acquisition"), as
herein permitted.
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Section 5.2.12.1. During the period from the Closing Date
through December 31, 1997, the Borrower may make Permitted Acquisitions,
provided that:
(a) Immediately prior to and upon the consummation of any
Permitted Acquisition, no Event of Default or Default shall have
occurred and be continuing and the Borrower shall have provided
the Majority Lenders with evidence satisfactory to them that,
upon the consummation of the Permitted Acquisition, no Default
or Event of Default will exist on a pro forma basis.
(b) The representations and warranties of the Borrower contained
in Article 4 hereof shall be true and correct in all material
respects on and as of the date of the Permitted Acquisition.
(c) The Lenders shall have received any financial information
relating to the subject cable television system reasonably
requested by any of them.
(d) The Agent and the Lenders shall have been provided with all
due diligence materials requested by the Agent or the Lenders
with respect to the subject cable television system, including,
without limitation, copies of all required consents, copies of
all Franchises relating to such cable television system, copies
of all contracts relating to such cable television system, and
legal opinions addressed to the Agent from the Borrower's
counsel, FCC counsel, local counsel to the Borrower and counsel
to the seller of such cable television system.
(e) At least thirty (30) days prior to the consummation of such
Permitted Acquisition, the Lenders shall have received annual
projections prepared by the Borrower on a consolidated basis
through the Term Loan Repayment Date, satisfactory to the
Majority Lenders in their sole discretion, showing pro forma
compliance with all covenants of the Borrower hereunder after
giving effect to such Permitted Acquisition, together with the
amount and purpose of any projected Capital Expenditures (which
amount and purpose of such Capital Expenditures must be
satisfactory to the Majority Lenders in their sole discretion)
with respect to such Permitted Cable System, and any other
projections reasonably required by any Lender. The Agent shall
notify the Borrower within thirty (30) days of receipt of such
projections of the
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satisfactory or unsatisfactory nature of such
projections.
(f) The Agent shall have received Security Documents with
respect to the subject cable television system in form and
substance satisfactory to the Agent and substantially in the
form of those Security Documents provided to the Agent in
connection with the Original Loan Agreement, and all other
documentation required to provide the Agent, acting as agent for
the Lenders, with a first priority perfected Lien on all assets
being acquired by the Borrower in connection with such Permitted
Acquisition as the Agent deems necessary or desirable as
collateral for the Obligations.
(g) If the seller of such cable system shall have agreed to
accept a note or deferred payment as partial payment of the
purchase price of such cable television system, the Agent shall
have received an affiliate subordination agreement executed by
such seller subordinating such note or deferred payment to the
Obligations in form and substance satisfactory to the Lenders in
their sole discretion.
(h) All Pending Acquisitions (other than the Vista I System)
shall be consummated on or before April 30, 1996 (or June 30,
1996 in the case of the Vista I System), in accordance with the
terms of the respective Purchase and Sale Agreements.
(i) The acquisition costs (including any fees and expenses
relating thereto) of any Permitted Acquisition other than a
Pending Acquisition shall not exceed $20,000,000, and the
aggregate purchase price of all such Permitted Acquisitions,
excluding the Pending Acquisitions, shall not exceed
$50,000,000.
(j) The Agent shall have received evidence that the Additional
Equity contribution attributable to any Pending Acquisition has
been made by the Investors.
Section 5.2.13. Transactions with Affiliates. Except as
contemplated by the Equity Documents, engage in any transaction or enter into
any agreement with an Affiliate, or in the case of Affiliates or Subsidiaries,
with the Borrower or another Affiliate or Subsidiary, on other than an arm's
length basis.
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Section 5.2.14. Change of Fiscal Year. Change its
fiscal year.
Section 5.2.15. Subordination of Claims. Subordinate or permit
to be subordinated any present or future claim against or obligation of another
Person, except as ordered in a bankruptcy or similar creditors' remedy
proceeding of such other Person.
Section 5.2.16. Compliance with ERISA. With respect to Borrower
and any Commonly Controlled Entity (a) terminate, or cease to have an obligation
to contribute to, any Multiemployer Plan so as to result in any material
liability of the Borrower or any Commonly Controlled Entity to PBGC or to any
Multiemployer Plan, (b) engage in any "prohibited transaction" (as defined in
section 4975 of the Code) involving any Plan which would result in a material
liability of the Borrower or any Commonly Controlled Entity for an excise tax or
civil penalty in connection therewith, (c) except for any deficiency caused by a
waiver of the minimum funding requirement under section 412 of the code, as
described above, incur or suffer to exist any material "accumulated funding
deficiency" (as defined in section 302 of ERISA and sections 412 and/or 418 of
the Code) of the Borrower or any Commonly Controlled Entity, whether or not
waived, involving any Single Employer Plan, (d) incur or suffer to exist any
Reportable Event or the appointment of a trustee or institution of proceedings
for appointment of a trustee for any Single Employer Plan if, in the case of a
Reportable Event, same continues unremedied for ten (10) days after notice of
such Reportable Event pursuant to section 4043(a), (c) or (d) of ERISA is given,
if in the reasonable opinion of the Lenders any of the foregoing is likely to
result in a material liability of the Borrower or any Commonly Controlled
Entity. The assets held under these Plans being sufficient to protect all
accrued benefits, (e) allow or suffer to exist any event or condition, which
presents a material risk of incurring a material liability of the Borrower or
any Commonly Controlled Entity to PBGC by reason of termination of any such Plan
or (f) cause or permit any Plan maintained by Borrower and/or any Commonly
Controlled Entity to be out of compliance with ERISA and/or Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1986, as amended. For purposes
of this Section 5.2.16 "material liability" shall be deemed to mean any
liability of Fifty Thousand Dollars ($50,000) or more in the aggregate.
Section 5.2.17. Capital Expenditures. Incur or make
Capital Expenditures during any fiscal year of the Borrower set
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forth below in an amount in excess of the amount set forth below opposite the
fiscal year of the Borrower ending at the date set forth below:
Fiscal Year Ending Maximum Capital Expenditure
- ------------------ ---------------------------
December 31, 1995 $ 5,200,000
December 31, 1996 $11,500,000
December 31, 1997 $13,500,000
December 31, 1998 $ 9,500,000
December 31, 1999 and each $ 8,500,000
fiscal year thereafter
If the Borrower and its Subsidiaries do not fully utilize the
maximum permitted amount of Capital Expenditures provided for above in any
fiscal year, they may carry forward for one year only the unexpended portion of
the maximum amount of Capital Expenditures permitted above to the immediately
succeeding fiscal year.
The maximum amount of Capital Expenditures permitted in any
fiscal year as set forth above may be increased, with the prior written consent
of the Majority Lenders, in the event the Borrower acquires a Permitted Cable
System in accordance with Section 5.2.12 hereof. The amount of such increase
shall be equal to the amount of Capital Expenditures projected to be made with
respect to such Permitted Cable System, adjusted to reflect any ownership by the
Borrower for less than a full fiscal year.
In any event, the Borrower shall make its Capital Expenditures
substantially in accordance with and for the purposes outlined in the
projections provided at the time of such Permitted Acquisition.
Section 5.2.18. Hazardous Waste. Become involved, or permit any
tenant of its real property to become involved, in any operations at such real
property generating, storing, disposing, or handling Hazardous Material or any
other activity that could lead to the imposition on the Borrower or the Agent or
any Lender, or any such real property of any material liability or Lien under
any environmental laws.
Section 5.2.19. Payments on Senior Subordinated Notes.
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Make any payment or prepayment of any principal of, interest on or fees and
other charges with respect to, or any payment, prepayment, redemption,
defeasance, sinking fund payment, other repayment of principal or deposit
(including, without limitation, any deposit under the terms of the Pledge and
Assignment Agreement other than the deposit of the initial net proceeds of the
Senior Subordinated Notes) for the purpose of any of the foregoing on or in
connection with the Senior Subordinated Notes, except for payments permitted to
be made to the holders of the Senior Subordinated Notes under the terms of
Article 12 of the Indenture, provided that in no event may the Borrower exercise
its right to make, or make defeasance payments under Article 4 of the Indenture
or make any optional or discretionary payment or prepayment of any principal of,
interest on, or fees and other charges with respect to, the Senior Subordinates
Notes or any payment, prepayment, redemption, defeasance, sinking fund payment,
repayment of principal or deposit (including, without limitation, any deposit
under the terms of the Pledge and Assignment Agreement other than the deposit of
the initial net proceeds of the Senior Subordinated Notes) for the purpose of
the foregoing on or with respect to the Senior Subordinated Notes.
Section 5.3. Reporting Requirements. From the date hereof and thereafter
for so long as any portion of the Commitment is outstanding or the Borrower is
indebted to any Lender and/or the Agent under any of the Financing Documents,
the Borrower will, unless the Majority Lenders shall otherwise consent in
writing, furnish or cause to be furnished to the Agent for distribution to the
Lenders:
Section 5.3.1. As soon as possible and in any event upon
acquiring knowledge of an Event of Default or Default, continuing on the date of
such statement, the written statement of an officer of the Borrower setting
forth details of such Event of Default or Default and the action which the
Borrower proposes to take with respect thereto;
Section 5.3.2. As soon as practicable after the end of each
fiscal year of Borrower and in any event within 90 days after the end of each
fiscal year of the Borrower, a balance sheet of the Borrower and each of its
Subsidiaries as at the end of such year, and a statement of income and cash
flows and partners' capital of the Borrower and each of its Subsidiaries for
such year setting forth in each case the corresponding figures for the preceding
fiscal year, such statements to be certified by a firm of independent certified
public accountants selected by Borrower and reasonably acceptable to the
Majority
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Lenders, and to contain a statement to the effect that such accountants have
examined Sections 5.1.10 through 5.1.14 and 5.2.17 and that in the scope of
their review nothing has come to their attention to indicate that a Default or
Event of Default exists on account of Borrower's failure to have been in
compliance therewith on the date of such statements;
Section 5.3.3. As soon as is practicable after the end of each
of each fiscal quarter of each Borrower fiscal year and in any event within
forty-five (45) days thereafter, a balance sheet of the Borrower and the
Subsidiaries as of the end of such period and a statement of income and cash
flows of the Borrower and the Subsidiaries for such period and the fiscal year
to that date, subject to changes resulting from year-end adjustments, together
with a comparison to the Budget for the applicable period, such balance sheet to
be prepared and certified by GTI in an Officer's Certificate as having been
prepared in accordance with GAAP except for footnotes and year-end adjustments,
and to be in form satisfactory to the Agent;
Section 5.3.4. As soon as practicable after the end of each
fiscal year the management letter for the Borrower and the Subsidiaries (when
and if issued) prepared with respect to such fiscal year by the certified public
accounting firm which certified the financial statements in question;
Section 5.3.5. Simultaneously with the furnishing of each of the
year-end financial statements of the Borrower and the Subsidiaries to be
delivered pursuant to Section 5.3.2 and each of the quarterly statements of the
Borrower and the Subsidiaries to be delivered pursuant to Section 5.3.3 an
Officer's Certificate of an officer of GTI which shall contain a statement in
the form of Exhibit 5.3.5 to the effect that no Event of Default or Default has
occurred, without having been waived in writing, or if there shall have been an
Event of Default not previously waived in writing pursuant to the provisions
hereof, or a Default, such Officer's Certificate shall disclose the nature
thereof. Each such Officer's Certificate shall also calculate, set forth and
certify to the accuracy of the amounts required to be calculated in the
financial covenants of the Borrower contained in this Agreement and described in
Exhibit 5.3.5;
Section 5.3.6. Promptly after the commencement thereof, notice
of all material actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the
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Borrower, GTI and/or any Subsidiary;
Section 5.3.7. As soon as reasonably possible and in any event
within 30 days after the end of each month, a certificate of an authorized
representative of the Borrower setting forth in reasonable detail and compared
to Budget, as to each of the Systems, (i) the numbers and types of Basic
Subscribers and other subscribers (including tier and pay subscribers) as at the
end of such month, (ii) changes in numbers of each such category of subscribers
(including numbers of disconnects and connects within each such category), (iii)
the numbers and types of Basic Subscribers more than sixty (60) days delinquent
measured from the date of original billing, and (iv) the average basic and pay
rates;
Section 5.3.8. On or before January 31 of each fiscal year of
the Borrower commencing hereafter, an updated proposed budget, prepared on a
monthly basis, and updated financial projections (together, the "Budget") for
the next four fiscal years, setting forth in detail reasonably satisfactory to
the Agent the projected results of operations of the Borrower, including without
limitation, projected revenues and expenses, detailed Capital Expenditures plan
and subscriber levels, stating underlying assumptions and, if required by the
Lender, accompanied by a written statement of an authorized representative of
the Borrower certifying as to the approval of such Budget by GTI;
Section 5.3.9. Such other information respecting the business,
properties or the condition or operations, financial or otherwise, of the
Borrower, GTI or any of their Subsidiaries as any Lender may from time to time
reasonably request;
Section 5.3.10. Written notice of the fact and of the details of
any sale or transfer of any ownership interest in GTI, or any ownership interest
owned by the Borrower, GTI or LLC in the Borrower or any Subsidiary or by the
Investors, Old Galaxy, Vista, Vantage or Management LLC in GTI or LLC given
promptly after Borrower acquires knowledge thereof except that notice with
regard to sales or transfers of Limited Partner's interests may be provided
annually within thirty (30) days after preparation of Borrower's limited
partnership federal tax return; provided, however, that this clause shall not be
deemed to constitute or imply any consent to any such sale or transfer;
Section 5.3.11. Prompt written notice of loss of any
key personnel, termination of or default under the Management
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Agreement or any material adverse change in the Borrower's, GTI's, Manager's or
any Subsidiary's condition, financial or otherwise, and an explanation thereof
and of the actions Borrower, General Partner, Manager and/or such Subsidiary
propose to take with respect thereto; and
Section 5.3.12. Written notice of the following events, as soon
as possible and in any event within 15 days after the Borrower knows or has
reason to know thereof: (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, or (ii) the institution of
proceedings or the taking or expected taking of any other action by PBGC or the
Borrower or any Commonly Controlled Entity to terminate, withdraw or partially
withdraw from any Plan and, with respect to any Multiemployer Plan, the
Reorganization (as defined in Section 4241 of ERISA) or Insolvency (as defined
in Section 4245 of ERISA) of such Plan and in addition to such notice, deliver
to the Lender whichever of the following may be applicable: (a) an Officer's
Certificate setting forth details as to such Reportable Event and the action
that the Borrower or Commonly Controlled Entity proposes to take with respect
thereto, together with a copy of any notice of such Reportable Event that may be
required to be filed with PBGC, or (b) any notice delivered by PBGC evidencing
its intent to institute such proceedings or any notice to PBGC that such Plan is
to be terminated, as the case may be.
ARTICLE 6.
EVENTS OF DEFAULT
Section 6.1. Events of Default. The Borrower shall be in default under
each of the Financing Documents, upon the occurrence of any one or more of the
following events ("Events of Default"):
Section 6.1.1. If Borrower shall fail to make due and punctual
payment of any principal, fees, interest and/or other amounts payable under this
Agreement as provided in any of the Notes and/or in this Agreement when the same
is due and payable, whether at the due date thereof or at a date fixed for
prepayment or if Borrower shall fail to make any such payment of fees, interest,
principal and/or any other amount under this Agreement and/or under any of the
Notes on the date when such payment becomes due and payable by acceleration;
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Section 6.1.2. If GTLP, GTI, LLC, Capital Corp., Management LLC,
the Manager or any Subsidiary shall make an assignment for the benefit of
creditors, or shall fail generally to pay its or their debts as they become due,
or shall admit in writing its or their inability to pay its debts as they become
due or shall file a voluntary petition in bankruptcy, or shall file any petition
or answer seeking any reorganization, arrangement, composition, adjustment,
liquidation, dissolution or similar relief under the present or any future
federal bankruptcy laws or other applicable federal, state or other statute, law
or regulation, or shall seek or consent to or acquiesce in the appointment of
any trustee, receiver or liquidator of it or of all or any substantial part of
its properties, or if partnership or corporate action shall be taken for the
purpose of effecting any of the foregoing; or
Section 6.1.3. To the extent not described in Section 6.1.2, (i)
if GTLP, GTI, LLC, Capital Corp., Management LLC, the Manager or any Subsidiary
shall be the subject of a bankruptcy proceeding, or (ii) if any proceeding
against any of them seeking any reorganization, arrangement, composition,
adjustment, liquidation, dissolution, or similar relief under the present or any
future federal bankruptcy law or other applicable federal, foreign, state or
other statute, law or regulation shall be commenced, or (iii) if any trustee,
receiver or liquidator of any of them or of all or any substantial part of any
or all of their properties shall be appointed without their consent or
acquiescence; provided that in any of the cases described above in this Section
6.1.3, such proceeding or appointment shall not be an Event of Default if GTI,
GTLP, LLC, Capital Corp., Management LLC, the Manager or the Subsidiary in
question shall cause such proceeding or appointment to be discharged, vacated,
dismissed or stayed within thirty (30) days after commencement thereof; or
Section 6.1.4. If final judgment or judgments aggregating more
than One Hundred Thousand Dollars ($100,000) shall be rendered against GTLP,
GTI, LLC, Capital Corp., Management LLC, the Manager or any Subsidiary and shall
remain undischarged, unstayed or unpaid for an aggregate of thirty (30) days
(whether or not consecutive) after entry thereof; or
Section 6.1.5. If GTLP, GTI, LLC, Capital Corp., Management LLC,
the Manager or any Subsidiary shall default (after giving effect to any
applicable grace period) in the due and punctual payment of the principal of or
interest on any Indebtedness exceeding in the aggregate $250,000 (other than the
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Loans), or if any default shall have occurred and be continuing after any
applicable grace period under any mortgage, note or other agreement evidencing,
securing or providing for the creation of such Indebtedness, which results in
the acceleration of such Indebtedness or which permits, or with the giving of
notice would permit, any holder or holders of any such Indebtedness to
accelerate the stated maturity thereof; or
Section 6.1.6. If there shall be a default in the performance of
the Borrower's obligations under Section 5.1.3 (insofar as such Section requires
the preservation of the limited partnership existence of the Borrower or the
corporate existence of any Subsidiaries), Sections 5.1.10, 5.1.11, 5.1.12,
5.1.13, 5.1.14, 5.1.15, or 5.1.27 or Section 5.2 of this Agreement; or
Section 6.1.7. If there shall be any default in the performance
of any covenant or condition contained in this Agreement or in any of the other
Financing Documents to be observed or performed pursuant to the terms hereof or
any Financing Document, as the case may be, other than a covenant or condition
referred to in any other subsection of this Section 6.1 and such default shall
continue unremedied or unwaived, (i) in the case of any covenant or condition
contained in Section 5.3, for twenty (20) Business Days, or (ii) in the case of
any other covenant or condition for which no other grace period is provided, for
thirty (30) days, or (iii) if any of the representations and warranties made or
deemed made by Borrower to the Lenders pursuant to this Agreement proves to have
been false or misleading in any material respect when made; or
Section 6.1.8. If there shall be any attachment of any deposits
or other property of GTLP, GTI, LLC, Capital Corp., Management LLC, the Manager
and/or any Subsidiary in the possession of any Lender or any attachment of any
other property of GTLP, GTI, LLC, Capital Corp., Management LLC, the Manager
and/or any Subsidiary in an amount exceeding Fifty Thousand Dollars ($50,000),
which shall not be discharged within thirty (30) days of the date of such
attachment; or
Section 6.1.9. Any certification of the financial statements,
furnished to the Agent pursuant to Section 5.3.2, shall contain any
qualification; provided, however, that such qualifications will not be deemed an
Event of Default if in each case (i) such certification shall state that the
examination of the financial statements covered thereby was conducted in
accordance with generally accepted auditing standards, including but not limited
to all such tests of the accounting records as
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are considered necessary in the circumstances by the independent certified
public accountants preparing such statements, (ii) such financial statements
were prepared in accordance with GAAP and (iii) such qualification does not
involve the "going concern" status of the entity being reported upon; or
Section 6.1.10. The on-the-air cable television operations
affecting more than 10% of the Basic Subscribers of the Borrower shall be
interrupted at any time for more than ten (10) consecutive days or more than 15
days in a 12-month period unless such interruptions are covered by business
interruption insurance; or
Section 6.1.11. (i) the Borrower or GTI shall lose, fail to keep
in force, suffer the termination, suspension or revocation of or terminate,
forfeit or suffer an amendment to any Franchise or group of Franchises at any
time held by it covering 10% or more of the Basic Subscribers of the Borrower or
which would have a Material Adverse Effect, which circumstance shall continue
for a period of thirty (30) days after the Borrower or GTI discovers such
circumstance; (ii) any governmental regulatory authority shall schedule or
conduct a hearing on the renewal of any Franchise held by the Borrower and the
Majority Lenders shall reasonably believe that the result thereof shall be the
termination, revocation, suspension, or material amendment of such Franchise and
that such event would be likely to have a material adverse effect on the
Borrower; (iii) any governmental regulatory authority shall commence an action
or proceeding seeking the termination, suspension, revocation or material
adverse amendment of any Franchise held by the Borrower or GTI or any such
termination, revocation, suspension or amendment which is reasonably likely to
result in a reduction of Gross Revenues on an annual basis in excess of 5% of
the Gross Revenues of the Borrower for the most recent fiscal year; or (iv) any
governmental or regulatory authority shall order a refund or rollback in
Borrower's cable television rates which will reduce Borrower's Projected Gross
Revenues by 2.5% or more; or
Section 6.1.12. For any reason (i) Tommy L. Gleason, Jr. and/or
James M. Gleason shall cease to actively serve in his present management
capacity with the Borrower or shall be released from such obligations, unless a
successor with comparable experience and training in the cable television
industry reasonably satisfactory to the Majority Lenders is appointed within
ninety (90) days after such cessation, or (ii) GTI shall cease to be a general
partner of the Borrower; or
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Section 6.1.13. The termination, for any reason, of the
Management Agreement or the occurrence of a material default by the Manager
thereunder unless a successor with comparable experience and training in the
cable television industry reasonably satisfactory to the Majority Lenders is
appointed pursuant to the terms of a management agreement satisfactory to the
Majority Lenders within ninety (90) days after such termination or the
occurrence of such Default; or
Section 6.1.14. The occurrence of a Change of Control; or
Section 6.1.15. The dissolution or termination of existence of
GTI, LLC or GTLP, Capital Corp., the revocation by GTI or LLC of its Unlimited
Guaranty in favor of the Agent of even date herewith or withdrawal by GTI or LLC
as a General Partner of the Borrower; or
Section 6.1.16. The occurrence of a default or event of default
under the Related Documents or the Equity Documents.
ARTICLE 7.
REMEDIES OF LENDERS
Upon the occurrence of any one or more of the Events of Default, the
Agent, at the request of the Majority Lenders, shall, by notice to the Borrower,
declare the obligation of the Lenders to make the Loans to be terminated,
whereupon the same and the Commitment shall forthwith terminate, and the Agent,
at the request of the Majority Lenders, shall, by notice to the Borrower,
declare the entire unpaid principal amount of the Notes and all fees and
interest accrued and unpaid thereon and/or under this Agreement, and/or any of
the Security Documents and any and all other Indebtedness under this Agreement,
the Notes and/or any of the Security Documents of GTLP, LLC GTI or Capital Corp.
and/or any Subsidiary to any of the Lenders and/or to any holder of all or any
portion of each Note to be forthwith due and payable, whereupon all such Notes,
and all such accrued fees and interest and other such Indebtedness shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however that upon the occurrence of an Event of Default
under Section 6.1.2 or 6.1.3,
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all of the unpaid principal amounts of the Notes, all fees and interest accrued
and unpaid thereon and/or under this Agreement and/or under the Security
Documents and any and all other such Indebtedness of the Borrower to any of the
Lenders and/or to any such holder shall thereupon be due and payable in full
without any need for the Agent and/or any Lender to make any such declaration or
take any action and the Lenders' obligations to make the Loans shall
simultaneously terminate. The Agent shall, in accordance with the votes of the
Majority Lenders, exercise all remedies on behalf of and for the account of each
Lender and on behalf of its respective Pro Rata Share of the Loans, its Note and
Indebtedness of the Borrower owing to it or any of the foregoing, including
without limitation all remedies available under or as a result of this
Agreement, the Notes or any of the Security Documents or any other document,
instrument or agreement now or hereafter securing any of the Notes without any
such exercise being deemed to modify in any way the fact that each Lender shall
be deemed a separate creditor of the Borrower to the extent of its Note and Pro
Rata Share of the Loans and any other amounts payable to such Lender under this
Agreement and/or the Security Documents and the Agent shall be deemed a separate
creditor of the Borrower to the extent of any amounts owed by the Borrower to
the Agent.
ARTICLE 8.
ADMINISTRATIVE AGENT
Section 8.1. Appointment. The Agent is hereby appointed as agent
hereunder and each Lender hereby authorizes the Agent to act hereunder and under
the Security Documents as its agent hereunder and thereunder. The Agent agrees
to act as such upon the express conditions contained in this Article 8. The
provisions of this Article 8 are solely for the benefit of the Agent, and
neither the Borrower nor any third party shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, the Agent shall act solely as agent of the 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 the Borrower.
Section 8.2. Powers; General Immunity.
Section 8.2.1. Duties Specified. Each Lender irrevocably
authorizes the Agent to take such action on such Lender's behalf,
including, without limitation, to execute and deliver the
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Security Documents to which the Agent is a party and to exercise such powers
hereunder and under the Security Documents and other instruments and agreements
referred to herein as are specifically delegated to the Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto. The Agent shall have only those duties and responsibilities which are
expressly specified in this Agreement or in any of the Security Documents and it
may perform such duties by or through its agents or employees. The duties of the
Agent shall be mechanical and administrative in nature; and the Agent shall not
have by reason of this Agreement or any of the Security Documents a fiduciary
relationship in respect of any Lender; and nothing in this Agreement or any of
the Security Documents, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of this
Agreement or any of the Security Documents or the other instruments and
agreements referred to herein except as expressly set forth herein or therein.
Section 8.2.2. No Responsibility for Certain Matters. The Agent shall
not be responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement, the
Notes, the Security Documents or any other document, instrument or agreement now
or hereafter executed in connection herewith or therewith, or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith by or on behalf of the Borrower and/or any Subsidiary to the Agent
or any Lender, or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds of the Loans or of
the existence or possible existence of any Default or Event of Default.
Section 8.2.3. Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees or agents shall be liable to any Lender for any
action taken or omitted hereunder or in connection herewith unless caused by its
or their gross negligence or willful misconduct. If the Agent shall request
instructions from Lenders with respect to any act or action (including the
failure to take an action) in connection with any of the Financing Documents,
the Agent shall be entitled to refrain from such act or taking such action
unless and until the Agent shall have received instructions from the Majority
Lenders
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(or all of the Lenders if the action requires their consent). Without prejudice
to the generality of the foregoing, (i) the 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 the Borrower), accountants, experts and other professional
advisors selected by it; and (ii) no Lender shall have any right of action
whatsoever against the Agent as a result of the Agent acting or (where so
instructed) refraining from acting under this Agreement or the other instruments
and agreements referred to herein in accordance with the instructions of the
Majority Lenders (or all of the Lenders if the action requires their consent).
The Agent shall be entitled to refrain from exercising any power, discretion or
authority vested in it under this Agreement or the other instruments and
agreements referred to herein unless and until it has obtained the instructions
of the Majority Lenders (or all of the Lenders if the action requires their
consent).
Section 8.2.4. Agent 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, Fleet in its individual capacity as a
Lender hereunder. With respect to its participation in the Loans and the
Commitment, Fleet 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
Fleet in its individual capacity. The 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 the Borrower or any Affiliate or
Subsidiary as if it were not performing the duties specified herein, and may
accept fees and other consideration from the Borrower for services in connection
with this Agreement and otherwise without having to account for the same to
Lenders.
Section 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 the
Borrower, GTI, the Manager and any Subsidiaries of any of them in
connection with the making of the Loans hereunder and has made
and shall continue to make its own appraisal of the
creditworthiness of the Borrower and the Subsidiaries. The Agent
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shall not 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 any Loan or any
time or times thereafter (except for information received by the Agent under
Section 5.3 hereof which the Agent will promptly forward to the Lenders), and
the Agent shall further not have any responsibility with respect to the accuracy
of or the completeness of the information provided to Lenders.
Section 8.4. Right to Indemnity. Each Lender severally agrees to
indemnify the Agent proportionately to its Pro Rata Share of the Loans, to the
extent the Agent shall not have been reimbursed by the Borrower, GTI and/or any
Subsidiary, 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
the Agent in performing its duties hereunder or in any way relating to or
arising out of this Agreement and/or any of the other Financing 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 the Agent's gross negligence or willful
misconduct. If any indemnity furnished to the Agent for any purpose shall, in
the opinion of the Agent, be insufficient or become impaired, the Agent may call
for additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished.
Section 8.5. Payee of Note Treated as Owner. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof shall have been
filed with the Agent. 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,
transferee or assignee of that Note or of any Note or Notes issued in exchange
for such Note.
Section 8.6. Resignation by Agent.
Section 8.6.1. The Agent may resign from the performance of all
its functions and duties hereunder at any time by giving 30 days' prior written
notice to the Borrower and each
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of the Lenders. Such resignation shall take effect upon the acceptance by a
successor Agent of appointment pursuant to clauses 8.6.2 and 8.6.3 below or as
otherwise provided below.
Section 8.6.2. Upon any such notice of resignation, the Majority
Lenders shall appoint a successor agent who shall be a Lender and who shall be
satisfactory to the Borrower and shall be an incorporated bank or trust company
with a combined surplus and undivided capital of at least Four Hundred Million
Dollars ($400,000,000).
Section 8.6.3. If a successor agent shall not have been so
appointed within said 30 day period, the resigning agent, with the consent of
the Borrower, shall then appoint a successor agent who shall be a Lender and who
shall serve as the Agent until such time, if any, as the Majority Lenders, with
the consent of the Borrower, appoint a successor agent as provided above.
Section 8.6.4. If no successor agent has been appointed pursuant
to clause 8.6.2 or 8.6.3 by the 40th day after the date such notice of
resignation was given by the resigning agent, the resigning agent's resignation
shall become effective and the Majority Lenders shall thereafter perform all the
duties of the resigning agent hereunder until such time, if any, as the Majority
Lenders, with the consent of the Borrower, appoint a successor agent as provided
above.
Section 8.7. Successor Agent. The Agent may resign at any time as
provided in Section 8.6. Upon any such notice of resignation, the Majority
Lenders shall have the right, upon five (5) days notice to and the approval of
(which approval shall not be unreasonably withheld) the Borrower, to appoint a
successor agent. Upon the acceptance of any appointment as the 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 agent,
and the retiring agent shall be discharged from its duties and obligations as
the agent under this Agreement. After any retiring agent's resignation hereunder
as the agent the provisions of this Article 8 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was the agent under this
Agreement.
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ARTICLE 9.
MISCELLANEOUS
Section 9.1. Consent to Jurisdiction and Service of Process.
Section 9.1.1. Except to the extent prohibited by applicable
law, the Borrower irrevocably:
Section 9.1.1.1. agrees that any suit, action, or
other legal proceeding arising out of this Agreement or any of the Loans may be
brought in the courts of record of the State of Rhode Island or New York or the
Commonwealth of Massachusetts or the courts of the United States located in the
States of Rhode Island or New York or the Commonwealth of Massachusetts;
Section 9.1.1.2. consents to the jurisdiction of
each such court in any such suit, action or proceeding; and
Section 9.1.1.3. waives any objection which it may
have to the laying of venue of such suit, action or proceeding in
any of such courts.
For such time as any of the Indebtedness of the Borrower to any Lender
shall be unpaid in whole or in part and/or the Commitment is in effect, the
Borrower irrevocably designates Goodwin, Procter & Hoar as its agent to accept
and acknowledge on its behalf service of any and all process in any such suit,
action or proceeding brought in any such court, and agrees and consents that any
such service of process upon such agent and written notice of such service to
the Borrower by registered or certified mail shall be taken and held to be valid
personal service upon the Borrower regardless of where the Borrower shall then
be doing business and that any such service of process shall be of the same
force and validity as if service were made upon it according to the laws
governing the validity and requirements of such service in each such state and
waives any claim of lack of personal service or other error by reason of any
such service. Any notice, process, pleadings or other papers served upon the
aforesaid designated agent shall, within three (3) Business Days after such
service, be sent by certified or registered mail to the Borrower at its address
set forth in this Agreement. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY
RIGHT
TO TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN THE
BORROWER AND THE
LENDERS WITH RESPECT TO THE FINANCING DOCUMENTS AND/OR ANY OF THE
TRANSACTIONS
CONTEMPLATED THEREBY.
Section 9.2. Rights and Remedies Cumulative. No right or
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remedy conferred upon or reserved to the Lenders in this Agreement is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given under this Agreement or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
under this Agreement, or otherwise, shall not prevent the concurrent assertion
or employment of any other appropriate right or remedy.
Section 9.3. Delay or Omission Not Waiver. No delay in exercising or
failure to exercise by the Lenders of any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every right and remedy
given by this Agreement or by law to the Lenders may be exercised from time to
time, and as often as may be deemed expedient, by the Lenders.
Section 9.4. Waiver of Stay or Extension Laws. The Borrower covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Agreement; and the Borrower (to the extent that it may lawfully do so) hereby
expressly waives all benefit and advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Lenders, but will suffer and permit the execution of every such power as
though no such law had been enacted.
Section 9.5. Amendments, etc. No amendment, modification, termination,
or waiver of any provision of this Agreement or of the Notes nor consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be in a written notice given to the Borrower by the Agent and
consented to in writing by the Majority Lenders (or by the Agent acting alone if
any specific provision of this Agreement provides that the Agent may grant such
amendment, modification, termination, waiver or departure) and the Agent shall
give any such notice if the Majority Lenders so consent or direct Agent to do
so; provided, however, that any such amendment, modification, termination,
waiver or consent shall require a written notice given to the Borrower by the
Agent and consented to in writing by all of the Lenders if the effect thereof is
to (i) change any of the provisions affecting the interest rate on the Loans or
the
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fees set forth in Section 2.3 or amend, modify or waive any of the provisions of
Sections 2.7 or 2.1, (ii) extend or modify the Commitment, (iii) discharge or
release the Borrower from its obligation to repay any or all principal
(including, without limitation, Additional Principal) or interest due under the
Loans or any indemnity or reimbursement payable to any Lender hereunder or
release any collateral or guaranty for the Loans, (iv) change any Lender's Pro
Rata Share of the Commitment or the Loans (except in connection with assignments
thereof), (v) modify this Section 9.5 of this Agreement, (vi) change the
definition of Majority Lenders, (vii) extend any due date for payment of
principal, interest or fees, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given,
(viii) modify, amend or terminate any material agreement or any Franchise, or
(ix) approve or consent to the amendment of any change in the subordination
provisions of the Related Documents. Any amendment or modification of this
Agreement must be signed by the Borrower, the Agent and at least all of the
Lenders consenting thereto who shall then hold the Pro Rata Shares of the Loans
required for such amendment or modification under this Section 9.5 and the Agent
shall sign any such amendment if such Lenders so consent or direct the Agent to
do so; provided that any Lender dissenting therefrom shall be given an
opportunity to sign any such amendment or modification. No notice to or demand
on the Borrower and no consent, waiver or departure from the terms of this
Agreement granted by the Lenders in any case shall entitle the Borrower to any
other or further notice or demand in similar or other circumstances.
Section 9.6. Addresses for Notices, etc. All notices, requests, demands
and other communications provided for hereunder (other than those which, under
the terms of this agreement, may be given by telephone, which shall be effective
when received verbally) shall be in writing (including telegraphic, telexed or
telecopied communication) and mailed, telegraphed, telexed, telecopied or
delivered to the applicable party at the addresses indicated below:
If to the Borrower:
1220 North Main Street
Sikeston, Missouri 63801
Attention: Tommy L. Gleason, Jr.
With copies to:
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Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
Attention: Kevin Dennis, Esq.
and
Thompson & Mitchell
One Mercantile Center
St. Louis, Missouri 63101
Attention: Robert LaRose
If to the Agent:
Fleet National Bank
111 Westminster Street
Providence, Rhode Island 02903
Attention: James Miller,
Vice President
Telecopy: (401) 278-3929
With a copy to:
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
Attention: Jonathan Bell, Esquire
Telecopy: (401) 277-9600
and, as to each Lender, at the address set forth for such Lender on the
signature page hereto, or, with respect to a Substituted Lender, the applicable
Substitution Agreement, or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party complying as to
the delivery with the terms of this Section. All such notices, requests, demands
and other communications shall be effective when received. Requests,
certificates, items provided pursuant to Section 5.3 and other routine mailings
or notices need not be accompanied by a copy to legal counsel for the Lenders or
the Borrower.
Section 9.7. Costs, Expenses and Taxes. The Borrower agrees to pay on
demand the reasonable fees and out-of-pocket expenses of Messrs. Hinckley, Allen
& Snyder, counsel for the Agent, and the Lenders in connection with the
preparation, execution and delivery of the Financing Documents and the Loans.
The Borrower agrees to pay on demand up to $10,000 of reasonable costs and
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expenses (including without limitation reasonable attorneys' fees) incurred by
the Agent in connection with assignments made by Lenders pursuant to Section
9.11. The Borrower agrees to pay on demand all reasonable costs and expenses
(including without limitation reasonable attorneys' fees) incurred by the Agent
in connection with any amendment hereto or to any of the Financing Documents.
The Borrower agrees to pay on demand all reasonable costs and expenses
(including without limitation reasonable attorneys' fees) incurred by the Agent
and any Lender, upon or after an Event of Default, if any, in connection with
the enforcement of any of the Financing Documents. The Borrower agrees to pay on
demand all reasonable costs and expenses (including without limitation
reasonable attorneys' fees of one law firm representing the Agent and of a
second law firm representing the Lenders as a group) incurred by the Agent and
the Lenders upon or within the occurrence of an Event of Default, if any, in
connection with any amendment, waiver or consent with respect thereto. In
addition, the Borrower shall pay on demand any and all stamp and other taxes and
fees payable or determined to be payable in connection with the execution and
delivery of the Financing Documents, and agrees to save the Lenders and the
Agent harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees, except
those resulting from the Lenders' gross negligence or wilful misconduct.
Section 9.8. Participations. Any Lender may sell participations in all
or part of the Loans made by it and/or its Commitment or any other interest
herein, in which event the participant shall not have any rights under any
Financing Document (the participant's rights against such Lender in respect of
that participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto) and all amounts payable by
the Borrower hereunder or thereunder shall be determined as if such Lender had
not sold such participation. Such Lender may furnish any information concerning
the Borrower and any Subsidiary in the possession of such Lender from time to
time to participants (including prospective participants).
Section 9.9. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the Borrower, the Agent and the Lenders and
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Majority Lenders. This Agreement and all covenants,
representations and warranties made herein
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and/or in any of the other Financing Documents shall survive the making of the
Loans, the execution and delivery of the Financing Documents and shall continue
in effect so long as any amounts payable under or in connection with any of the
Financing Documents or any other Indebtedness of the Borrower to any Lender
remains unpaid or the Commitment remains outstanding; provided, however, that
Sections 2.3.4 and 9.7 shall survive and remain in full force and effect after
expiration of the Commitment and for 90 days following repayment in full of all
amounts payable under or in connection with all of the Financing Documents and
any other such Indebtedness.
Section 9.10. Actual Knowledge. For purposes of this Agreement, no
Lender shall be deemed to have actual knowledge of any fact or state of facts
unless the senior loan officer or any other officer responsible for the
Borrower's account established pursuant to this Agreement at such Lender, shall,
in fact, have actual knowledge of such fact or state of facts or unless written
notice of such fact shall have been received by such Lender in accordance with
Section 9.6.
Section 9.11. Substitutions and Assignments. Upon the request of any
Lender, the Agent and such Lender may, subject to the terms and conditions
hereinafter set forth, take the actions set forth below to substitute one or
more financial institutions (a "Substituted Lender") as a Lender or Lenders
hereunder having an amount of the Loans as specified in the relevant
Substitution Agreement executed in connection therewith.
Section 9.11.1. In connection with any such substitution the
Substituted Lender and the Agent shall enter into a Substitution Agreement in
the form of Exhibit 9.11.1 hereto (a "Substitution Agreement") pursuant to which
such Substituted Lender shall be substituted for the Lender requesting the
substitution in question (any such Lender being hereinafter referred to as a
"Selling Lender") to the extent of the reduction in the Selling Lender's portion
of the Loans specified therein. In addition, to that extent such Substituted
Lender shall assume such of the obligations of each Selling Lender under this
Agreement, the Security Documents and the Notes as may be specified therein and
this Agreement shall be amended by execution and delivery of each Substitution
Agreement to include such Substituted Lender as a Lender for all purposes under
this Agreement, the Security Documents and the Notes, and to substitute for the
then existing Exhibit 1.8 to this Agreement a new Exhibit 1.8 in the form of
Schedule A to such Substitution Agreement setting forth the portion of the Loans
belonging to
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each Lender following execution thereof. Each Lender and the Borrower hereby
appoint the Agent as agent on its behalf to countersign and accept delivery of
each Substitution Agreement and, to the extent applicable, the provisions of
Article 8 hereof shall apply mutatis mutandis with respect to such appointment
and anything done or omitted to be done by the Agent in pursuance thereof.
Section 9.11.2. Without prejudice to any other provision of this
Agreement, each Substituted Lender shall, by its execution of a Substitution
Agreement, agree that neither the Agent nor any Lender is any way responsible
for or makes any representation or warranty as to: (a) the accuracy and/or
completeness of any information supplied to such Substituted Lender in
connection therewith, (b) the financial condition, creditworthiness, affairs,
status or nature of the Borrower and/or any of the Subsidiaries or the
observance by the Borrower, or any other party of any of its obligations under
this Agreement, any of the Notes or any of the Security Documents or (c) the
legality, validity, effectiveness, adequacy or enforceability of this Agreement,
any of the Notes or any of the other Security Documents.
Section 9.11.3. The Agent shall be entitled to rely on any
Substitution Agreement delivered to it pursuant to this Section 9.11 which is
complete and regular on its face as to its contents and appears to be signed on
behalf of the Substituted Lender which is a party thereto, and the Agent shall
have no liability or responsibility to any party as a consequence of relying
thereon and acting in accordance with and countersigning any such Substitution
Agreement. The effective date of each Substitution Agreement shall be the date
specified as such therein and each Lender prior to such effective date shall,
for all purposes hereunder, be deemed to have and possess all of their
respective rights and obligations hereunder up to 12:00 o'clock P.M. on the
effective date thereof.
Section 9.11.4. Upon delivery to the Agent of any Substitution
Agreement pursuant to and in accordance with this Section 9.11 and acceptance
thereof by the Agent (which delivery shall be evidenced and accepted exclusively
and conclusively by the Agent's countersignature thereon pursuant to the terms
hereof without which such Substitution Agreement shall be ineffective): (i)
except as provided hereunder, the respective rights of each Selling Lender and
the Borrower against each other under this Agreement, the Notes and the Security
Documents with respect to the portion of the Loans being assigned or delegated
shall be
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terminated and each Selling Lender and the Borrower shall each be released from
all further obligations to the other hereunder with respect thereto (all such
rights and obligations to be so terminated or released being referred to in this
Section 9.11 as "Discharged Rights and Obligations"); and (ii) the Borrower and
the Substituted Lender shall each acquire rights against each other and assume
obligations towards each other which differ from the Discharged Rights and
Obligations only in so far as the Borrower and the Substituted Lender have
assumed and/or acquired the same in place of the Selling Lender in question; and
(iii) the Agent, the Substituted Lender and the other Lenders shall acquire the
same rights and assume the same obligations between themselves as they would
have acquired and assumed had such Substituted Lender been an original party to
this Agreement as a Lender possessing the Discharged Rights and Obligations
acquired and/or assumed by it in consequence of the delivery of such
Substitution Agreement to the Agent.
Section 9.11.5. Discharged Rights and Obligations shall not
include, and there shall be no termination or release pursuant to this Section
9.11 of (i) any rights or obligations arising pursuant to this Agreement in
respect of the period or in respect of payments hereunder made during the period
prior to the effective date of the relevant Substitution Agreement, (ii) any
rights or obligations relating to the payment of any amount which has fallen due
and not been paid hereunder prior to such effective date or rights or
obligations for the payment of interest, damages or other amounts becoming due
hereunder as a result of such nonpayment, any rights or claims of the Borrower
against the Seller hereunder arising prior to the effective date of the
Substitution Agreement.
Section 9.11.6. With respect to any substitution of a
Substituted Lender taking place after the Closing Date, the Borrower shall issue
to such Substituted Lender and to such Selling Lender, new Notes reflecting the
inclusion of such Substituted Lender as a Lender and the reduction in the
respective Loans of such Selling Lender, such new Notes to be issued against
receipt by the Borrower of the existing Notes of such Selling Lender. The
Selling Lender or the Substituted Lender shall pay to the Agent for its own
account an assignment fee in the amount of $4,000 for each assignment hereunder,
which shall be payable at or before the effective date of the assignment.
Section 9.11.7. Each Lender may furnish to any
financial institution which such Lender proposes to make a
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Substituted Lender or to a Substituted Lender any information concerning such
Lender, the Borrower and any Subsidiary in the possession of that Lender from
time to time; provided that any Lender providing any confidential information
about the Borrower and/or any Subsidiary to any such financial institution shall
obtain such financial institution's agreement to keep confidential any such
confidential information.
Section 9.12. Payments Pro Rata. The Agent agrees that promptly after
its receipt of each payment from or on behalf of the Borrower in respect of any
Obligations of the Borrower hereunder it shall distribute such payment to the
Lenders pro rata based upon their respective Pro Rata Shares, if any, of the
Obligations with respect to which such payment was received. Each of the Lenders
agrees that, if it should receive any amount hereunder (whether by voluntary
payment, by realization upon security, by the exercise of the right of setoff or
banker's lien, by counterclaim or cross action, by the enforcement of any right
under the Financing Documents, or otherwise), which is applicable to the payment
of the Obligations of a sum which with respect to the related sum or sums
received by other Lenders is in a greater proportion than the total amount of
such Obligation then owed and due to such Lender bears to the total amount of
such Obligation then owed and due to all of the Lenders immediately prior to
such receipt, except for any amounts received pursuant to Section 2.3.3, then
such Lender receiving such excess payment shall purchase for cash without
recourse or warranty from the other Lenders an interest in the Obligations of
the Borrower to such Lenders in such amount as shall result in a proportional
participation by all the Lenders in such amount; provided, however, that if all
or any portion of such excess amount is thereafter recovered from such Lender,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
Section 9.13. Governing Law. This Agreement and the Notes
shall be governed by, and construed in accordance with, the laws
of the Commonwealth of Massachusetts.
Section 9.14. 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.
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Section 9.15 Headings. Article and Section 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.
Section 9.16. Counterparts. This Agreement may be executed and delivered
in any number of counterparts each of which shall be deemed an original, and
this Agreement shall be effective when at least one counterpart hereof has been
executed by each of the parties hereto. Delivery of an executed counterpart of a
signature page to this Agreement by telecopier shall be effective as delivery of
a manually executed counterpart of this Agreement.
Section 9.17. Senior Indebtedness. The parties hereto agree
that the Indebtedness under this Agreement shall be "Senior
Indebtedness" as that term is defined in the Indenture.
Section 9.18. Joint and Several Obligations. The
Obligations of GTLP and Capital Corp. are joint and several.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as a sealed instrument by their respective officers
thereunto duly authorized, as of the date first above written.
In the presence of: GALAXY TELECOM, L.P.
_________________________ By:
General Partner
_________________________ By:
Name:
Title:
In the presence of: GALAXY TELECOM CAPITAL CORP.
_________________________ By:
Name:
Title:
In the presence of: FLEET NATIONAL BANK, as Agent
_________________________ By:
Name:
Title:
_________________________ By____________________________
Name:
Title:
LENDERS:
In the presence of: FLEET NATIONAL BANK
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_________________________ By:
Name:
Title:
_________________________ By____________________________
Name:
Title:
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In the presence of: INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
_________________________ By:
Name:
Title:
Address: 135 East 57th Street
New York, NY 10002
Attn: James Turino
Fax:
In the presence of: STATE STREET BANK AND TRUST
COMPANY
_________________________ By:
Name:
Title:
Address: 225 Franklin Street
Boston, MA 02110
Attn: James C. Gregg
Fax:
In the presence of: UNION BANK
_________________________ By:
Name:
Title:
Address: 445 South Figueroa Street
15th Floor
Los Angeles, CA 90071
Attn: Michael K. McShane
Fax:
92
